Could offshore operations become a ‘hydrogen hub’?

In the 1970s, Aberdeen transformed from a fishing port to an outpost of Texan oil men tapping black gold from beneath the North Sea. Today, its streets are home to hydrogen buses. While it’s the city council that has invested in the buses, oil and gas companies are following, driven by investors, governments and the public and net-zero commitments.

In a net-zero world, hydrogen offers a ‘clean’ route to market for natural gas, using it to produce ‘blue’ hydrogen alongside carbon capture and storage, as well as to enter new markets (for ‘green’ hydrogen produced by electrolysis of water) and remain “relevant and investible,” Swedish oil firm Lundin Energy’s CEO told an industry event in February.

It’s a form of energy – in molecules – the oil and gas companies are familiar with. It’s already used in the refinery process, it fits their business models, from production through to transport, and they even understand how to store it in geological formations (in principle).

According to a US consortium including Chevron and Shell, the hydrogen economy has the potential to generate 700,000 US jobs and $140bn (£100bn) a year in revenues by 2030. The figure has been put at around £9bn a year in the UK, just for producing it. Analysts Rystad predict that upstream oil and gas portfolios could see their value drop by 30-40 per cent, as the energy transition speeds up.

BP’s CEO Bernard Looney has described hydrogen as being “like an LNG-type business in its infancy,” while Shell’s CEO Ben van Beurden has said “It’s absolutely essential for the energy mix of the future. Without hydrogen by 2050 I do not believe we can aim to be a net zero economy.”

Van Beurden also warned that it will take time. There’s no market for hydrogen yet and it’s more expensive than both the gas and electricity used to make it.

Mike Tholen, upstream policy director at industry body Oil & Gas UK, says: “We need to start growing a market now for it to be the right scale by 2050 (the UK’s net zero target).” Blue hydrogen is the fastest way to do that, he argues, as there’s not yet enough renewable electricity in the system. But we do also need to be working on green hydrogen solutions, he says.

A large focus has been put on major integrated schemes to decarbonise entire industrial regions, to create scale. Incorporation of blue or green hydrogen depends largely on regional factors - for example: CO2 pricing, access to low-cost renewable power and/or gas grid infrastructure.

Norwegian energy firm Equinor is involved in various blue hydrogen projects across Europe, including the Zero Carbon Humber alliance, the kick-starter project of which, Hydrogen to Humber (H2H) Saltend, could initially comprise a 600MW auto-thermal reformer (ATR) with carbon capture, the largest plant of its kind in the world, to extract hydrogen from natural gas. Equinor’s ambition is to expand the infrastructure at Saltend five-fold, enough for 3GW of blue and green hydrogen by 2030.

The H21 report, which Equinor contributed to, sets out a wider North of England vision for 12GW of hydrogen production from nine ATR units, with 8TWh of hydrogen storage in 300,000 cubic metres of caverns and 17 million tonnes per annum of underground offshore CO2 storage.

Steinar Eikaas, VP of low-carbon solutions at Equinor, says: “H2H Saltend is our flagship project in the UK because it’s the first step on a journey which will make what’s today the UK’s most CO2-intensive cluster fully carbon-neutral by 2040. We believe you need this scale to kick-start the hydrogen economy.

“The ideal is full electrification and renewables to generate the electricity. That’s the ideal. But you cannot electrify everything. You need energy storage; you need the muscles in molecules-based energy. Today, it’s oil and gas that deliver this, and hydrogen can replace those.”

Equinor’s other projects include converting a Dutch power station from running on natural gas to blue hydrogen, with hydrogen storage for production flexibility. The hydrogen would cost 50 per cent more than natural gas, but would still be half the cost of electricity, says Equinor. It’s also testing use of the gas grid to distribute hydrogen to homes and industry.

Oil companies Total, Chrysaor and Shell are involved in the Acorn project in Scotland, which is looking to capture CO2 from St Fergus gas plant then store it underground offshore, as well as producing blue hydrogen. Shell, SSE, Arup and others are considering converting imported LNG to blue hydrogen at the Isle of Grain to supply London. A 200W initial project is expected to see first hydrogen in 2026/27. Centrica is assessing hydrogen storage at Rough, where it usually stores natural gas. The list of projects grows daily.

Green hydrogen is also a focus. Projects include NortH2 in the Netherlands, involving Shell and again Equinor, targeting 0.4 million tonnes of green hydrogen production by 2030 and 1 million tonnes by 2040, using power from offshore wind. Some projects use both, such as Shetland’s Orion project.

A big challenge, when producing green hydrogen from offshore wind, is where to do it. Rene Peters, at Dutch technology institute TNO, has been researching this area for some time. He says: “When you move to floating wind and deeper offshore, you have got to question how to bring that energy to demand centres. Converting it to hydrogen is probably one of the easiest ways to do that.”

One reason is existing power cable limitations. Dutch/German grid operator TenneT is developing an HVDC connection to transmit 2GW of offshore wind to shore. It’s expensive, and “you are on the edge of what’s possible,” says Peters. What’s more, 100km-long HVDC power cables, with converter stations, will cost more than €1bn (£858,000). A pipeline can transport hydrogen at a tenth of the cost, Peters says, and existing natural gas pipelines could be used.

The Dutch PosHYdon project is looking to test these concepts. An initiative of Nexstep, a Dutch association focusing on reuse of facilities, and TNO, it involves putting a 1MW PEM (polymer electrolyte membrane) electrolyser on an offshore gas production platform, powered with wind-generated energy from shore, to create green hydrogen from seawater.

“The main aims are how to handle saline (seawater) and operating in a harsh environment,” explains Peters. “It’s also looking at how efficient and effective intermittent operation is, because wind is not always at full power.”

In the UK, a Crown Estate Scotland study is looking at whether oil platforms could be reused as hydrogen production hubs. Companies, including fabricator Lamprell, are even considering floating hydrogen production units. Another option, being pursued in Denmark, is energy islands, where offshore wind energy can be redistributed as power or hydrogen.

It seems it’s all to play for. There are no technical hurdles to using hydrogen, says Eikaas. “To switch from natural gas to hydrogen, from a technology perspective, is not difficult. It will cost more, so there are economic hurdles. There’s also a safety component. Hydrogen needs to be managed differently, but it’s safe if managed the right way.” Another hurdle is the political dimension, he says. “We’re fully dependent on politicians delivering on their ambitions.”

It’s also a big industrial opportunity. “This is a little bit like the industrial revolution 200 years ago,” he explains. “Everything since has been incremental steps. To get to net zero from where we are today is really going to be a transformation.”

Martyn Tulloch, head of energy system integration at OGTC, a technology accelerator in Aberdeen, also says the commercial framework is not there yet. “We need a CO2 tax, the contracts for difference piece. But governments and the EU are now starting to move to meet their national strategies.”

Malcolm Forbes-Cable, vice-president for upstream consulting and supply chain lead at consultancy Wood Mackenzie, says the oil majors can see the long term and hydrogen’s strategic importance. “But we are also still at the early stage of understanding these things and how oil companies can play in it – as producer, distributor – and what the business model is.”