Blue hydrogen supply growth likely to be negligible

Oil&Gas Materials 15 February 2021 10:21 (UTC +04:00)

BAKU, Azerbaijan, Feb.15

By Leman Zeynalova – Trend:

The scope for the use of green and blue hydrogen in the refining sector in the coming decade is relatively limited, Trend reports with reference to Fitch Solutions.

“There are several reasons to suppose this. The International Energy Administration estimates that, globally, around 35 percent of hydrogen consumed in the downstream is produced as a by-product. The remainder of demand is either met by dedicated onsite production (40 percent) or by third-party suppliers (25 percent), with the latter typically only available in built-up industrial areas. On-site production is dominated by steam methane reforming (SMR) and so, for refineries looking to decarbonise their supply, the application of carbon capture utilisation and storage (CCUS) is a valid option. Not only does CCUS offer cost benefits in this context, oil and gas companies would stand to gain from its wider uptake across industries,” said the company in its latest report.

This should see the supply of blue hydrogen increase over the coming decade, according to Fitch Solutions.

“However, the growth will likely be negligible. The Global CCS institute records only four CCUS projects in operation at hydrogen facilities, in Canada, France, Japan and the US with only four projects currently under development. The prospects for green hydrogen are also relatively limited in the near term. We are aware of only two projects currently under development – the REFHYNE project at Royal Dutch Shell’s Rheinland refinery in Germany.

The project is set to come onstream over 2021, but is small scale, at just 10 MW. In August 2020, the WESTKUESTE 100 project, which aims to produce green hydrogen to feed the Heide refinery (also in Germany) also announced that it had secured the necessary funding to begin construction. The first phase of the project includes a 30 MW electrolysis plant and is slated for completion in 2025.

Despite the small project pipeline, it is our view that green hydrogen will likely form a larger part of long-term clean hydrogen supply in the refining sector than blue hydrogen, given faster cost reductions and stronger levels of public and policy support and an increasing number of new projects joining the pre-FID pipeline. Nevertheless, given the long lead times on these types of projects (typically five to seven years from the date of announcement), we can assume that the supply of clean hydrogen to the refining sector will remain severely limited across the coming decade,” said the company.


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