Could hydrogen investments future-proof oil companies?

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Could hydrogen investments future-proof oil companies?

22 Apr 2020 | Energy News

Record low oil prices should prompt petroleum companies to invest more heavily in hydrogen, analysis by a World Energy Council member suggests.

The Covid-19 pandemic has triggered a global demand slump of almost 30 million barrels a day. This has led to brimming oil storage capacity and stubbornly low crude prices, creating historic uncertainty in the oil and gas sector.

Argentine energy consultant and WEC member Massimiliano Cervo’s analysis presents hydrogen as a means for oil and gas companies to diversify themselves.

“Policymakers and energy leaders can make the most out of the current situation,” Cervo says in an item on the BusinessNZ Energy Council’s website.

“Hydrogen can present an opportunity for a new period of transitioning. A well-functioning, vibrant economy relies on investment in sustainable and resilient energy.”

Cervo says large-scale hydrogen production would enable a new way of trading energy, producing clean fuels and decarbonising high-heat sectors such as the metals industry.

“This moment should be used as a turning point for a better and cleaner future,” he says.

A tale of two sectors

Cervo’s analysis examines the performance of three oil major stocks – Exxon Mobil, PetroChina and Baker Hughes – from 2015 to now.

He notes those companies showed a steady downward trend before a steep decline in 2020.

In comparison, three major companies – Ballard Power, NEL and ITM Power – that have invested in hydrogen over the same period have achieved an upward trend since 2017.

They have also experienced sharp drops in early 2020, but much less than oil and gas stocks.

A wake-up call to diversify

BusinessNZ Energy Council executive director Tina Schirr says oil and gas companies can find ways to survive the current crisis and ultimately recover.

The oil industry must address overproduction and lack of storage. But it should look for opportunities to diversify, she says.

Oil and gas companies can transition into businesses that deal with energy more broadly.

“Hydrogen is a possible way of quick and easy emission cuts, integrating renewables and hydrogen into new upstream and LNG developments,” she says.

“The oil and gas industry has extensive know-how and now has the opportunity of playing a crucial role in accelerating the deployment of new technologies, and helping develop them at scale.”

Other opportunities besides hydrogen include methanol and advanced biofuels, which would draw on the sector’s technologies and also help reduce emissions.

Modelling New Zealand’s hydrogen pathway

The Coalition Government see green hydrogen as playing a key role in achieving its net-zero carbon emission ambitions.

Castalia has announced it is preparing detailed modelling for the Ministry of Business, Innovation and Employment on hydrogen demand and production.

This modelling will integrate up-to-date costs and technical information to determine the potential supply and demand for green hydrogen production at multiple locations in New Zealand.

It will also assess the demand in heavy vehicle transportation, electricity generation and storage, piped gas and for export markets.

Castalia will also train MBIE officials to use the model.

Contact: Craig Greaves