India-based Essar Oil has struck a £750 million ($1.02 billion) provisional deal to develop what is expected to be the UK’s first blue hydrogen hub on Merseyside, north-west England.

Essar Oil and Progressive Energy — developers of HyNet North West, a major UK industrial decarbonisation cluster — signed a memorandum of understanding to form a joint venture to produce hydrogen at the Stanlow refinery in Ellesmere Port, on the west bank of the Mersey river, opposite Liverpool.

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The initial facility aims to produce 350 megawatts of hydrogen and start up in 2025, Essar Oil UK chief executive Stein Ivar Bye told the Financial Times, with the target of bringing a second 700MW facility online two years later.

This will go some way to meeting the government’s target of generating 5 gigawatts of low-carbon hydrogen production capacity by 2030.

Essar and Progressive will await details of the UK’s new subsidy regime before they take a final investment decision on the project.

Gas and fuel gases from the Stanlow refinery will be converted to hydrogen, with carbon dioxide captured and stored offshore in sub-surface reservoirs in Liverpool Bay.

In October, Italian player Eni was awarded a storage licence to use its Hamilton, Hamilton North and Lennox gas reservoirs in Liverpool Bay for CO2 storage.

The hydrogen hub aims to deliver clean energy to industry in HyNet’s low-carbon cluster and also to fuel buses, trains and heavy goods vehicles, as well as heating homes and generating electricity.

The project will use Johnson Matthey’s Low Carbon Hydrogen technology, with Canada’s SNC-Lavalin advancing engineering studies through funds provided by the UK government.

Bye said: “HyNet and hydrogen production is integral to Stanlow’s strategy and will set it on a journey to be the UK’s first net-zero emissions refinery, with the ambition to avoid emissions of over 2 million tonnes of carbon dioxide to the atmosphere per year.

“With the support from government to establish the appropriate business incentives, together with Progressive Energy, we are committed to undertaking the development and the financing of its construction.”

Justin Madders, the local member of parliament, hopes Ellesmere Port “will play a central role in the green jobs revolution we need to meet the challenge of climate change”.

Four other combined blue hydrogen-carbon capture and storage hubs being planned in the UK are at various stages of evolution.

Two are in north-east England, at Humberside and on Teesside; one is at Grangemouth in south-east Scotland; and the other is in Port Talbot, south Wales.