How Oil & Gas Companies Can Help Build the Hydrogen Economy

A series of unforeseen events in recent years has led to a global energy crisis. Among these events, the Russia-Ukraine war left many countries struggling to get adequate supply of oil and natural gas.

What’s the way out for these countries?

They must lower the dependence on a single region for supplies and intensify their efforts to move away from fossil fuels and diversify the energy mix.

Hydrogen, which is widely available, has become a popular choice as an alternative to traditional fuel.

Additionally, the push for eco-friendly energy and sustainability has also fueled the demand for hydrogen, as it does not emit harmful substances into the atmosphere.

In 2022, the global demand for hydrogen reached 113 million tons, accounting for 2.8% of the final global energy consumption, states a GEP white paper. In the same year, its demand in the transportation industry increased to 48 thousand tons, a 60% increase over the previous year, the paper adds.

Not surprisingly, the number of heavy-duty hydrogen trucks used in logistics increased sixfold in 2022 compared to 2021.

Many cities, particularly in Europe, are investing in a fleet of hydrogen-powered buses to lower emissions.

With demand for hydrogen rising at a tremendous pace in energy as well as transportation, there is an immediate need to streamline its end-to-end supply chain – from production of blue or green hydrogen to transmission across regions, utilization and reusable storage.

Leveraging Existing Supplier Relationships is Key

Oil and gas companies, which regularly produce hydrogen as a by-product of the fracking process, have a tremendous opportunity to drive the creation of the hydrogen economy and supply chain of the future.

But this fracking process also produces carbon dioxide, which needs to be removed with carbon capture and utilization systems (CCUS) to produce a cleaner form of hydrogen, known as blue hydrogen.

This has a significantly lower carbon footprint than the traditional gray hydrogen. Also, as CCUS technology can be integrated with existing steam methane reforming plants, the cost of deploying blue hydrogen production can be lowered.

Oil companies need to deploy CCUS solutions in existing oil plants to produce this cleaner form of hydrogen. To do this, they need to invest in equipment upgrades including absorbers, strippers, heat exchangers and compressors.

The good news is that all this equipment is already in use at some stage in the current framework. Heat exchangers, for example, are extensively used for liquefaction and distillation in cracking units.

This means that sourcing teams in oil companies can leverage the relationships with existing suppliers to reduce sourcing efforts, accelerate co-development of heat exchangers specific to CCUS requirements and lower procurement costs at the same time.

Additionally, they can enjoy the benefits of spend consolidation and faster deployment by exploring strategic partnerships with selected advanced incumbents for turnkey projects.

Also Read: Hydrogen Cars Vs. Electric Vehicles: Which is More Sustainable?

Lack of Distribution and Transmission Infrastructure is the Biggest Challenge

The key challenge hampering its widespread use is the distribution of hydrogen via pipelines, high-pressure tube trailers and liquified hydrogen tankers.

High initial capital is needed to build a new hydrogen pipeline network, with its properties presenting unique challenges in pipeline materials and compressor design. As a result, most hydrogen used worldwide today is produced at or close to where it is utilized.

Less energy per unit volume than any other fuel makes hydrogen more expensive to transport, store, and deliver to end-users per gallon of gasoline.

Also, the process of hydrogen production is energy-intensive, with significant energy losses during the process.

During transmission over long distances in tankers, pressurization of hydrogen gas into liquid consumes a huge amount of pressurization energy and requires specially designed compressors. Additionally, cryogenic refrigerating equipment, which is needed to maintain sub-critical temperature, enhances the cost of long-distance distribution.

To avoid these upfront capital costs, oil & gas companies can leverage existing natural gas infrastructure and adapt the existing pipeline to deliver a blend of hydrogen and natural gas. Alternately, they can reduce installation costs by using fiber-reinforced polymer (FRP) pipelines instead of steel pipes for distribution.

They can also build on existing partnerships with players in the compressor and refrigeration space to develop the technology and infrastructure needed to build a hydrogen-specific logistics network.

Finally, to build inventory, oil & gas companies can store hydrogen in their depleted reservoirs, thereby using existing infrastructure for a low-cost energy storage solution.

To know more about how oil & gas companies can benefit from using hydrogen, read the GEP white paper.