OPINION: In the battle of ideas over proper energy-transition pathways, the oil and gas industry has largely surrendered the notion that oil exploration and production can keep growing at rates seen in the past.
Few in the industry are willing to accept the scenario proposed by the International Energy Agency (IEA) that all exploration must stop now if the world is to meet the Paris climate agreement goals.
And few major oil-producing countries have signalled their intention to halt all new licensing.
Role of gas
But the more intense scientific and public relations battles are now being waged around the role of natural gas in the energy transition.
Countries with huge gas reserves are arguing that gas is the key to a smooth energy transition to net-zero carbon emissions.
They say that with carbon capture and storage (CCS) facilities, there is nothing to stand in the way of this lower-carbon fuel.
Others say all of this is a financial distraction from building out zero-carbon dioxide renewable power while CCS remains expensive and unproven at huge scale.
In determining clean hydrogen’s role in the transition, governments and companies are still grappling over whether gas should play a part, even if hydrogen made with renewables has better future prospects.
Is this fuel the easy answer to decarbonising carbon-intensive industries, as well as heavy truck transport and domestic heating?
The latest annual energy outlook by Equinor refers to a “hydrogen frenzy”.
Yet for now, the Norwegian state-controlled oil company concludes this is mainly talk. “Massive, prolonged policy support” would be needed for hydrogen to really take off, it argues.
Major oil companies Shell and BP — and the IEA — have historically underestimated the speed and growth of non-fossil fuels, such as solar and wind power.
Green or blue H2
While “green” hydrogen (made with renewables) might be the dream ticket, surely “blue” hydrogen made with natural gas plus CCS would also be clean hydrogen. For now, blue hydrogen remains the cheaper and quicker way to make progress.
The German Cabinet has been split in two over the green/blue issue, leaving the door open to both in its national hydrogen strategy.
The European Union itself is under similar pressure, but committed to building 40 gigawatts of green hydrogen capacity at home and a similar amount abroad.
The UK’s Hydrogen Taskforce, which launched last year and has attracted the ear of government, sees a significant future for hydrogen — but avoids the green/blue question.
Shell, involved in the UK taskforce, has just signed a deal with Australia’s Worley to construct a green hydrogen plant in the Netherlands powered by an offshore wind farm.
The UK taskforce argues the national pipeline “grid” that supplies most homes with gas for heating and cooking should at least be set up to blend quantities of hydrogen into it, thus reducing the CO2 content.
Scotland has set up its own review of hydrogen’s potential, seeing roles for both renewables and North Sea gas.
Green hydrogen rising
A recent survey from credit and data agency Fitch Solutions suggested green hydrogen projects are ascendant.
Fitch counts four blue and 76 green projects in planning and development worldwide, with Western Europe leading the way.
Meanwhile, the US Department of Energy has launched an “earth shot” aiming to cut green hydrogen costs by 80% in the next decade.
The fight for the role of gas in the energy transition may be won or lost around hydrogen.
(This is an Upstream opinion article.)