What Incentives do Oil Majors Have to Invest in Hydrogen Technology?


INSIGHT


  • HYDROGEN HAS SOME MAJOR DISADVANTAGES THAT WILL LIKELY PREVENT IT FROM BECOMING A VIABLE SOLUTION IN TRANSPORTATION. OIL MAJORS RECOGNIZE THIS AND THEY ARE THINKING MORE ABOUT THE USAGE OF HYDROGEN IN INDUSTRY WHERE IT IS NEEDED. 

  • HYDROGEN SOLUTIONS MAY ONLY BE ATTRACTIVE TO OIL-IMPORTING COUNTRIES AS THEY NEED THE ENERGY. 

  • HYDROGEN IS PART OF THE ENERGY INFRASTRUCTURE OF THE FUTURE. IT IS NOT CLEAR TO WHAT EXTEND IT WILL PLAY A ROLE IN OUR FUTURE ENERGY SYSTEM.



1. A BRIEF SUMMARY OF THE PROSPECTS FOR HYDROGEN IN RELATION TO THE MAJOR OIL COMPANIES


This is a complex issue that deserves further attention. Hydrocarbon producers or fuel producers focus on energy yield. The more scientific term for this is EROI (energy-return-on-energy-invested). We want to get as much energy as possible out of a given energy source – with as little effort as possible. The right energy technology helps us to achieve this.

We try to give the customer what he wants. The customer, the buyer, wants energy in abundance, available almost everywhere for any purpose (B2C and B2B), as cheap as possible and as environmentally friendly as possible. It is within this frame of reference that we find ourselves.

As an oil producer, you try to scale operations. This is true for any business, but the scale of the oil business, other CAPEX (capital expenditures) and OPEX (operating expenditures) in the energy business is often much larger and requires much more capital upfront.

Planning often takes place over decades, and one must account for changes in the regulatory environment and the cyclicality of the business. First, this is only possible if you find the right energy source; second, this can only be achieved with the right energy technology. Third, you can only scale fast enough if you have relatively easy access to capital.

This brings us to the main point: hydrogen is generously supported by governments to pursue environmental goals. To achieve these goals, financing is made easier. For many hydrocarbon companies, the investment is worthwhile because:

1. one wants to build strategic partnerships with other companies in emerging, thriving areas of the energy industry to increase the value of the company.

2. one must consider that a successful entry into the hydrogen sector gives first movers an advantage.

3. one gains knowledge and benefits from spill-over effects and acquires new technologies that can be used elsewhere.

4. one builds up a comprehensive portfolio that includes various energy carriers.

We have written extensively on this topic, and if you would like, we refer you to the following post on our website, which also highlights the role of waste treatment in hydrogen fuel production.

More information on oil producers’ business models can also be found on the following page, which describes the challenges currently facing oil producers in global energy markets.


2. CONCLUSION


  • The major oil companies are looking for new opportunities on the market. They are not just focusing on hydrogen as a fuel, but a potential addition to their existing portfolio. 

  • Due to the volatility of the oil price, the available quantities of residual fuel oil and the disruption of the midstream supply chain, it makes sense to look at other options on the market.


Many thanks for the shared interest in the energy world!



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