Oil and gas industry lobbies for blue hydrogen

Oil rig offshore Australia (blue hydrogen)
Image: Shutterstock

Australia’s LNG producers are testing the waters for blue hydrogen—which is produced when natural gas is split into hydrogen and CO2 either by Steam Methane Reforming (SMR) or Auto Thermal Reforming (ATR), with the CO2 captured and stored. 

According to a report in S&P Global, the biggest case for blue hydrogen has been that it could be the pathway for green hydrogen. For oil and gas companies, access to depleted acreage for storing carbon is an advantage, and blue hydrogen can give them an early foothold with customers in Asia to grow the market further.

“Australian oil and gas companies are in a race with peers in the Middle East that have pilot projects to scale up blue hydrogen, oil majors like Shell are bringing in global technological expertise to lower hydrogen costs, and proponents of green hydrogen advocate taking the plunge without transitioning through blue hydrogen,” report authors stated.

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“There’s also the question of whether Australian LNG companies will look to hydrogen as a substitute for LNG in the long run, or just a diversification strategy, amid the debate about stranded assets.”

“Woodside is not proposing to switch from LNG to hydrogen production; our company strategy encompasses the development and production of both LNG and hydrogen,” a spokesperson from Woodside Energy said.

“Our current portfolio of hydrogen production opportunities involves separate facilities in separate locations from our base LNG export business, but in the general area of existing infrastructure,” she said.

“LNG is needed to meet the Paris Agreement global goals and the growing energy needs of the world’s population, but by 2050 we expect hydrogen will be important in the world’s energy mix and we intend to be part of that.”

Origin Energy‘s general manager of future growth Tracey Boyes said natural gas will remain key to global energy transition, especially in hard to abate industries, and its gas business was actively developing decarbonisation plans, as a part of which it was investigating opportunities in blue hydrogen.

“We have long-term supply contracts with LNG customers and are not looking to switch our infrastructure over to hydrogen production in this time; we see the two technologies as complementary in our portfolio,” Boyes said.

Santos CEO and APPEA chairman Kevin Gallagher said converting gas into hydrogen offered “the fastest, lowest-cost pathway to a hydrogen economy and, combined with CCS, could put Australia at the forefront of this new industry while the technology for renewable hydrogen evolves and the costs come down.”

The tricky part for Australian companies was timing their hydrogen investments, and when to decide between blue and green hydrogen, despite the oil and gas sector advocating blue hydrogen.

According to the report, a lot will depend on what customers like Japan are willing to pay for, as some technologies require more investment on the producer end and others on the receiving end.

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“Exporting hydrogen will require capital investment at production plants as well as in the transportation infrastructure. The scale of investment will depend upon the distances and hydrogen delivery mode,” S&P Global Platts Analytics hydrogen analyst Ankit Sachan said.

He said Australia has the unique advantage to produce grey (where CO2 is not captured) or blue hydrogen from natural gas in the short term and, as the demand grows, can radically increase investments in green hydrogen.

“Given the close proximity [to Japan and South Korea], Australia is targeting this future demand and collaborating with others so all can move up the learning curve together,” Sachan said.

Woodside’s spokeswoman said there are complementary roles for LNG, blue hydrogen and green hydrogen and “timing comes down to what customers want and are prepared to pay for, as well as the broader policy and regulatory settings in production and customer jurisdictions.”