BP puts $1b Kwinana hydrogen and clean fuel projects on ice

The two projects will be "recycled" amid BP's concerns about costs and government policy.

BP puts $1b Kwinana hydrogen and clean fuel projects on ice
BP's closed its Kwinana oil refinery in 2021 after 66 years of operation. BP

EXCLUSIVE

UK oil and gas producer BP has put on ice plans for two clean fuel projects worth about $1 billion at its disused oil refinery in Kwinana, south of Perth.

BP informed its employees in meetings on Thursday, followed by telling contractors on Friday, according to people involved who were not authorised to speak to the media. Some BP staff will be made redundant.

BP was considering building a biofuel plant, Kwinana Renewable Fuels (KRF), to make sustainable fuel from biomass and a green hydrogen plant dubbed H2Kwinana.

Some workers were told the projects were to be "recycled", which likely means BP will return to the early stages of its project assessment process to fundamentally review what, if anything, it wants to do at Kwinana.

Factors influencing BP’s decision included rising costs to build the plants, and the lack of a mandate in Australia to use the fuels, leaving BP uncertain if the products would have a ready local market, according to the sources.

The cost of the KRF had been reported to be $580 million while a public conceptual study estimated the first stage of H2Kwinana to cost $399 million.

A BP spokesman said it had made significant progress in developing the renewable fuels and hydrogen projects at Kwinana over the past three years.

"While bioenergy remains a core part of BP’s strategy, BP has decided to rephase the Kwinana Renewable Fuels project," he said.

"This involves adjusting the pace of delivery with a focus on improving capital efficiency and better alignment with government policies."

The KRF was to be the first of five BP plants worldwide to turn biomass, including used cooking oil, into 10,000 barrels a day of sustainable aviation fuel and renewable diesel.

Work was underway refurbishing tanks at Kwinana and an $80-million-plus hydrogen production unit had been ordered from French firm Technip.

BP's decision on renewable fuel is not a surprise after Boiling Cold revealed two weeks ago that engineering and design contractors had been stood down.

Hydrogen false start

The hydrogen plant was one of six short-listed in late 2023 to compete for $2 billion of Federal Government funding under its Hydrogen Headstart Program.

BP declined to comment on H2Kwinana until the Federal Government announced its decision on the hydrogen funding.

That decision is imminent. Two weeks ago, a spokesperson for the Australian Renewable Energy Agency that administers the program told Boiling Cold it expected to announce the successful applicants in the coming weeks.

The KRF was to be one of the customers for H2 Kwinana, and Boiling Cold understands BHP's nearby shuttered nickel refinery was also lined up as a major customer.

The $136 billion company started front-end engineering for the hydrogen plant in late 2023 backed by $70 million from the Federal Government.

The first phase of H2Kwinana, with a 100-megawatt electrolyser to extract hydrogen from water using renewable energy, was expected to provide about 150 jobs in operations.

Its annual production of 14,000 tonnes of green hydrogen would have been enough to fuel about 750 heavy vehicles. There was potential to eventually expand the project 15-fold.

BP will continue to use its prime 250-hectare waterfront site in Kwinana to import and store fuel.

There was bad news for another of those projects on Monday: the Central Queensland Hydrogen project in Gladstone. 

The Australian reported that the Queensland government has rejected a request for more than $1 billion in government funding from the joint venture led by state-owned power generator Stanwell Corporation.

The other shortlisted projects are Korea Electric Power Corporation’s proposal in Newcastle, Origin Energy’s Hunter Valley Hydrogen Hub, a $1 billion synthetic fuels plant in Tasmania backed by Chilean HIF Global, and Copenhagen Infrastructure Partners' Murchison Green Hydrogen near Kalbarri in WA.

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