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The Haralds of Hydrogen

Floris Jacobus Adrianus de Klerk Wolters

Chapter 11: Mining and Quarrying

Texte intégral

  • 1 This number involves companies registered under NACE section B: Mining and quarrying.
  • 2 Refineries do not fall under this economic section, but under NACE C19: Manufacture of coke and ref (...)

1The mining and quarrying section has very few registrations (N=31, 1.86%).1 Yet, the support of large integrated oil and gas companies, as well as refineries,2 draws a lot of attention (Balat & Balat, 2009; Meadowcroft & Langhelle, 2009; Royal Dutch Shell & Wuppertal Institut, 2017). Before focusing on the oil and gas sector, which constitutes over 75% of this section’s hydrogen association members, it should be noted that several mining companies are present, including Jastrzębska Spółka Węglowa (JSW) and Anglo American. This is in line with previous predictions of the coal industry coming out in favour of (blue) hydrogen (see e.g. Victor et al., 2003; Winter, 2005). Although JSW is an influential company in Poland, it is a relatively isolated example. So far, the coal industry (and clean coal technologies) appears to be a relatively insignificant component of the momentum for hydrogen in Europe. This is slightly at odds with previous expectations from the literature.

Figure 10: Pie chart for mining and quarrying

Figure 10: Pie chart for mining and quarrying

11.1. Oil and Gas Industry

  • 3 These are the NACE divisions/groups/classes C19: Manufacture of coke and refined petroleum products (...)

2Three-quarters of the mining and quarrying section consists of companies involved in the extraction of crude petroleum and natural gas. The focus on extraction is, however, artificial. The large oil and gas companies are particularly present throughout the entire value chain. For this reason, these paragraphs include several other business activities along the oil value chain: mining support activities, manufacturing of refined petroleum, the retail sale of automotive fuel, and the wholesale of solid, liquid and gaseous fuels.3 With all these included, the sector becomes bigger than the overarching section of mining and quarrying (N=48).

Figure 11: Pie chart for oil and gas industry

Figure 11: Pie chart for oil and gas industry

3 A primary reason why this sector matters is that on top of a few relatively local tank station companies, the majority are very large multinationals. Examples include Total, Kuwait Petroleum International, Shell, Equinor, Lotos, Polskie PGNiG, Galp, Repsol, BP, Petrofac, Baker Hughes and OMV. These are some of the largest companies in Europe. Three out of the four largest European companies by revenue in 2019 (Fortune, 2019) fall into this category and are members of several hydrogen associations: Shell (6), BP (3) and Total (3). It includes the largest companies by revenue of Austria, France, the Netherlands, the UK, and Norway; and among the three largest of Poland, Spain and Portugal – with Italy’s largest company (Eni) absent from hydrogen association lists but still explicitly supportive (Eni, 2019).

4A second reason why their support is important is because refineries are one of the largest consumers of hydrogen, responsible for roughly a third of global hydrogen consumption (IEA, 2019c, p. 91). This gives them natural clout with regard to hydrogen. Hydrogen is responsible for roughly 20% of refineries’ CO2 emissions (IEA, 2019c, p. 91). This means that companies in this sector can use blue and green hydrogen to decarbonise a globally significant chunk of their emissions and are also crucial in the decarbonisation of other sectors.

5 Third, there seems to be serious interest in hydrogen beyond mere membership of coalitions. BP, Equinor, Shell and Total are all steering members who took part in the launching of the global Hydrogen Council. In annual and sustainability reports of these same four (BP, 2020b, 2020a; Equinor, 2020a, 2020b; Shell, 2020b, 2020a; Total, 2019, 2020) hydrogen is given considerable attention – more than from the large electricity companies, for instance. There appears to be a consensus about the role that hydrogen can play in the future energy system, although Shell, Repsol (2019), OMV (2020b, p. 76) and BP appear to be much more open to green hydrogen while Equinor emphasises blue hydrogen and CCS technologies.

  • 4 In a consortium with Nouryon and the Port of Rotterdam.
  • 5 Itself member of two associations.
  • 6 As well as Air Liquide, Daimler and Linde.

6 However, the extent to which this translates into concrete investment is dubious. On the one hand, there is clearly some willingness to invest. In the mid-2000s, BP already put forward a serious proposal for a 350 MW blue hydrogen plant with a $1 billion price tag, which ultimately only fell through because of government delays (Macalister, 2007; Meadowcroft & Langhelle, 2009, p. 170). European oil companies have increasingly been “racing” to invest in clean energy, with notably Total and Shell taking steps (Abington & Gilblom, 2019). BP built a green hydrogen plant for its refinery in Lingen in 2018 and is exploring the possibility of a 250 MW green hydrogen plant in Rotterdam4 (BP, 2019; IEA, 2019c, p. 97). Shell is partnering with Gasunie and Groningen Seaports in the NortH2 project mentioned before, besides smaller projects such as the 10 MW REFHYNE green hydrogen project for its Rheinland refinery (Shell, 2020b, p. 53). There is clear engagement in expanding the European HRS network, with the $400 million H2 MOBILITY scheme in Germany seemingly the most ambitious and developed plan in Europe.5 OMV, Shell and Total are partners of this programme, 6which is on course to deliver 100 HRSs in 2020 and aims to deliver 300 more by 2023 (H2 MOBILITY, 2020; Iwan, 2017).

7 On the other hand, many of these projects are mostly based on public money, and investments in hydrogen are negligible relative to total investments. The REFHYNE project highlighted by Shell is funded by the European Commission (IN4Climate.NRW, 2019; REFHYNE, 2018). Refilling stations in the UK, the Netherlands and Germany, for instance, are labelled successes, but are all predominantly financed through multi-million GBP/EUR subsidies either from national governments or mixed with European funding (Adelski, 2019; Shell, 2018b, 2018c; Thomas, 2018). The H2 MOBILITY project is also an example of this, as it is funded by the German Federal Ministry of Transport and Digital Infrastructure and several EU-level subsidies (H2 MOBILITY, 2020).

8 This has some wider implications, as it is not for a lack of own investment resources that the sector is waiting. Capital investments for 2019 alone were $28+ billion for Shell (2020a, p. 40), $15+ billion for BP (2020a, p. 113), $17+ billion net for Total (2020, p. 74) and $5+ billion for OMV (2020a, p. 63). In comparison, initial investments in electrolysers or CCS systems to produce hydrogen used in refineries are relatively small. The same goes for HRSs. OMV (2020b, p. 67) invested €1 million (0.02% of total investments) in future mobility assets. Even the very ambitious $400 million H2 MOBILITY project would be (much) less than 1% of the combined total investment of the companies listed above. Yet, the sector seems to depend on public investment to realise projects worth less than $15 million to begin creating the hydrogen market which they say is central to their own future. This is a different situation to that of automakers such as Toyota and Hyundai, where investments have seemingly been more aligned with strategic statements about the future of hydrogen.

9 There is also another factor at play in these investment decisions when it comes to building HRSs specifically: the absence of first-mover advantages. While the hydrogen market is still immature, HRSs are uncompetitive and a net cost for owners due to a lack of business. Moreover, when the market becomes competitive, the ease of building HRSs will mean existing HRSs will quickly be exposed to competition, further challenging their profitability. At the same time, early adopters may end up paying both higher construction costs due to lacking economies of scale, as well as risking the necessity that they need to pay extra for adapting HRSs to evolving regulations. Notwithstanding the legitimate profitability concerns of being the first to deploy HRSs on a large scale, the oil sector also shows little concrete willingness to change this status quo. It seems evident that while the oil sector may be serious about the long-term potential of hydrogen, it doesn’t appear serious enough to put (relatively speaking) significant investment into its deployment, especially when there are no direct short-term returns.

10 A key motivation for large oil and gas companies to consider investing in (green) hydrogen to begin with is the sustainability of their business model during and after the energy transition. The increasingly narrow time frames for this transition are bad for the perceived viability of their business models. Shell is a good example of this. Its Sustainability Report (2020b), Energy Transition Report (2018a), and its Annual Report (2020a) tell the story of a company under increasing pressure from shareholders to make an investment case as a company that can remain profitable in the medium to long term when its core business (i.e. oil and gas) is expected to decline. Both BP and Shell have been and remain at the receiving end of activist shareholders who question this on environmental and business grounds. Large institutional shareholders such as the Church of England and major pension funds are part of a growing list of critical investors that influenced Shell to sharpen its climate targets (Burton, 2020; Vaughan, 2017, 2018a, 2018b). This also affects the ability of the sector to recruit young talent and attract consumers. Its three corporate sustainability pillars of responsible business, a sustainable energy future, and contributing to society can also be understood through this lens. Hydrogen is a way for the sector to attempt to clean up its image for the wider public and potential employees, and to present a viable long-term business model to investors. The energy giants either embrace alternative energies such as hydrogen or face long-term decline.

11 For refineries (both independent and as part of integrated companies), increasing carbon prices and pressure to decrease emissions are motivations to search for lower-carbon solutions for their use of hydrogen as feedstock. This is amplified by developments in the fuel sector that demand lower sulphur contents, which in turn require still more hydrogen input (IEA, 2019c, p. 96). The profit margins of refineries are already tight, and higher emissions prices carry business risks in the longer term. Relatively low-cost investments in CCS would lead to large emissions reductions and take away a large chunk of this risk. The installation of electrolysers and the provision of green hydrogen would eliminate these specific emissions costs.

12 Blue hydrogen in particular has some other major business benefits for oil companies (Equinor, 2020a, p. 48, 2020b, p. 27; IEA, 2019c, p. 96; Meadowcroft & Langhelle, 2009). As described in the literature overview, there is a ‘double dividend’ of being able to sell foregone emissions rights in combination with getting captured CO2 that can be used for EOR. This ignores an obvious ‘third dividend’: oil and gas companies also retain a market for their fossil fuel products (and related capital assets) with widespread deployment of CCS. In general, hydrogen would allow the creation of business along a completely new value chain (Equinor, 2020a, p. 48). This is a welcome perspective for oil companies facing calls for further diversification and questions about their long-term profitability.

13 The tank stations at the end of the value chain for fuels also see the potential of hydrogen. The rise of BEVs might mean that many customers will charge their vehicles at home rather than fuel them at tank stations. This threatens the viability of the current business model of tank stations. In a purely electric driving world, there is little use for tank stations. Fast-charging stations can be placed anywhere, and the infrastructural need for handling gasoline (including safety and quality control regulations) that justified specialised tank stations as a concept will be gone. The transition to hydrogen would create a situation where tank stations largely retain their current function and business model.

14 All the above incentives raise the question of why the oil and gas sector has remained so hesitant to put significant investments into hydrogen. One factor, already proposed as a possible barrier by the IEA (2019c, p. 96) and confirmed by BP, is the absence of real carbon pricing. The regulatory pressure on emissions as felt by, for instance, the chemical industry and the steel industry seems to be less acute in threatening the profit margins of the oil sector: BP (2020b, p. 27) states that “robust policies, including carbon pricing, will be required to incentivise the investment required to exponentially grow the use of hydrogen.” OMV (2020a, p. 29) states that the legal environment is not there to support CCS in various countries, including in Austria, particularly considering storage. Equinor (2020b, p. 28) equally expects a big role for the government in triggering further investments in hydrogen. It appears that without public guarantees and direct public involvement, there is relatively little actual investment in hydrogen from the oil sector. This remains the case even though there is a clear business interest for the sector to engage directly in hydrogen to secure their long-term survival.


1 This number involves companies registered under NACE section B: Mining and quarrying.

2 Refineries do not fall under this economic section, but under NACE C19: Manufacture of coke and refined petroleum products. More on this in subsequent paragraphs.

3 These are the NACE divisions/groups/classes C19: Manufacture of coke and refined petroleum products, G46.7.1: Wholesale of solid, liquid and gaseous fuels and related products, and G47.3: Retail sale of automotive fuel in specialised stores. These are mostly refineries and tank stations. From G46.7.1 and G47.3 H2point, Green Planet Pesse, FaktorPlus Green Technology, and H2 Mobility Deutschland have been excluded, as they provide non-fossil fuels.

4 In a consortium with Nouryon and the Port of Rotterdam.

5 Itself member of two associations.

6 As well as Air Liquide, Daimler and Linde.

Table des illustrations

Titre Figure 10: Pie chart for mining and quarrying
Fichier image/png, 44k
Titre Figure 11: Pie chart for oil and gas industry
Fichier image/png, 46k


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