State-owned Sinopec has identified hydrogen as its best bet for carving out a role in China’s transition to cleaner energy, placing the zero-emission fuel at the center of an ambitious long-term drive to decarbonise well before national targets.

Sinopec’s new strategy will involve hydrogen and new-energy segments as a major growth engine for the next few years, according to management comments at an earnings conference on Monday. Asia’s largest oil refiner also aims to peak its carbon emissions by 2025, five years ahead of a national target of 2030, and then become carbon-neutral by mid-century, which would be a decade before China hopes to stop contributing to global warming following President Xi Jinping’s pledge last September.

The long-term strategy is for Sinopec to become a comprehensive energy service provider for oil, gas, hydrogen, electricity and non-oil services

Sinopec’s greenhouse gas emissions reached 171mn t of CO₂ equivalent in 2020, more than 80pc of which was generated by refining and chemicals operations. Last year’s emissions were up slightly from 170.69mn t in 2019 but down from 171.52mn t in 2018.

Hydrogen will play a major role in Sinopec’s low-carbon push, with the company aiming to have 100 hydrogen refuelling stations this year as part of a previously announced target of 1,000 stations by the end of the 14^th Five-Year Plan period in 2025. “Hydrogen is the core of Sinopec’s low-carbon energy transition,” Chairman Zhang Yuzhuo said on Monday. “We want to be China’s largest hydrogen company.”

Sinopec already has first-mover advantage in hydrogen as it looks to ride growing global momentum for the clean fuel. The NOC has hydrogen production capacity of 3.5mn t/yr, accounting for 14pc of China’s hydrogen output, and ten pure hydrogen refuelling and hydrogen-oil integrated stations in operation. Another 27 hydrogen fuelling pilot projects were up and running in eastern and southern China by the end of last year.

“We have been producing hydrogen for our refining and petrochemical complexes, while we have the biggest retail network in China,” said Zhang.

The heavy focus on hydrogen during Monday’s results conference underlines how Sinopec—along with fellow NOCs Petrochina and Cnooc—are playing up their ambitions in green energy businesses as Beijing prioritises cutting carbon emissions in the coming years. But such businesses remain a minuscule part of the three NOCs’ multibillion-dollar revenues.

Refuelling network

A key advantage for Sinopec’s foray into hydrogen is its massive retail network of traditional petrol and diesel stations that numbered 30,713 at the end of last year. It plans to retrofit many of these into multi-energy facilities that can also supply natural gas and hydrogen, and will start to add battery charging and swapping facilities for electric vehicles this year.

The long-term strategy is for Sinopec to become a “comprehensive energy service provider for oil, gas, hydrogen, electricity and non-oil services”, according to Zhang.

At present, Sinopec’s modest hydrogen output is almost entirely from refinery units and consumed internally. But the emphatic pivot to hydrogen suggests Sinopec will move towards green hydrogen compared with its current brown/grey hydrogen setup, and commercialise its hydrogen production by expanding further down the value chain and tapping into the transportation end-user market. China’s hydrogen demand could reach close to 60mn t/yr by 2050, according to the China Hydrogen Energy Alliance.

171.mn t – Sinopec CO2 equivalent emissions for 2020

Zhang said Sinopec will continue to focus on fossil fuel-based hydrogen production over the next five years but will also start using renewable energy to power the electrolysis needed to split water molecules into hydrogen and oxygen—a process that is already economic in some parts of China.

Separately, Sinopec said it aims to halve methane emission intensity by 2025 while completing a megaton-class demonstration project to capture, utilise and store carbon emitted by its production facilities.

---

Author: Shi Weijun