BP Plc will exit its role in a massive green hydrogen production facility planned in Australia as the British oil major refocuses on the fossil fuels that drive its profits.
The company told its partners in the Australian Renewable Energy Hub that it plans to leave the project as both operator and equity holder, according to a statement from a BP spokesperson. It’s the latest setback for green hydrogen, a fuel once touted as a key way for Big Oil to profit from the energy transition that has so far proved too costly for mass production and consumption.
The AREH project company will take over as operator over coming months with support from founding partner InterContinental Energy, according to an AREH spokesperson. BP’s decision to exit the project doesn’t reflect the opportunity the hub presents to decarbonize the Pilbara and support the creation of a green iron industry, they said.
BP’s entry into the project – once estimated to cost about $36 billion – came at a time when the company sought to rapidly build up a business in low-carbon energy and shrink its oil business. But after years of stock under-performance compared with its peers and the departure of the plan’s architect – Chief Executive Officer Bernard Looney – BP has refined its strategy to focus more squarely on profits than green goals.
The company is far from alone in leaving its ambitions for green hydrogen behind. Scores of companies that once saw the fuel as the next big thing in energy have cut back plans as hoped for cost declines failed to materialize.
Also on Thursday, Fortescue Ltd. said it would abandon plans for a $550 million Arizona Hydrogen Project in the US and a $150 million PEM50 Project in Gladstone, Australia – resulting in a pretax writedown of $150 million. Meanwhile, Woodside Energy Group Ltd. reported a profit hit after ditching a major hydrogen project in the U.S.
Around a third of the announced green hydrogen pipeline in Australia has now been suspended or cancelled, according to Nigel Rambhujun, hydrogen analyst at Rystad Energy. A lack of commitment from buyers is the biggest issue for such projects in the country, he said.
Green hydrogen is made by splitting water molecules into hydrogen and oxygen using electricity. That means cost reductions are limited by how cheaply you can produce power.
The Australian Renewable Energy Hub aims to install 26 gigawatts of solar and wind capacity over a vast 6,500-square-kilometer (2,500-square-mile) stretch of Western Australia’s Pilbara region, an area bigger than Delaware.
News of BP’s decision was earlier reported by the Australian Financial Review newspaper.
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