Category: Nieuws

The UK government has decided to temporarily suspend competition rules for the country’s downstream oil sector in an attempt to alleviate supply-chain issues at fuel service stations.

The measure — known as the Downstream Oil Protocol — will exempt the industry from competition legislation so information can be shared and fuel supply optimised. “While there has always been and continues to be plenty of fuel at refineries and terminals, we are aware that there have been some issues with supply chains,” business secretary Kwasi Kwarteng said. “This is why we will enact the Downstream Oil Protocol to ensure industry can share vital information and work together more effectively to ensure disruption is minimised.”

The government has implemented the long-standing contingency plans after a sustained period of panic buying by motorists over the past few days forced many UK fuel service stations to close, with others running short of at least one grade of gasoline or diesel. The rush on service stations began late last week when it emerged that a shortage of qualified heavy goods vehicle (HGV) drivers had disrupted fuel supply to some forecourts. BP, which operates the largest number of filling stations in the UK, said at the time that 50-100 of its more than 1,200-strong network were running out of at least one grade of fuel and that a handful had been forced to close temporarily.

The supply chain problems have since been exacerbated by unusually high demand from motorists concerned about a looming fuel shortage, with long queues forming at service stations over the weekend. The exact number of filling stations affected is unclear. ExxonMobil and Shell, which operate the second- and third-largest number of fuel service stations in the UK, both declined to say how many of their forecourts had run out of fuel. But ExxonMobil stressed that fuel supply to its distribution terminals is normal and urged drivers to stick to their usual buying patterns, and Shell said it is working hard to ensure supplies for motorists. “Since Friday [24 September] we have been seeing higher-than-normal demand across our network which is resulting in some sites running low on some grades. We are replenishing these quickly, usually within 24 hours,” Shell said.

The Petrol Retailers Association (PRA) — representing independent fuel retailers, which now account for 65pc of the UK’s more than 8,000 forecourts — said it is impossible to ascertain how many of its members’ service stations have been affected. But it said its chairman, Brian Madderson, has spoken to a number of members who between them run around 200 sites and they reported 50-90pc are dry.

The PRA said it does not know how long the disruption will last. “However, our assessment is that if most vehicles are now full, this gives some respite to replenish the tanks,” executive director Gordon Balmer told Argus.

The UK Petroleum Industry Association (UKPIA) — a trade body representing refiners, renewable fuel producers, terminal operators and filling stations — has reassured the public that there are no reported issues with the production, storage or import of fuels.

Temporary visas

Supply chain delays caused by the shortage of HGV drivers are not unique to the UK’s downstream oil sector. They are being seen across the country’s economy, notably in the food industry. Freight industry group Logistics UK estimates that the country needs around 90,000 more HGV drivers. The UK’s Road Haulage Association published a report on the shortage in July, in which it identified Brexit, Covid-19, an ageing workforce, tax changes and unsatisfactory pay as being among the key factors.

The government announced a package of measures to tackle the shortage on 25 September, including a plan to give temporary visas to 5,000 HGV drivers for three months in the run-up to Christmas and deploying ministry of defence examiners to increase driver testing capacity. The government acknowledged that fuel tanker drivers need additional safety qualifications, and said it will work with industry to ensure people can access these as quickly as possible.

Argus by James Keates, September 29, 2021

The COVID pandemic has wreaked considerable damage on the economies of South America’s smaller fiscally fragile countries, with the former Dutch colony of Suriname hit especially hard.

During 2020 the impoverished South American nation’s gross domestic product shrank by 13.5%, the continent’s worst performance after Venezuela. A deeply impoverished Suriname now finds itself mired in a severe economic crisis that is threatening an already fragile state that only emerged from an intense political impasse during July 2020.

The depth of Suriname’s economic problem is reflected by the former Dutch colony defaulting on scheduled debt service payments for $675 million of sovereign debt during 2020. Since then, Paramaribo has been negotiating with creditors to cure the default. That resulted in international credit agencies Fitch Ratings and S&P Global Ratings downgrading Suriname’s credit rating.

President Chan Santokhi, who won the tiny South American country’s top office in the July 2020 election, is battling to resurrect a flailing economy and cast off the corruption as well as the malfeasance of the Bouterse administration. Like in neighboring Guyana, Santokhi’s government plans to exploit what appears to be Suriname’s considerable offshore petroleum wealth to revitalize the economy, bolster government finances and return the former Dutch colony to growth.

Despite Suriname only possessing oil reserves of 89 million barrels, the tiny South American nation possesses enormous oil potential. The impoverished country shares the Guyana Suriname Basin, which the U.S. Geological Survey estimates contains up to 35.6 billion barrels of undiscovered oil resources. Already, neighboring Guyana is experiencing a massive oil boom that saw its GDP expand by an exceptional 43% during 2020.

Exxon’s slew of quality oil discoveries in the Stabroek Block offshore Guyana, with the latest at the Pinktail well, point to even greater petroleum potential. Exxon along with partner Malaysian national oil company Petronas, which is the operator, found the presence of hydrocarbons at the 15,682-foot Sloanea-1 exploration well in offshore Suriname Block 52. The 1.6-million-acre Block 52 and neighboring 1.4-million-acre Block 58 are believed to lie on the same hydrocarbon fairway as the prolific Stabroek Block.

That proposition is supported by the five quality oil discoveries made by Apache and TotalEnergies, the operator, in Block 58 where they both hold a 50% interest.

Investment bank Morgan Stanley in 2020 announced that it had modeled the oil potential for Block 58 and determined that it could contain oil resources of up to 6.5 billion barrels.

Industry consultancy Rystad Energy estimates that the five discoveries made in offshore Suriname up until the end of June 2021 hold recoverable oil resources of up to 1.9 billion barrels of crude oil.

At the June 2021 Suriname Energy, Oil and Gas Summit Apache’s Vice President Global Geoscience and Portfolio Management Eric Vosburgh stated; “What I would say is that the ultimate scale of the resource and production potential is big. I think I need a word bigger than big, but it’s big.”

Apache and partner TotalEnergies are committed to developing Block 58. At the start of 2021, Apache announced that most of its annual $200 million exploration budget will be directed toward drilling in Suriname.

TotalEnergies set a 2021 exploration budget allocated $800 million with the energy supermajor devoting a third of its exploration appraisal activities to Block 58.

While plans to develop the block have yet to be released TotalEnergies and Apache are expected to make their final investment decision during mid-2022 and work toward first oil by 2025. Suriname’s national oil company and industry regulator Staatsolie has the right to farm into Block 58 and take up to a 20% stake, which would see it liable for $1 billion to $1.5 billion in development costs.

Paramaribo is also focused on attracting further energy investment in Suriname recently awarding three shallow-water blocks to foreign energy supermajors. TotalEnergies and partner Qatar Petroleum won Blocks 6 and 8, which are adjacent to Block 58, and Chevron was awarded Block 5.

That region is underexplored and thought to possess considerable petroleum potential. 

The medium and light crude oil found in Block 58 has similar characteristics to the Liza grade crude oil being pumped from the neighboring Stabroek Block. When that is combined with a low estimated breakeven price of around $40 per barrel Brent it is easy to see why offshore Suriname is especially attractive for international energy companies.

As further petroleum discoveries are made, oilfields developed and infrastructure built the breakeven price for offshore Suriname will fall to under $40 per barrel, making the region competitive with neighboring offshore Guyana and Brazil. 

The downgrades to Suriname’s credit rating will make it difficult for Paramaribo to raise urgently needed capital including that required by Staatsolie to exercise its farm in option for Block 58.

International ratings agency Fitch in April 2021 announced it had downgraded Suriname to restricted default (RD) after the government failed to make $49.8 billion of payments on its 2023 and 2026 notes.

That event according to the ratings agency was Suriname’s third default since the pandemic began in March 2020.

Those events highlight why Paramaribo must resolve the negotiations with creditors and the potential for a sovereign debt default if it is to build further momentum for the exploitation of Suriname’s vast offshore petroleum resources.

The current economic crisis coupled with the economy shrinking by nearly 14% last year emphasizes why Paramaribo must attract further investment from foreign energy companies so it can experience a massive economic boom like the one underway in neighboring Guyana.

It is French oil supermajor TotalEnergies which is positioned to become a leading player in Suriname’s emerging offshore oil boom.

Oilprice by Matthew Smith, September 22, 2021

WTI oil has recently made several attempts to settle above the $70 level but failed to gain additional upside momentum and pulled back.

However, WTI oil remains close to this psychologically important level and has a good chance to get back to yearly highs in the remaining months of this year.

It is already clear that coronavirus-related concerns have failed to put big pressure on oil as many traders were ready to buy any significant pullback. As a result, WTI oil has quickly rebounded from the $62 level to the $70 level.

While the situation with coronavirus remains a big concern for oil traders, recent data suggests that the number of new daily cases in the world has started to decline. Importantly, the number of daily deaths has began to decline as well.

Watching this grim data may be more important to the analysis of potential coronavirus-related restrictions around the world as governments will likely focus on critical cases and deaths rather than on total caseload as vaccination progresses.

Meanwhile, recent inventory reports indicated that crude inventories continued to decline. According to the latest EIA Weekly Petroleum Status Report, U.S. commercial crude inventories declined by 7.2 million barrels from the previous week. U.S. domestic oil production increased from 11.4 million barrels per day (bpd) to 11.5 million bpd but it will take a hit in the upcoming reports due to the negative impact of Hurricane Ida.

OPEC+ has recently decided to stick to its plan to raise oil production by 0.4 million bpd per month as the organization believed that demand recovery was strong despite challenges presented by the spread of the Delta variant of coronavirus.

In fact, OPEC+ increased its demand growth outlook for 2022 to 4.2 million bpd. The economic rebound continues at a robust pace thanks to the strong support from the world’s central banks and governments, and demand for oil looks strong as well.

The key question for the oil market is whether the world will have to deal with another wave of the virus at the beginning of the flu season in the Northern Hemisphere. More coronavirus-related restrictions may put pressure on demand growth, but governments’ desire for new lockdowns appears limited except for countries like Australia and New Zealand, which are located in the Southern Hemisphere.

In case developed countries manage to get through the beginning of the flu season without new restrictions, oil demand will continue to grow while crude inventories will remain under pressure. In this bullish scenario, WTI oil will have a good chance to test yearly highs near the $77 level.

Let’s start with the weekly chart. WTI oil failed to get to the test of the 50 EMA as it received strong support near the $62 level. The rebound was very strong, and WTI oil has quickly managed to get back above the 20 EMA which is located at $67.60.

Currently, WTI oil is stuck between the support at the 20 EMA and the resistance at the psychologically important $70 level. RSI is in the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

In case WTI oil manages to get back above the $70 level, it will head towards the next resistance at the $74 level. A move above this level will open the way to the test of the resistance which is located at yearly highs at the $77 level.

On the support side, a move below the 20 EMA will push WTI oil towards the recent lows near the $62 level. Oil ignored technical levels during the recent moves in the $62 – $67 range, but it remains to be seen whether it will be able to gain strong downside momentum and quickly get to the test of the recent lows near $61.75 as the oil market looks ready to buy strong pullbacks.

As usual, more levels can be found on the daily chart. However, it should be noted that the road to yearly highs still looks rather easy in case oil manages to settle above the resistance at the $70.

Most likely, the market will attract more speculative traders once oil settles above $70, and oil may quickly get to the test of the next resistance at $72.50. A move above this level will push oil towards the above-mentioned resistance at $74.

On the support side, a move below $67.60 will open the way to the test of the support level at $66. In case oil declines below this level, it will head towards the next support at $64. If oil manages to settle below the support at $64, it will move towards the support at the recent lows at $61.75.

S&PGlobal by Surabhi Sahu, September 14, 2021

Oil’s Rebound Continues As Crude Inventories Decline

WTI oil has recently made several attempts to settle above the $70 level but failed to gain additional upside momentum and pulled back. However, WTI oil remains close to this psychologically important level and has a good chance to get back to yearly highs in the remaining months of this year.

It is already clear that coronavirus-related concerns have failed to put big pressure on oil as many traders were ready to buy any significant pullback. As a result, WTI oil has quickly rebounded from the $62 level to the $70 level.

While the situation with coronavirus remains a big concern for oil traders, recent data suggests that the number of new daily cases in the world has started to decline.

Importantly, the number of daily deaths has began to decline as well. Watching this grim data may be more important to the analysis of potential coronavirus-related restrictions around the world as governments will likely focus on critical cases and deaths rather than on total caseload as vaccination progresses.

Meanwhile, recent inventory reports indicated that crude inventories continued to decline. According to the latest EIA Weekly Petroleum Status Report, U.S. commercial crude inventories declined by 7.2 million barrels from the previous week. U.S. domestic oil production increased from 11.4 million barrels per day (bpd) to 11.5 million bpd but it will take a hit in the upcoming reports due to the negative impact of Hurricane Ida.

OPEC+ has recently decided to stick to its plan to raise oil production by 0.4 million bpd per month as the organization believed that demand recovery was strong despite challenges presented by the spread of the Delta variant of coronavirus.

In fact, OPEC+ increased its demand growth outlook for 2022 to 4.2 million bpd. The economic rebound continues at a robust pace thanks to the strong support from the world’s central banks and governments, and demand for oil looks strong as well.

The key question for the oil market is whether the world will have to deal with another wave of the virus at the beginning of the flu season in the Northern Hemisphere.

More coronavirus-related restrictions may put pressure on demand growth, but governments’ desire for new lockdowns appears limited except for countries like Australia and New Zealand, which are located in the Southern Hemisphere.

In case developed countries manage to get through the beginning of the flu season without new restrictions, oil demand will continue to grow while crude inventories will remain under pressure. In this bullish scenario, WTI oil will have a good chance to test yearly highs near the $77 level.

Let’s start with the weekly chart. WTI oil failed to get to the test of the 50 EMA as it received strong support near the $62 level. The rebound was very strong, and WTI oil has quickly managed to get back above the 20 EMA which is located at $67.60.

Currently, WTI oil is stuck between the support at the 20 EMA and the resistance at the psychologically important $70 level. RSI is in the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

In case WTI oil manages to get back above the $70 level, it will head towards the next resistance at the $74 level. A move above this level will open the way to the test of the resistance which is located at yearly highs at the $77 level.

On the support side, a move below the 20 EMA will push WTI oil towards the recent lows near the $62 level. Oil ignored technical levels during the recent moves in the $62 – $67 range, but it remains to be seen whether it will be able to gain strong downside momentum and quickly get to the test of the recent lows near $61.75 as the oil market looks ready to buy strong pullbacks.

As usual, more levels can be found on the daily chart. However, it should be noted that the road to yearly highs still looks rather easy in case oil manages to settle above the resistance at the $70.

Most likely, the market will attract more speculative traders once oil settles above $70, and oil may quickly get to the test of the next resistance at $72.50. A move above this level will push oil towards the above-mentioned resistance at $74.

On the support side, a move below $67.60 will open the way to the test of the support level at $66. In case oil declines below this level, it will head towards the next support at $64. If oil manages to settle below the support at $64, it will move towards the support at the recent lows at $61.75.

YahooFinance by Vladimir Zernov, September 13, 2021

BTMS is a platform that integrates, upgrades or completely replaces existing systems. The primary purpose is supervising and managing Terminals, Tank farms and loading/unloading trucks, ships and rails.

BTMS was developed by engineers who have more than 30 years of experience in the oil & gas industry.  BTMS has the task of combining the functionalities necessary for the entire Monitoring and Management System to work in a way acceptable to operators, dispatchers and other business entities. Its task is to enable the exchange of data between SCADA, Tank System, Metering stations and other business and technological processes.  

Also, this software is responsible for inspecting all authorized business entities in the condition of the tank, active and inactive batches and transports (completed and planned) and the preparation and distribution of the necessary business reports, all in accordance with their assigned access rights. 

BTMS is made for: 

• Tank storages
• Terminals

Benefits: 

• Respect legacy

Maximal utilization of existing software’s and hardware’s 

• Open and flexible

Various connectivity options. 

Unlimited number of clients 

• Modular

Customer buys what he needs and when he needs it 

Clients can run on exiting computers 

• Cybersecurity 

Certified methods for cybersecurity, especially for plant and process data 

The BTMS platform can be divided into several modules: 

• Scheduler
• Planner
• Terminal Management
• Infrastructure
• Reports
• Control house (Laboratory)
• KPI

The system architecture follows four main guidelines that allow modularity and scalability of the system: 

• Component-based design – separation into specific independent sections
• Multi-level architecture – allows flexibility and reusability
• Distribution – allows easy scaling 
• Service Oriented Architecture – eases integration with other Systems

Cybersecurity 

BTMS is implemented in companies of strategic value and requires compliance with all network and application security levels. BTMS can be implemented in network infrastructures where the separation of process and business data networks is required. BTMS retains the existing task and functionality in such systems as well, and communication between these networks takes place via data diodes intended for one-way data flow. 

Terminal Management System 

Terminal Management System ensures efficient, accurate, safe, and secure material transfers for tank storage facilities/terminals. This module will help operators to manage and supervise tank farms, loading/unloading trucks, ships and rails. Terminal Manager also offers real-time data monitoring and connection to existing systems. Terminal Manager is a scalable, highly reliable solution that is appropriate for terminals of all sizes. 

Contains a real-time load / unload scheduler. 

Systematically enforces your schedule for accurate and reliable offloads and automatically triggers sample capture. 

Possibility of connecting with quality control laboratories. 

Berth monitoring: 

– sampling system management 

– manage the arrival / departure of ships 

– connection of measuring stations for loading/unloading ships 

Automation from entry to exit allows a facility to operates completely unmanned with site access to product offload handled by drivers. 

Accurate inventory tracking provides the information needed for planning and operations and customer position reporting. 

Easy-to-use, reliable system provides flexibility and supports additional growth as a terminal expands. 

Alarms, reports and balancing 

For more information, please contact us. 

Luvis Projekt d.o.o. 
Phone: +385 1 644 8222 
E-mail: info@luvis-pro.com 
www.luvis-pro.com  

U.S. oil major Exxon Mobil Corp, along with Chevron Corp, is seeking to bulk up in the burgeoning renewable fuels space by finding ways to make such products at existing facilities, sources familiar with the efforts said, as reported by Reuters.

The two largest U.S. oil companies want to produce sustainable fuels without ponying up billions of dollars that some refineries are spending to reconfigure operations to make such products. Renewable fuels account for 5% of U.S. fuel consumption, but are poised to grow as various sectors adapt to cut overall carbon emissions to combat global climate change.

Both Chevron and Exxon have massive refining divisions that contribute heavily to their overall carbon emissions. The companies have been criticized for a less urgent approach to renewable investments than European rivals Royal Dutch Shell Plc and TotalEnergies, and have generally spent a lower percentage of their capital than those companies on “green” technologies.

The companies are looking into how to process bio-based feedstocks like vegetable oils and partially processed biofuels with petroleum distillates to make renewable diesel, sustainable aviation fuel (SAF) and renewable gasoline, without meaningfully increasing capital spending.

Commercial production of renewable fuels is costlier than making conventional motor gasoline unless coupled with tax credits.

A task force was created at Exxon’s request within international standards and testing organization ASTM International to determine the capability of refiners to co-process up to 50% of certain types of bio-feedstocks to produce SAF, according to the sources.

Exxon says it will repurpose its existing refinery units among other strategies to produce biofuels. It aims at more than 40,000 barrels per day of low-emission fuels at a competitive cost by 2025.

“We see the potential to leverage our existing facility footprint, proprietary catalyst technology and decades of experience in processing challenging feed streams to develop attractive low-emission fuels projects with competitive returns,” spokesperson Casey Norton said in an e-mailed response.

Chevron is looking into how to run those feedstocks through their fluid catalytic crackers (FCC), gasoline-producing units that are generally the largest component of refining facilities.

“Our goal is to co-process biofeedstocks in the FCC by the end of 2021,” a Chevron spokesperson told Reuters, to supply renewable products to consumers in Southern California.

The company is partnering with the U.S. Environmental Protection Agency (EPA) and California Air Resources Board (CARB) to develop a path to produce fuel that would qualify for emissions credits.

A source familiar with the matter said if approved by the EPA and CARB, Chevron would be able to produce and generate credits for renewable gasoline. That product is not yet commercially available, but can reduce carbon dioxide emissions by 61% to 83%, depending which feedstock is used, according to the California Energy Commission.

Chevron said on its earnings call earlier this month that in the second phase of its process, it would be the first U.S. refiner to use the cat cracker to produce renewable fuels.

“We did it this way, in part, because it’s very capital-efficient … It’s literally just a tank and some pipes,” Chevron Chief Finance Officer Pierre Breber said on the call.

Congress is considering legislation for tax credits that would further spur refiners to process sustainable aviation fuel commercially.

Some refiners, like San Antonio-based Valero Energy Corp and Finland-based Neste, have ramped up production of renewable fuels from waste oils and vegetable oils to cash in on lucrative federal and state financial incentives. Several U.S. refiners are in the midst of partially or totally converting plants to produce certain renewable fuels, particularly diesel.

If approved, new methods of producing renewable fuels at refineries could allow refiners to avoid lengthy environmental permitting processes. Many of these processes are still undergoing further testing to see which can make renewable fuels commercially, but without damaging refining units.

By BIC Magazine, September 16, 2021

Oil and gas companies have long delivered the fuels that form the bedrock of today’s energy system, but against a backdrop of persistently high global emissions, they are coming under increasing pressure to deliver solutions to climate change.

While these may sound like binary choices, most companies will likely try to do both. In practice, the two are closely interlinked, as most of the financial resources for diversified spending, at least initially, will come from traditional investments in oil and gas supply.

While individual company approaches to the energy transition vary, capital expenditure on clean energy is seeing an increasing share of overall investment. Companies — most notably the large European players — are now actively seeking to ramp up their transition to renewables.

BP says it will increase its annual clean energy investment from USD 500 Mn in 2019 to USD 5 Bn per year by 2030, with an interim goal of USD 3-4 Bn per year by 2025. Total has announced that some USD 2.5 Bn of its planned total investment of USD 12-13 Bn in 2021 will go into renewables and electricity (including gas-fired power). Shell is targeting a 25% share of investment on clean energy capital expenditure by 2025. Eni’s

strategic plan for 2021-24 targets 20% of average yearly capex of EUR 7 Bn to clean energy projects. Additionally, several companies including Saudi Aramco and ADNOC, are exploring possibilities to develop low-carbon hydrogen production, as well as investments in CCUS.

The IEA’s World Energy Investment 2021 report suggests that these commitments are already starting to have an impact. If the current trajectory is maintained for the full year, the share of capital investment going to clean energy investments could rise to more than 4% in 2021 from 1% in 2020.

The Oil and Gas Industry’s Eye for Hydrogen

According to a survey of over 1,000 oil and gas executives by consulting firm DNV GL, the proportion of oil and gas companies intending to invest in the hydrogen economy doubled from 20% to 42% in 2020. Half of senior oil and gas professionals expect hydrogen to be a significant part of the energy mix by 2030, with a fifth of surveyed oil and gas companies already active in the hydrogen market.

For over a century, oil companies have spent tremendous sums of money to deliver fuel to the power and industrial sectors. If hydrogen is supposed to replace petroleum in that equation, no one could reasonably be expected to have better expertise than Big Oil.

As of the end of June 2021, there were 244 large-scale green hydrogen projects planned, according to the Hydrogen Council, an industry group, up more than 50% since the end of January. It estimates tens of billions of dollars have already been earmarked for hydrogen projects.

BP, Shell and Total are all pursuing multimillion-dollar hydrogen projects themselves, often with government support, as they seek to redefine their future role in a world less reliant on fossil fuels.

BP is exploring the use of hydrogen to replace natural gas in industries such as steel, cement, and chemicals, and also as a substitute for diesel in trucks. Overall, BP forecasts hydrogen could account for about 16% of the world’s energy consumption by 2050–if net-zero carbon emissions goals are to be achieved–up from less than 1% today. However, BP doesn’t expect green hydrogen to be a material part of its business until the 2030s, and it has yet to make a final investment decision on any new hydrogen projects.

Shell also is grappling with high costs. This month, the company started up what it said is Europe’s largest green hydrogen plant, to supply its Rhineland refinery in Germany. But that hydrogen is between five and seven times more expensive than the fossil-fuel-based product it predominantly uses.

Shell hopes it can reduce costs by building hydrogen projects in strategic locations alongside customers’ plants, like at ArcelorMittal’s steel mill in the German port of Hamburg, where it can also add hydrogen refueling stations for trucks.

The industry is also getting government support. The European Union paid half the roughly $23 Mn cost of Shell’s Rhineland project and has earmarked funding for hydrogen as part of its pandemic recovery program.

Notably, The EU’s proposed ~$558 bn plan to switch to hydrogen by 2050 is dwarfed in comparison to the typical spending of the oil and gas sector (~US$500 bn) in developing new fields every year. Shifting just a small share of the sector’s spending into hydrogen could be enough to drastically increase the technology’s scale and economics.

Another key expected area of overlap between the current petroleum economy and a hydrogen future is likely to be in midstream infrastructure: pipelines, ships, and storage facilities.

Salt caverns – artificial caves already widely used to store oil and gas, including the U.S. strategic petroleum reserve – are likely to be critical nodes in the hydrogen network. A few are already in use for industrial hydrogen, but many more will be needed. One study conducted in 2020 estimated a capacity to store about 7.3 PWh (1 PWh = 1 billion MWh) of hydrogen in salt caverns near Europe’s coasts, equivalent to nearly two years of the continent’s electricity demand. Depleted oilfields can play a similar role in areas where salt formations aren’t available. No industry understands this geology better than the oil and gas sector.

Engineered infrastructure will also be key. In the Netherlands, a consortium including Shell is planning to put green hydrogen produced by a giant 10 GW offshore wind farm through pipelines serving the declining Groningen gas field, which would otherwise be scrapped. At the port of Rotterdam, another group is hoping to spend about EUR 2 Bn re-powering the local industrial cluster with blue hydrogen instead of conventional fuel.

Critics of Big Oil’s push towards hydrogen

Consultants and oil company executives argue that an interim step to reaching large-scale green hydrogen production is to capture and store carbon generated by making hydrogen from natural gas to reduce emissions–making what is known as blue hydrogen.

Critics contend that the fossil fuel giants have been heavily talking up hydrogen as most of the world’s hydrogen supply is currently produced from natural gas. Blue hydrogen may offer an intermediate step towards green hydrogen. However, it may also end up like coal power with CCS: previously hailed as a promising way of reducing emissions but now seen as a costly dead-end that provided cover for the last burst of coal investments in Asia.

Others argue that oil and gas companies are pouring money into lobbying efforts to direct public investment towards building a hydrogen economy (with considerable success notable in Canada, Germany, and the UK) to delay the transition to electrification. These companies will be key players embedded in the hydrogen value chain if the fuel “works”, and will have slowed the shift to electricity if it does not.

Either way, the scale of the challenge before us is vast. The world will need to produce 80 exajoules (or 660 million tons) of hydrogen a year by 2050, according to the Hydrogen Council. Doing that with electrolyzers, the only viable zero-carbon pathway, would require more electricity than the entire world produced in 2019. That will need about nine times more wind and solar generators than exist worldwide to date.

Whether Big Oil’s advance into the hydrogen economy will help or hinder the global effort to decarbonize the planet remains to be seen.

Power-eng by Danyel Desa, September 1, 2021