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Why Oil And Gas Companies Are Considering Green Hydrogen

As interest in green hydrogen picks up worldwide, energy firms are using a variety of renewable energy projects to power hydrogen production. One major source for this production is wind power, thanks to decades of development of wind farms worldwide. Green hydrogen has been hailed by many as a magical fuel that could eventually provide an alternative to diesel and jet fuel, as well as a movement away from the sole reliance on electric batteries – produced using mined metals and minerals. However, the reason for the sudden interest in green hydrogen by many energy companies is to support longer-term oil and gas production by helping to decarbonize operations. 

The U.S. Office of Energy Efficiency and Renewable Energy believes that the net-zero carbon emissions by 2050 target cannot be achieved by relying purely on renewable electricity. Instead, green hydrogen could provide households with a vital heating source and could contribute substantially to the decarbonization of the transport sector. It could also be used in industries that currently rely heavily on fossil fuels, and in agriculture. While the production of blue and grey hydrogen – using natural gas to drive output – is already fairly common, the production of green hydrogen from renewable energy sources is less typical. 

The growing number of wind farms in the U.S. and other countries around the world could help energy companies to shift their hydrogen production practices from blue and grey to green. Green hydrogen is produced using renewable electricity to power an electrolyzer, which then splits water into hydrogen and oxygen. The gas is then burned to produce power, emitting only water vapor and warm air, making it carbon-free. The potential for green hydrogen produced from wind energy is significant, as both onshore and offshore wind operations are expanding at a rapid rate.

In the U.S., the offshore wind pipeline grew by 13.5 percent in 2021, compared to 2020, with 40,083 megawatts (MW) now in various stages of development. In 2021 and 2022, the government expanded the areas of the U.S. available for offshore wind development, auctioning several new lease areas. This development was supported by the falling costs of wind energy projects, with the cost of commercial-scale offshore wind projects decreasing by 13 percent, to $84/MW-hour on average. Meanwhile, global offshore wind installations saw a record year in 2021, with the commissioning of 17,398 MW of new projects, meaning a global installed capacity of over 50 GW

The development of the green hydrogen industry is seen as key to a green transition as it has the potential to replace natural gas in heating, as well as to be used in place of diesel and other fuels. In Europe and Asia, numerous large-scale green hydrogen projects have been announced over the last year, with a major hydrogen corridor planned for Europe. At present, the production of green hydrogen is expensive compared to other forms of renewable energy. However, much like solar and wind power, production prices are expected to drop significantly as hydrogen operations expand worldwide. 

But many energy companies are looking to green hydrogen not only to support the transition away from fossil fuels but to decarbonize oil and gas operations to boost their longevity. In the Gulf of Mexico, offshore wind farms have attracted great interest, with some looking to use the energy to power homes in Texas and Louisiana – around 3.1 million houses in total – and others seeing the potential for powering oil refining operations. The Biden administration plans to build 30 GW of offshore wind by 2030, capable of powering 10 million homes. But others are eyeing the windfarms for their potential to fuel green hydrogen projects that could power industrial processes, helping energy firms to decarbonize operations. 

Green hydrogen would be sent to shore via oil and gas pipelines, replacing fossil fuels in powering oil operations, reducing carbon emissions by as much as 68 percent. This would be the first project of its kind and could spur other companies around the globe to do the same. Some opponents believe it would be prolonging the lifespan of the fossil fuel projects that they wish to end. The national policy director for Taproot Earth, Kendall Dix, explained: “Hydrogen is, at worst, a false solution and, at best, potentially a distraction.”

Many oil and gas majors have already started to shift to lower-carbon oil operations by moving away from aging oil regions to new areas, such as Africa and the Caribbean, and incorporating carbon-cutting technologies. Wind-powered hydrogen production is just the latest trend that Big Oil is jumping on as a means of extending the potential lifespan of oil and gas operations, to meet the high global demand while decarbonizing. But many believe this is a fallacy and that as demand for green hydrogen increases, the clean fuel source could be better used for heating and transportation in a bigger transition away from fossil fuels.

By Felicity Bradstock for Oilprice.com

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