23 Feb 24

Is hydrogen the new crude oil?

The compound of forecourts, pipelines, fast refills, and even drilling for H2 has caught the oil industry’s interest in hydrogen as a springboard opportunity. But their infrastructural experience, framework and investment rounds won’t necessarily turn it into a success.

 Thriving on profits, the oil companies are spending vast amounts of money on hydrogen development. As the transport and the utilisation of the renewable energy carrier is comparable to their familiar oil and gas businesses, they are lobbying administrations to unprecedented levels - especially in the United States, where their presence has grown tenfold since Biden took office: 32 oil and gas companies are listed lobbying for hydrogen.

Hydrogen (green) is only sustainable when derived from electrolysing water with renewable electricity. However, more than 90% of the current production is derived from natural gas, labelled blue, when the CO2 emissions are offset by carbon capture (up to 70%). In this lucrative opportunity lies the danger - or the opportunity to some - that the oil firms’ commitment results in prolonging the fossil energy era.

Pushing innovation

On the other hand, these companies also push innovation. One interesting development is the use of depleted oil wells, treated with bacteria to enable steady, long-term hydrogen production, potentially lasting for decades. This approach could help oil companies leverage their existing infrastructure.

Found in continental crust layers and constantly generated, they also drill for natural hydrogen labelled white or gold. The value chain is comparable to natural gas but costs much less than industrial hydrogen. The consortium Beam Earth, comprising several companies from the oil and gas sector, projects a pump price between 0.45 and 0.90 euro cents per kilo after scaling up. Currently, these challenging projects are highly experimental.

The lobbying from Hydrogen Europe hasn’t been without merit, as the organisation succeeded in convincing the European Union to adopt a strategy to build 2x40 gigawatts of electrolysers to produce green hydrogen and pursue the roll-out of a hydrogen network of one station per 150 kilometres across member states under AFIR (Alternative Fuels Infrastructure Regulation).

However, these high ambitions are met by cold figures. The few billions that BP, Total, Chevron, Shell and Exxon Mobile are each injecting instead target the energy demands of shipping and aviation rather than the car fleet market and are but a droplet compared to the 200 billion dollars invested in oil and gas fields in 2023.

Lastly, the International Energy Agency (IEA) calculated that from all the worldwide projects currently announced under lobbying pressure, only 7% will be realised by the decade's end, confirming the gap between expectations and reality.

Read more on our E-Book From hydrogen to EV

Image: Shutterstock (ID: 2145513343)

Authored by: Piet Andries