May 13

Oil and gas supermajor BP has announced plans for its first full-scale green hydrogen project with Danish offshore wind generation leader Orsted at BP’s Lingen Refinery in northwest Germany.

The project envisions a 50-megawatt electrolyser powered by offshore wind, which will replace about 20% of the natural gas-based hydrogen, or “grey hydrogen,” consumed at the plant. This will replace around 80,000 tonnes of carbon emissions equivalent a year, which is equal to the footprint of about 45,000 cars in Germany.

BP and Orsted see the project as becoming operational as early as 2024. The companies have signed a letter of intent and will further hammer out the details, including an application for sums from the EU Innovation Fund, with an expectation to make a final investment decision in early 2022.

The partnership sees the project as an initial step toward larger ambitions, which include scaling up ten times to 500 megawatts of renewable-powered capacity at the Lingen plant. That would produce enough hydrogen to meet all the refinery’s demand and become feedstock for future fuel production.

Hydrogen is considered as one future direction of clean fuel across Europe for trucking, city busing, maritime transport and aviation, as the block seeks to achieve carbon neutrality by 2050. Numerous pilot projects are under way in each sector to test their viability to transition from fossil fuels. Even so, demand for alternative fuels is currently negligible.

From the production side, at least one hurdle to reducing the cost of hydrogen to viable commercial levels is gaining scale in production. Thus the industry is in a bit of a “chicken or the egg” quandary at the moment.

Linking green hydrogen capacity to an oil refinery may seem counter-intuitive, as the two represent different directions for the future of fuel. But there is one driving piece of logic: oil refineries are major regular consumers of hydrogen. 

Refineries use and will continue to use large amounts of the gas in the manufacturing processes, according to Martin Neubert, executive Vice President and CEO of offshore wind for Orsted. Green hydrogen is a desirable product for companies that wish to dramatically lower their emissions footprint.

“But first renewable hydrogen has to become cost competitive with fossil-based hydrogen, and for that we need projects such as this with BP’s Lingen refinery,” Neubert said.

The British oil producer undertook a drastic change in strategy this year as it plans to pull investment from oil exploration and let output fall, while boosting its position in renewable and clean power. It has tabbed hydrogen as one area of development.

“We are determined to build a leading position in this emerging industry,” Dev Sanyal, BP Executive Vice President for gas and low carbon, said in the statement.

The fact that BP, which also produces natural gas, is willing to actively develop green hydrogen points to its earnest intentions to branch off into alternative energy. With the project at Lingen, BP can start to gain scale, competency and efficiencies all aimed at lowering costs for green hydrogen should the project come to fruition.

The company’s strategy, it appears, is to take the expensive route in the short term in order to gain a leadership position in clean fuels in the long term.

By Stephen Bierman

Stephen Bierman is an energy markets journalist and the editor of New Economy Observer.

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