BP's Huge Hydrogen Bet May Only Be a Start

Copyright © 2023 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.

BP's move to snap up a giga-scale green hydrogen project in Australia last week may only be the beginning. The UK supermajor is pointing to a much grander scale needed in the green hydrogen realm, and the broader industry appears to be viewing green hydrogen with more serious eyes amid the global energy crisis. BP’s decision to take a majority 40.5% stake and assume operatorship of Western Australia’s gigantic Asian Renewable Energy Hub (Areh) — billed as among the largest renewable power and green hydrogen proposals in the world — came just a day after TotalEnergies said it would take a 25% stake in a similar venture in India.

Climate Plus Security

With natural gas losing appeal amid the Ukraine crisis, the allure of green hydrogen is obvious — both for weathering the energy transition and addressing energy security — although some are awaiting firm investment decisions before putting too much hope in the sector. BP describes its Areh catch as both a “cornerstone” for meeting net-zero carbon commitments as well as a “long-term clean energy security contributor in Asia-Pacific.” The supermajor clearly envisages exporting green hydrogen to North Asia, noting that Areh’s output would help “countries such as South Korea and Japan to decarbonize.”

With at least two supermajors taking a significant exposure to the fledging green hydrogen business, it’s just a matter of time before others follow suit. In fact, BP itself has signaled having more giant hydrogen projects in the pipeline as it works toward capturing a “10% share in core hydrogen markets globally.” BP’s bullishness on hydrogen is evident in its emailed comment to Energy Intelligence: “The scale of domestic and global demand for hydrogen for the energy transition is expected to be immense. No single project, even one the size of Areh, is capable of meeting the scale required.”

Project Timeline

BP did not provide an updated timeline for the development of the Areh project in its Jun. 15 announcement, but it tells Energy Intelligence: “We are targeting to deliver low-carbon power to the Pilbara region by 2029.” The Pilbara mining and minerals processing region in Western Australia is expected to be the first to benefit from the wind and solar power generated by Areh.

But the 2029 start indicated by BP suggests a delay for Areh. The project's initial backers — InterContinental Energy (26.4%), renewable energy firm CWP Global (17.8%) and financial group Macquarie (15.3%) — had envisaged sanctioning it in 2025, with construction starting a year later and exports to Asia in 2027 or 2028.

Before BP’s involvement, the investors had planned on earmarking 3 gigawatts for the domestic market, out of a planned first phase of 15 GW. The Areh project targets a final wind/solar generation capacity of up to 26 GW, which would underpin the production of 1.6 million tons per year of green hydrogen, or 9 million tons/yr of green ammonia.

On how it plans to phase the Areh project after assuming operatorship, BP explains: “Taking a phased approach, we aim to develop the project over 20 years to incrementally grow its production capacity, which will be underpinned by green energy offtake to meet customers’ decarbonization needs.”

Eyeing More Projects

The company has undertaken a feasibility study for green hydrogen production at another Aussie site — Geraldton — also within the state of Western Australia. The Geraldton study, completed last year, found production of green hydrogen and ammonia using renewable energy “looks particularly promising in the mid-west of Western Australia,” BP had said last August. Geraldton is sited in the mid-west while the Areh site is in the northwest of Western Australia.

The Geraldton study was modeled on a more modest scale equivalent to 1 million tons of ammonia production per annum from renewable hydrogen, versus Areh’s more ambitious goal of 9 million tons/yr (or 1.6 million tons/yr of green hydrogen) at full capacity. The solar and wind capacity planned at Geraldton would total around 4 GW in a base case scenario, compared with Areh’s full-strength case of 26 GW.

In addition to Areh and Geraldton, BP is also looking at “repurposing” its former Kwinana oil refinery — also sited in Western Australia — into a ‘‘clean energy hub’’ for producing green hydrogen, sustainable aviation fuel and renewable diesel. The supermajor in 2021 ceased refining operations at Kwinana, saying the plant was not profitable. It is now conducting a hydrogen feasibility study for Kwinana in partnership with Macquarie Capital, with funding from the state government.

Asked whether the commitment to Areh would affect its interest in Geraldton or Kwinana, BP explained: “The scale of domestic and global demand for hydrogen for the energy transition is expected to be immense. No single project, even one the size of Areh, is capable of meeting the scale required,” adding: “The green hydrogen hubs planned for Kwinana and Geraldton will complement BP’s strategy in Australia.”

BP's Green Hydrogen Proposals in Western Australia
LocationProject DescriptionPartners
PilbaraAsian Renewable Energy Hub (Areh) BP, InterContinental Energy, CWP Global, Macquarie
 1.6 million tons/yr green hydrogen, or 9 million tons/yr green ammonia at full capacity, based on 26 GW wind/solar generation capacity 
Geraldton Geraldton Export-Scale Renewable Investment (Geri)BP
 1 million tons/yr green ammonia, based on 4 GW wind/solar generation capacity 
KwinanaKwinana Green Hydrogen HubBP, Macquarie
 Electrolyzer of at least 75 MW, hydrogen storage, compression and truck-loading facilities  

'Vote of Confidence'  

For Australia, which is seeking to add green hydrogen to its already significant LNG export prowess, the entry of BP is a catalyst to accelerate progress. BP’s commitment to Areh is a “significant vote of confidence,” says the Western Australian state government, which has been pushing hard for Areh’s development but faced roadblocks from the federal government.

Areh suffered a rejection from the federal government last year, when then-Environment Minister Sussan Ley pronounced it “clearly unacceptable” due to the impact on wetlands and migratory birds. But with BP in the picture now as operator, the supermajor says Areh can count on its “broad range of capabilities to help bring the project to fruition." These include BP's extensive experience in constructing and operating such large-scale facilities in remote locations in close collaboration with local communities, not to mention its global businesses in shipping and trading.

Hydrogen, Renewable Electricity
Wanda Ad #2 (article footer)
LCOE calculations stubbornly confirm that renewables are the cheapest option for new power generation.
Wed, May 24, 2023
Energy Intelligence examines some of the energy flashpoints of the crucial bipartisan compromise legislation — although its passage is no sure thing.
Tue, May 30, 2023
The US Department of Energy's Clean Fuels and Products Shot will focus on alternatives that are bio-based or derived from wasted CO2 or other waste streams.
Tue, May 30, 2023