Kavan Choksi on Big Oil and Green Hydrogen

Kavan Choksi is delighted that oil firms are finally contemplating large-scale investments that would make green hydrogen a heavy industry after years of tinkering. They're chasing a specific vision of a low-carbon future: multibillion-dollar projects that generate massive amounts of renewable energy. The aim is to transform it into chemicals or clean fuels for global delivery via power trucks, ships, and even planes.

"This green hydrogen will be the new energy business," Julien Rolland, head of power and renewables at commodities trader Trafigura Group Pte Ltd, said.

Even with such advantages, Kavan Choksi thinks the idea is still a large investment in an unproven technology that may fall short of its potential.

Deep Pockets

There has been a lot of major news about hydrogen last month. For example, according to Paul Bogers, Shell PLC's vice president for hydrogen, it's only a matter of time until the company launches its latest megaproject. Shell is searching for a location with enough wind and solar resources for a large-scale project that will use the company's assets, he said in an interview on the sidelines of the Financial Times Hydrogen Summit in London.

Chevron Corp., one of the world's largest oil companies, is set to invest billions in a hybrid of green and blue hydrogen that splits natural gas and captures and stores carbon dioxide through a chemical reaction. Trafigura, a smaller player in the oil market, is looking at various midsize green hydrogen projects, including a 440-megawatt plant near Adelaide, Australia.

While the trading house lacks the financial strength of a major oil company, it plans to design large-scale projects with several gigawatts of capacity, including one in South America, and then collaborate with a larger company to build it, according to Rolland.

The Future’s Lifeline

The global super-majors still spend most of their money on oil and gas, but Kavan Choksi believes low-carbon energy is becoming increasingly necessary. The quest for low-carbon energy has involved significant investments in sectors other than its core industry, such as offshore wind farms, solar plants, battery technologies, and electric-car charging stations.

The majors' hydrogen plans have been limited until lately. BP is developing an electrolyzer to produce green hydrogen for those facilities at its Castellon plant in Spain and Lingen refinery in Germany. Last year, Shell began operating a 10-megawatt hydrogen production plant for its Rheinland refinery in Germany, with plans to grow capacity.

Annex described hydrogen as "a lifeline into the future" for Big Oil because of its complicated pressurized pipelines and storage facilities, processing plants, and the specialized tankers necessary for delivery.

Another natural synergy exists for businesses that have a long history of seeking the world's largest concentrations of energy and markets and discovering low-cost means to connect them.

Long-Term Strategy

While large-scale projects may be the future of green hydrogen, Pierre-Etienne Franc, CEO of Hy24, a joint venture between asset managers Ardian SAS and FiveT Hydrogen, believes there is still a long way to go before they can be proven financially viable.

"You can't get from 10 megawatts to gigawatts overnight," Franc explained. First, facilities on the order of hundreds of megawatts will be required, which is ten times the size of current pilot projects in Europe. He claims that these will improve operational expertise and electrolyzer manufacturing capability, allowing him to grow to the next level.

However, Kavan Choksi argues large-scale hydrogen may represent the best hope for the current generation of oil majors to remain essential players in a climate-compatible energy economy in the mid-twentieth century.