US major Chevron is joining other oil and gas firms in investigating ways to use its LNG expertise to develop the hydrogen sector over the next decade.

Chevron has set a goal to reduce the carbon intensity of its scope one, two and three emissions, and its decarbonisation strategy revolves around using CCS, offsets and hydrogen.

The firm has formed an increasingly large part of the LNG market since the US started exporting volumes in 2016, becoming what is known as a portfolio player—meaning it operates a trading desk buying and selling both its own volumes and those of others.

The US major now wants to bring that commercial and shipping expertise to the hydrogen sector, according to Jeff Gustavson, president of Chevron New Energies.

50,000 t/yr – Chevron’s 2030 hydrogen production target

“In hydrogen, we are evaluating over 50 opportunities focusing on developing production hubs that leverage existing natural gas value chains,” he said at the firm’s investor day in early March.

The firm’s hydrogen strategy is focused on lowering costs both production and transportation.

Initially, Chevron is looking at blue hydrogen, using existing hydrogen production technologies of steam methane reforming and autothermal reforming coupled with CCS. Lowering the cost of production therefore requires cutting the cost of CCS, which the firm is doing through a number of pilot projects aimed at reducing the cost of capture.

Chevron says hydrogen is likely to be phased into its operations slowly. It is working with Japanese utility Jera—a long-term LNG customer—to find ways to slowly replace some LNG volumes with hydrogen.

“They are interested in whether there is a way to drop products such as hydrogen and ammonia into that [LNG] value chain,” says Gustavson.

“We are working with them on how we can produce blue ammonia—that is the lowest cost [hydrogen product] today—and transporting it to blend into some of their existing coal-fired infrastructure.”

Gustavson says the firm is in the study phase and is cautious to make sure it marries any supply with actual demand from customers. But he is bullish about the long-term prospects.

“We will build this new energy system and all the infrastructure that is needed to make it a reality,” he says. Chevron has a target to produce 150,000t/yr of low-carbon hydrogen by 2030.

To lower costs of transportation, Chevron is investigating the potential of liquid organic hydrogen carriers (LOHC) as well as ammonia. Some studies have shown that LOHC technology could eventually be the most cost-effective way to transport hydrogen molecules over long distances.

Long-term uncertainty

Many of the main LNG demand sectors—chiefly power generation and industry—could theoretically be fuelled by hydrogen.

But because of the initial focus of hydrogen is on decarbonising industrial clusters and ongoing concerns about the cost feasibility of long-distance shipping, scenarios vary wildly on the extent to which hydrogen will displace LNG in the global energy system.

Shell’s latest LNG outlook sees demand reaching 650–700mn t/yr by 2040. But under the IEA’s net-zero scenario, LNG demand must fall to under 200mn t/yr by 2040.

Europe has seen a large spike in LNG demand, which is likely to stay over the next few years, with the EU needing 140mn t/yr of LNG imports due to its avoidance of Russian gas —around twice the bloc’s historic level, according to Shell.

EU importers are making their import terminals ‘hydrogen ready’ as one way to be seen to not be locking in LNG infrastructure that might become stranded should the global energy system accelerate decarbonisation in line with the IEA’s net-zero scenario.

But as some NGOs point out, hydrogen is a very different gas to LNG with its own specific infrastructure requirements.

“The speed and scale at which countries are beginning to lean into shaky and expensive, supposedly ‘hydrogen ready’ LNG transport methods are cause for concern,” saysUS NGO the National Resources Defence Council.

“Rigorous and transparent investigations of the economic, technological, climate and safety implications of a transition from LNG to either liquid hydrogen or ammonia should be carried out before expanding LNG infrastructure premised on this transition.” 

Joining the club

Both Shell and BP are also pursuing strategies to ultimately pivot from LNG to hydrogen. Shell took FID on a 200MW electrolyser to be constructed on the Tweede Maasvlakte in the Port of Rotterdam, and BP is developing the Asian Renewable Energy Hub in Western Australia, which is targets exports to Asian markets.

The majors are also exploring options for transporting the low-carbon fuel. Shell has a memorandum of understanding (MoU) with Japanese utility Kansai Electric Power to explore and cooperate on business opportunities in liquid hydrogen supply chains. BP is evaluating different transport options for Areh and has an MoU with shipping firm NYK Line to investigate shipping ammonia.

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Author: Tom Young