With rising climate change concerns and ambitious net zero emissions commitments from governments as well as companies, the oil and gas industry faces mounting societal pressure. This is to profoundly reduce greenhouse gas emissions across its operations. Clean hydrogen presents a game-changing opportunity for the oil and gas sector. It helps to align with decarbonization imperatives while retaining economic relevance.
This article examines pathways through which low-carbon hydrogen adoption can enable oil and gas firms to slash emissions substantially. That too across hydrocarbon value chains. It ranges from production to transportation to end-use consumption.
Why Hydrogen is Critical for Oil and Gas Sector Decarbonization
Clean hydrogen derived either from renewable energy electrolysis or natural gas with carbon capture provides a powerful tool for the oil industry. It helps to deeply cut emissions. This is especially true from its most energy and emissions-intensive operations.
Sufficient low-cost green hydrogen production volumes appear increasingly viable this decade. This is as the world rapidly scales up wind, solar, and other renewable infrastructure to meet climate goals. Additionally, innovations in distribution including chemical carriers like ammonia as well as enhanced pipeline materials are unfolding. As a result, it helps to overcome transportation hurdles.
With carefully crafted policy incentives and infrastructure support, widescale hydrogen adoption could eventually transform and decarbonize oil and gas value chains. This can be the same in the way electric vehicles are revolutionizing transport and mobility. Fossil fuel behemoths that recognize hydrogen’s enormous potential and make decisive early investments across production, storage, distribution, and asset integration can pioneer this transition. This is also while meeting sustainability objectives and maintaining profitability.
Myriad Decarbonization Pathways
Clean hydrogen offers multiple decarbonization levers across the oil and gas sector. This is whether blended directly into natural gas grids and pipelines, utilized as industrial furnace fuel, converted into synthetic hydrocarbons, or used in fuel cells. Even as the world transitions slowly away from fossil fuel dependence over this century, thoughtful hydrogen integration allows the industry to profoundly curb emissions. That too in the interim while retaining economic dynamism.
Production Pathways for Clean Hydrogen
A portfolio of clean hydrogen production methods with varying maturity and costs is growing. It helps to enable industry adoption at scale. Moreover, renewable energy-powered electrolysis is the most promising for sustainable oil and gas value chains. So, let us look at some production pathways ahead:
Mature Production From Steam Methane Reforming
Over 70 million metric tonnes of hydrogen are produced globally each year. It happens predominantly via natural gas steam methane reforming. It is an emissions-intensive process responsible for 830 million tonnes of CO2 annually. So, incorporating carbon capture utilization and storage at these plants, referred to as blue hydrogen, drastically reduces this footprint. It takes it to a very low or negative emission intensity. Captured CO2 may also be employed in enhanced oil recovery. Furthermore, it can be used in chemical processes and concrete curing.
Promising Electrolytic Hydrogen From Renewables
Green hydrogen is generated by using renewable electricity. It helps to split water molecules into oxygen and hydrogen via electrolysis. Additionally, costs for such electrolyzers have fallen 50% since 2015 due to improved manufacturing.
Moreover, it continues declining as solar and wind electricity achieve record low prices in various global markets. With ample inexpensive renewable power, green hydrogen can eventually become the most competitive production route for sustainable oil and gas value chains.
Emerging Alternative Production Methods
Additional techniques like biomass gasification, solar thermochemical conversion, artificial photosynthesis, and biological agents are emerging which may augment supply depending on viability. Moreover, international collaboration on research and pilot projects is accelerating their trajectory.
Essential Infrastructure for Oil and Gas Sector Adoption
Cost-effectively transporting and storing clean hydrogen at a mass scale remains imperative for the oil industry. This is to utilize hydrogen and achieve major emissions reductions. That too across hydrocarbon infrastructure assets and operations.
Distribution Network Buildout Challenges and Options
While natural gas grids allow limited hydrogen blending today before facing embrittlement risks, dedicated hydrogen pipelines, shipping channels, and multimodal transport connectivity would be obligatory. It will help in moving very large volumes between diverse supply sources, storage hubs, and end-use demand centers. This entails significant capital outlays, complex coordination, and also overcoming public perception hurdles around hydrogen safety.
International standardization including storage vessel and vehicle design would streamline cross-border movement. Moreover, geostrategic energy considerations may dictate trade corridors to link cost-advantageous locations with industrial clusters.
Necessity of Vastly Upscaled Underground Storage
Seasonal variability in renewable energy underscoring electrolytic hydrogen output would mandate vastly expanded geologic storage capabilities. It includes salt caverns, aquifers, and depleted oil and gas reservoirs. This is to serve as buffer hydrogen repositories. Furthermore, pipeline operators like Enbridge are already assessing feasibility. They have also announced development plans for initial underground hydrogen storage sites.
Such hydrogen storage buildout may benefit from the oil industry’s subsurface expertise. Underground hubs with connections to local pipelines and refueling stations may also eventually resemble today’s oil terminals.
Downstream Retrofitting Complexity
Transitioning existing refineries and petrochemical plants to run on clean hydrogen and derivatives like ammonia requires significant capital investments. This is into compatible processes. It includes modified turbines, reactors, valves, and distillation towers. Quest in Canada, Humber Refinery in the UK, and PREEM in Sweden have announced early-stage modifications.
So, extensive further retrofitting initiatives across global refining centers face engineering design and optimization challenges. This is around maintaining operational continuity and safety standards.
Industry coalitions to share best practices around hydrogen asset repurposing can accelerate learning.
Policy Priorities to Incentivize Adoption Across Oil and Gas Value Chains
Well-designed regulations, financial incentives, and environmental penalties can greatly accelerate clean hydrogen integration. It can also accelerate consequent emissions reductions across oil and gas company portfolios.
Production Tax Credits and Purchase Guarantees
Over longer time horizons, hydrogen production costs are projected to decline to be cost-competitive. However, consistent near-term tax credits, grants, and production purchase guarantees at scale are vital to buoy producers.
These may necessitate simultaneous oil and gas sector demand incentives. It includes Clean Fuel Standards which mandate declining carbon intensity from fuel sales.
Streamlined Permitting and Uniform Safety Codes
Clear uniform standards and rapidly coordinated permitting protocols. This is for infrastructure projects across ports, pipelines, and storage is essential. It provides regulatory clarity for private and public investors allocating massive capital expenditure. Moreover, public transparency and dialogue around safety governance can help gain a vital social license.
Incentives Across Oil and Gas Value Chains
Well-designed environmental fees and emissions trading schemes that penalize uncontrolled greenhouse gas emissions while rewarding verified abatement could further spur oil companies to integrate hydrogen and CCUS innovations.
This is for deep decarbonization across assets from drilling to pipelines to refinery units. Moreover, contract for differences mechanisms provide downside carbon price protection while benefiting producers from upside price volatility.
Myriad Applications to Decarbonize Hydrocarbon Value Chains
In this section, we will look at the application of clean hydrogen. So, let’s dive in:
Blending in Upstream Fuel Supplies
Natural gas produced on oil well pads generates substantial methane and CO2 emissions. So, partially blending clean hydrogen into these streams can lower their carbon prints.
Portable hydrogen fuel cells also provide zero-emission supplemental power for remote drilling rigs. Furthermore, they could eventually help electrify digitally connected intelligent wells.
Clean Refining and Petrochemical Feedstock
Oil refining, natural gas processing, and petrochemical cracking need a lot of heat. This heat comes from burning fuels that produce a lot of emissions. These emissions are not good for the environment. Clean hydrogen can replace these feeds in heating and reforming furnaces across various units. As a result, substantially curbing carbon dioxide as well as NOx, SOx, and particulate effluents.
Synthetic E-Fuels for Transport Decarbonization
Leveraging hydrogen as a feedstock for catalytic synthesis produces sulfur-free synthetic liquid fuels. It also produces ethanol, methanol, ammonia, and electrofuels for transportation applications. It is crucially important as electric vehicles disrupt demand for gasoline and diesel. So, scaling up such e-fuel output bolsters oil and gas companies’ relevance. This is amid declining internal combustion engine demand while enabling customer sustainability.
Hydrogen Derivative Advancements
New ways of moving and keeping hydrogen energy, like using ammonia and special liquids, make it easier. This also opens up new chances. It helps solve problems in getting hydrogen to different places. Plus, we can use things we already have, like using ammonia transport for agriculture.
Using clean hydrogen can help oil and gas companies reduce the pollution they create if they make the right investments and follow the right rules. To get the most out of hydrogen’s ability to make things more eco-friendly, these companies need to spend a lot of money and increase how much hydrogen they make fast. If they’re really good at finding cost-innovative ways to do things and repurposing their existing resources now, they can be successful in the future when more people want fuels that don’t harm the environment as much.
If you want to learn more about low-carbon hydrogen production, reducing on-site emissions, building new oil and gas facilities, and more, the global summit on net zero energy production is the right place for you. It takes place on 30-31 January 2024 in Amsterdam, Netherlands. Over 100 attendees and 30 industry leaders will be gracing the event leading to a lot of rare insights and networking opportunities. So, make sure you don’t miss the opportunity!