Troubled UK oil and gas major BP has exited its third WA alternative fuel project in six months, walking away from the Australian Renewable Energy Hub after just two years.
The $2.3 billion-plus decommissioning on a WA nature reserve will be part-funded by the Federal and WA governments returning about half the royalties they received over six decades.
BP pulls out of $55b mega-scale Pilbara hydrogen project
Troubled UK oil and gas major BP has exited its third WA alternative fuel project in six months, walking away from the Australian Renewable Energy Hub after just two years.
BP will exit both ownership and leadership of a vast solar and wind-powered hydrogen project north of Port Hedland just two years after it bought a 40.5 per cent stake in the venture.
In an update to BP's Australian Renewable Energy Hub (AREH) team on Thursday afternoon, BP country president Lucy Nation wrote, "BP has made the difficult decision to exit the Australian Renewable Energy Hub project in WA's Pilbara region, both as an equity participant and as an operator."
The move caps off a brutal week for Australia's hydrogen hopes after both Woodside and Fortescue dropped major projects, mirroring a worldwide drop in enthusiasm for the product.
It is understood that many in BP's AREH team of 40 have already been told they will be made redundant. At one stage, BP had assigned more than 100 staff to the sprawling project.
The move completes BP's near-complete exit from alternative fuel projects in WA after it put its Kwinana hydrogen and biofuel plants on ice in February. Workers were told the projects would be "recycled", but Boiling Cold understands there is little likelihood of them going ahead.
A BP spokeswoman said it had advised its partners of its intention to exit both operatorship and ownership of the 6500 square kilometre project.
"This decision reflects BP’s recent strategy reset, which will see BP grow its upstream oil and gas business, focus its downstream business, and invest with increasing discipline into the transition," she said.
"While AREH no longer aligns with BP’s strategy, it continues to present an important opportunity for WA to decarbonise the Pilbara,
"BP will work with its AREH partners to ensure a safe and efficient transition of operatorship."
InterContinental Energy and CWP Global own a 26 per cent and 10 per cent stake, respectively.
InterContinental Energy will take the helm until the effort is moved into a project company, instead of the current joint venture model with one owner acting as operator.
InterContinental Energy chief executive Tancock said BP had played a vital role in advancing the project.
"We remain committed to working closely with the Government of WA and all stakeholders to drive the next phase of development," he said.
"We believe strongly in the project’s potential to decarbonise the Pilbara and diversify the State’s economy, and we look forward to delivering on this shared vision.”
Beyond AREH, InterContinental Energy holds a majority stake in the Western Green Energy Hub in the remote south east of WA and Green Energy Oman in partnership with Shell and others.
The many shapes of AREH
In 2017 the motivation behind installing wind turbines and solar panels over a vast area, remote even by Pilbara standards, was not to produce hydrogen, but to supply Indonesia with clean electricity through a subsea cable.
However, a lack of credit-worthy customers in Java who could support long-term power purchase agreements for what was then called the Asian Renewable Energy Hub was a significant problem.
Three years later, that plan was dropped in favour of using the emission-free electricity to make green hydrogen by splitting water into hydrogen and oxygen using power-hungry electrolysers.
The hydrogen was then to be combined with nitrogen to produce liquid ammonia, which is more easily transportable than hydrogen gas.
A jetty was required to load 10 million tonnes of ammonia a year onto ships. However, in 2021, then-federal environment minister Sussan Ley rated its impact on wetlands and migratory birds as "clearly unacceptable."
The conclusion, applied to less than one in 500 projects assessed by the federal government, was a shock to the proponents, but they expressed confidence that it could be overcome.
Boiling Cold understands that in recent years, the focus has shifted to selling power to the vast Pilbara mining region to the south, with Korean POSCO's planned green iron plant and Andrew Forrest's Fortescue's decarbonization drive being prime targets.
BPs move is just one of many reversals this week in either Australian hydrogen projects, or Australian hydrogen investments overseas.
Hours before BP's AREH team learned their fate, Andrew Forrest's Fortescue told investors it would not proceed with its Arizona Hydrogen project or the PEM50 project in Gladstone, Queensland.
Fortescue Energy chief executive officer Gus Pichot said the company - a leading hydrogen evangelist - has in the past year applied a "sharpened focus on commercial outcomes."
"That’s meant making some tough decisions," he said.
The day before Woodside announced it had exited its H2OK Project in Oklahoma, citing higher costs and lower demand than hoped for, with a $US140 million ($212 million) impairment expected.
I worked in oil & gas in commercial and engineering roles for 20 years. Since 2016, I have written for The West Australian, WAtoday, The Guardian and Boiling Cold, winning five WA Media Awards.
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