Oil giants turn to green technologies

The fight against climate change and the efforts of governments to switch to “green” energy sources have brought “green” hydrogen technologies to the fore.

Esty Dweck, CIO

The war in Ukraine and Western efforts to accelerate decarburization have left the fuel industry no choice but to adopt a greener roadmap.

Thus, the world’s largest oil companies are planning massive investments that will make green hydrogen the business of the future.

BP invests in green hydrogen

In mid-June, BP announced it would acquire a 40.5% stake in the Asian Renewable Energy Center (AREH), which has the potential to become one of the largest renewable energy and green hydrogen hubs in the world.

Operating in Western Australia’s Pilbara region, AREH intends to supply renewable energy to local consumers in the world’s largest mining region, as well as produce green hydrogen and green ammonia for the Australian domestic market and export to major international users starting in Asia. Pacific Ocean.

The AREH project began in 2014 and is currently being developed by partners that currently include InterContinental Energy, CWP Global, Macquarie Capital and Macquarie’s Green Investment Group.

Under the terms of the agreement, from July 1, 2022, BP will take over 40.5% of operations. The main shareholders will remain InterContinental Energy (26.4%), CWP Global (17.8%), Macquarie Capital and Macquarie’s Green Investment Group (15.3%). APEX.

Decarbonization of the Asia-Pacific region

According to BP’s executive vice president, AREH “really reflects what integrated energy is – it combines onshore solar and wind power with hydrogen generation to transform sectors and regions.” BP sees AREH as a fundamental project for the company to help its customers and partners meet their commitment to zero net consumption.

The project is expected to contribute to the long-term clean energy security in the Asia-Pacific region, including helping energy-intensive countries such as South Korea and Japan reduce their carbon footprint and meet their emission reduction targets.

Upon completion, AREH will provide BP with significant clean renewable energy generation capacity, an important step towards its strategic goal of capturing 10% of the world’s major hydrogen markets and becoming a major global player in the renewable energy market.

2022.06.29.AREX
When it reaches its maximum capacity, AREH should produce 1.6 million tons of green hydrogen and 9 million tons of green ammonia.
Source: BP.com

Big bet on unapproved technology

The development of green technologies is nothing new for oil companies. The latter are investing billions of dollars to produce large amounts of renewable electricity to convert it into chemicals or clean fuels that can then be shipped around the world.

Thus, green hydrogen and green ammonia will definitely be the future of energy. However, the oil giants are often criticized for betting big on unapproved technology that may not realize the expected potential even in the long term.

Try or die trying

But the oil companies have no choice.

Refusal to switch to clean energy sources is a death sentence for the oil giant. Therefore, betting on renewable technologies is their only option for survival.

And today the oil giants have the means to do so.

Oil prices have risen sharply since early 2021, jumping 175% due to strong post-pandemic demand and lower production. The war in Ukraine and sanctions on Russian oil helped drive oil prices to high levels, boosting oil companies’ revenues and profits for several months.

2022.06.29.Oil prices
Oil prices are skyrocketing due to stronger post-pandemic demand and limited supply.
Source: Trade review

Oil rally will fund the green revolution

Even with skyrocketing oil prices and clear demand from governments, the world’s oil giants are showing a clear reluctance to increase their refining capacity. This is a natural response to the efforts of governments to reduce and even eliminate the use of fossil fuels in the long term.

So investing in future renewables seems like the best option for the fossil fuel giants as these companies risk their future right here and now. And since they can afford it, it’s time for the oil giants to invest in a green revolution. The increase in post-pandemic demand, the expected opening of China and limited global supply should support the rally in oil prices and continue to fill the Big Oil coffers.

BP, for example, has set itself the goal of becoming a net zero company by 2050 or sooner and helping the world reach its net zero target. French company Total Energies has joined Indian billionaire Gautam Adani’s conglomerate in a venture that aims to invest up to $50 billion over the next ten years in clean hydrogen. Chevron has announced that it is ready to spend billions on a mixture of green and blue hydrogen, which uses a chemical reaction to separate natural gas and capture and store carbon dioxide.

And it’s only a matter of time before Shell launches its own hydrogen megaproject. The company’s vice president, Paul Bogers, said Shell is looking for a location with enough wind and solar energy to power a large-scale project. He added that the development of green technologies is certainly more suitable for companies with deep wallets than start-ups.

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