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Adani-TotalEnergies deal: Why Big Oil is betting on green hydrogen
After years of dabbling, major oil companies are finally planning the kind of large-scale investments that would make green hydrogen a serious business.
They’re chasing a very particular vision of a low-carbon future — multibillion dollar developments that generate vast concentrations of renewable electricity and convert it into chemicals or clean fuels that can be shipped around the world to power trucks, ships or even airplanes.
‘The oil majors have been building multibillion-dollar projects since forever,’ said Julien Rolland, head of power and renewables at commodities trader Trafigura Group Pte Ltd. ‘This green hydrogen, green ammonia stuff will be the new energy industry.’
The plan is well suited to the companies’ natural strengths in project management and their financial heft, but even with those advantages they’re still making a big bet on an unproven technology that could fall short of its potential.
“I don’t think any company out there has developed anything to these kinds of scales,” said Gero Farruggio, head of Australia and global renewables at consultant Rystad A/S.
Deep Pockets
This month has seen a flurry of big news about hydrogen.
BP Plc is taking the lead in the $36 billion Asian Renewable Energy Hub, a project that aims to install 26 gigawatts of solar and wind farms over a vast 6,500-square-kilometer (2,500 square-mile) stretch of Western Australia’s Pilbara region, and use the electricity generated to split water molecules into hydrogen and oxygen. Once fully developed, each year it would produce about 1.6 million tons of green hydrogen or 9 million tons of ammonia, which can be used to make fertilizer.
TotalEnergies SE has joined Indian billionaire Gautam Adani’s conglomerate in a venture that has the ambition to invest as much as $50 billion over the next 10 years in green hydrogen. An initial investment of $5 billion will develop 4 gigawatts of wind and solar capacity, about half of which will feed electrolyzers producing hydrogen used to manufacture of ammonia. The venture could expand to 1 million tons of annual green hydrogen production by 2030, driven by 30 gigawatts of clean power.
It’s only a matter of time before Shell Plc follows with a megaproject of its own, said Paul Bogers, vice president for hydrogen at the company. Shell is looking for a place where there are sufficient wind and solar resources for a large-scale project that would play to its strengths, he said in an interview on the sidelines of the Financial Times Hydrogen Summit in London.
‘The size of these projects isn’t something done by a small startup,’ Bogers said. ‘It requires deep pockets.’US giant Chevron Corp. is ready to spend billions on a mixture of green and blue hydrogen, which uses a chemical reaction to split natural gas and capture and store the carbon dioxide. Smaller players in the oil market are also getting involved, with Trafigura looking at a number of mid-size green hydrogen projects, such as a 440-megawatt development near Adelaide, Australia.
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