The Great Unfunded Green-Hydrogen Dream of Europe’s Oil Refiners

(Bloomberg) -- Europe’s oil refiners have big plans to boost the use of green hydrogen to help them make fuel, an important component of the petroleum industry’s plans to cut its operational carbon emissions.

But with the clock ticking in the battle against climate change, the reality of what the industry has committed to remains modest. Green hydrogen comes from water and renewable electricity, while the vast majority of hydrogen made today comes from fossil fuels.

While using green hydrogen will help to clean up a refinery’s operations, it won’t have a big impact on the world’s overall carbon emissions because most of those occur when fuels are consumed rather than when they’re made. The gas is an essential part of oil refining, being used to take impurities out of fuels.

The first European plant to bring a so-called green hydrogen project online looks set to be Royal Dutch Shell Plc’s Rheinland refinery in Germany, with a small electrolyzer scheduled to start production in July. It will make about 1,300 metric tons a year. The International Energy Agency estimates global hydrogen usage is about 70 million tons annually, with consumption dominated by oil refineries and chemical makers.

With capacity of 10 megawatts, Rheinland is on a similar scale to pilot projects being developed across Europe by peers including Austria’s OMV AG and Spain’s Repsol SA. Over the course of a year, an electrolyzer of that size would produce enough hydrogen for less than a week at a complex like Rheinland. There are far bigger developments in the wings -- up to a few hundred megawatts -- but none of those have so far been funded.

“The problem is that the technology is still being developed, expensive to build and will need to increase in scale to make a significant difference,” said Jonathan Leitch, a director at Turner, Mason & Company.

While green hydrogen delivers higher carbon savings, refiners are also looking at so-called blue hydrogen, where projects tend to be bigger, at around 1,000 megawatts. Those rely on more-established carbon capture technology.

Carbon Capture

Refiners are more at home with blue hydrogen, described by Leitch as being pretty much the same as making hydrogen in a conventional refinery, except the carbon is captured and stored. The U.K., the Netherlands and Norway have the advantage here of being able to use caverns left over from the production of oil and gas to store carbon.

Companies across Europe are looking at using green or blue hydrogen, and most plan to use it in the production of fuels, rather than as a source of power. A refinery would need to make considerable modifications to run on hydrogen, with furnaces only able to tolerate a limited amount of hydrogen in the gas mix, according to Zoran Milosevic, a specialist with Eurotek Refining Services, a U.K.-based consultancy.

“Burning higher volumes of hydrogen in furnaces as fuel will be technically challenging and hardly economical,” Milosevic said.

Below is a list of hydrogen projects at European refineries. It includes projects where a developer mentions refiners among possible customers. It will be updated as developments take place.

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