According to TechCrunch, BP, a major player in the oil and gas industry, has announced a significant reduction in its early-stage hydrogen projects. This decision, detailed in a 32-page earnings report, involves the termination of 18 hydrogen initiatives and the sale of its U.S. onshore wind-power operations. These moves are expected to save the company $200 million annually, enhancing its financial performance. The hydrogen industry, which has been supported by oil and gas companies through financial investments and lobbying, is now facing a more challenging future.
BP has previously been an advocate for hydrogen, with its venture capital arm investing in several green hydrogen startups such as Electric Hydrogen and Advanced Ionics. Earlier this year, BP committed to developing over ten hydrogen projects across the U.S., Europe, and Australia. However, the company has now revised its plans, indicating it will pursue between five and ten projects, without specifying which ones will proceed.
Hydrogen holds promise for significantly reducing carbon emissions in various sectors, including petrochemical refining, steelmaking, and long-haul shipping. However, the infrastructure for hydrogen, particularly green hydrogen produced using renewable electricity, remains underdeveloped. This is partly due to the high production costs of green hydrogen and the expensive logistics involved in its transportation compared to fossil fuels.
The hydrogen industry has viewed oil and gas companies as crucial partners for growth, given their existing hydrogen production capabilities from natural gas and their extensive experience in large infrastructure projects. These companies are seen as logical customers for startups developing electrolyzers, which produce hydrogen using water and electricity. Despite this potential, the reliance on fossil fuels for profits provides oil and gas companies with a strong incentive to transition slowly to alternative energy sources.
BP's decision to scale back its hydrogen ambitions is unlikely to be an isolated event within the sector. The move reflects broader challenges faced by the hydrogen industry as it seeks to establish itself as a viable alternative to traditional fossil fuels. The industry's future will depend on overcoming these hurdles and finding ways to make hydrogen production and transportation more cost-effective.