BP will target “double-digit” returns from its hydrogen business, with an ambition to produce 500,000–700,000t/yr of “primarily green” hydrogen from 2030, CEO Bernard Looney told a 2022 results call this morning.

BP expects to leverage its refining business to act as anchor offtake for hydrogen projects in the US and Europe in order to build regional hubs with eventual third-party offtake from industries seeking to decarbonise, such as steel. It expects to take FID and begin construction on such projects between 2023 and 2025, with startup from 2025–30.

The major also plans to build export hubs for hydrogen and its derivatives, with FID and construction on these projects expected over 2025–30. These include the 1.6mn t/yr Asian Renewable Energy Hub (AREH) project in Australia and potential export hubs throughout the UAE, Oman, Mauritania, Egypt and Spain.

The oil major has a total of 1.8mn t/yr of production capacity in its development pipeline—which it expects to double this year. “This is about establishing this decade the foundations for a material business in the decades to come,” Looney says.

“This is about establishing this decade the foundations for a material business in the decades to come” Looney, BP

While Looney expects the majority of BP’s hydrogen production by 2030 to be green, the major will also invest in select blue hydrogen projects where there is supportive policy and access to CCS infrastructure.

BP’s hydrogen and renewables business is expected to stay in a growth phase up to 2030, when it will contribute $2–3bn to the group’s expected $51–56bn profit. The company plans to invest an additional $8bn up to 2030 in its energy transition segments, with returns of more than 15pc expected from bioenergy and electric vehicle-charging in the near term.

And while renewables are expected to provide returns of only 6–8pc, BP anticipates this segment will be increasingly important in scaling green hydrogen production.

“It is not just about gigawatts, it is about value integration,” says Anja-Isabel Dotzenrath, BP’s executive vice-president for gas and low-carbon energy. She notes that for projects such as AREH, which BP took a 40.5pc operating stake in last year, renewables can represent 70pc of total capex. “We need leading edge capability to deliver green electrons at the lowest cost of energy.”

Dotzenrath adds that offshore wind is the only scalable source of renewable electricity for green hydrogen production in Europe.

US gamechanger

The US’ Inflation Reduction Act (IRA) has been a “game changer” and underpins a lot of BP’s low-carbon projects, says Dotzenrath. “As a consequence of the IRA, we clearly have prioritised projects in the US versus other regions around the world,” she says.

“Europe is catching up, and there were some promising announcements last week. But the beauty of the IRA is the simplicity, and I think this is where I think Europe needs to catch up a little bit.”

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Author: Polly Martin