Real Solutions for Energy Trilemma

Energy must be secure, affordable, and low-carbon in nature. Achieving these goals is the ‘energy trilemma’ that bp seeks to address. One of the most recognisable names in the energy industry, bp is a major with a mission. The company has set out its vision for net-zero by 2050 – inline with others in the market. But bp hopes to do things better and faster. In 2020, the company adopted a clear strategy for transition, but that has been hastened with an added $8 billion committed to bioenergy, convenience, EV charging, hydrogen and renewables, and power, with added focus on sustainable aviation fuels.

While decarbonising for the sake of the environment, bp is also confident that the process can yield financial returns, presenting a long-term opportunity for value creation.

“Renewable energy is the world’s fastest growing energy source and essential to getting the world to net zero,” the company shares. “Rapidly growing our renewables business is core to our strategy: by 2030, we aim to have developed around 50GW of net renewable generating capacity globally, up from 3.3GW in 2021.”

Three established and proven areas of low carbon, low emission, high energy delivery are wind, solar, and hydrogen. It is these three categories in which major energy companies will win the race for lasting, positive climate change. Here, bp is already leading the way and looking to advance its position exponentially.

WIND

In Scotland, bp and partner EnBW successfully gained a lease option to develop a major offshore wind farm at the start of last year. The company announced that Aberdeen would become its global centre of excellence for offshore wind, and its new project could potentially power three million households. The project, known as Morven – after a mountain in the Aberdeenshire hills – will sit in depths of 65-75m and will generate 2.9GW.

Bp CEO Bernard Looney and EnBW CEO Frank Mastiaux were both particularly excited about the prospect of generating clean energy in Scottish waters, utilising industry knowledge developed in oil and gas to meet the needs of the future.

“bp has a proud 100-year history in Scotland,” said Looney. “We want to thank Crown Estate Scotland for the opportunity to now start a new chapter, helping Scotland continue as a global energy leader for the next 100 years. We have a fantastic partner in EnBW and now an even more competitive portfolio of nearly 6GW of combined offshore wind to develop together.”

Mastiaux added: “Since the construction of the first German offshore wind farm in 2010 by EnBW, we have become a major player in offshore technology, even beyond Germany’s borders. We are therefore very pleased to be able to contribute our experience of developing and operating technically demanding offshore wind projects once again with our partner bp.”

In Germany, the company won a 4GW offshore auction to bring about change for the better in its onshore operations. Renewable energy will power green hydrogen and biofuels production, electric mobility growth and refinery decarbonisation. Two projects, fixed-bottom in nature, will be connected by the end of 2030 and will sit 130km and 150km off the coast.

“These awards are a huge milestone for bp’s decarbonisation plans in Germany and are a strong reflection of our wider strategy,” said executive vice president, gas and & low carbon energy, Anja-Isabel Dotzenrath. “The renewable power we aim to produce will anchor the significant demand we expect for green electrons for our German operations, from a whole host of products and services including green hydrogen and biofuels production, electric mobility growth and refinery decarbonisation.

“Germany is a core market for bp,” she reminded, “and we are excited to continue and grow our business here. The investment is fully aligned with our integrated energy strategy and is accommodated within our disciplined capital frame. Expected returns of 6-8% are consistent with our renewables and power growth engine on an unlevered basis, with the potential to realise enhanced value through integration across the Germany value chain.”

Currently, bp employs around 4000 people in Germany and looks after around 2300 retail sites through the Aral brand. The company also boasts 1500 fast EV charging points and recently expanded its Hamburg office to underpin efforts int eh renewable space.

“We are investing massively in Germany’s energy transition and in our own – from renewable power generation to having an impact on the decarbonization of road transport to the decarbonisation of our refineries,” said CEO of BP Europa, Patrick Wendeler. “Our major existing businesses here are transforming – powered by green hydrogen, biofuels and offshore wind. And today’s win accelerates the pace of change as we look to do more. We look forward to the important role we can play in contributing to Germany’s energy transition and its efforts to become climate neutral in 2045.”

HYDROGEN

Similar to the other majors, bp is waiting for government policy to back up the hydrogen rollout. Already confident in the ability of the element as a fuel, and far down the road in terms of testing viability for heavy-duty transport and industrial application, bp is busy ramping up its hydrogen presence.

Germany and Scotland are again focus regions for bp’s ambitious rollout. In January, the company announced it would investigate the possibility of installing an industrial-scale ammonia cracker at Wilhelmshaven where repurposed oil and gas infrastructure could be used to transport hydrogen for industrial use. With ammonia coming from bp sites around the world, the cracker at Wilhelmshaven would split hydrogen from nitrogen, with the hydrogen used for customers in the Ruhr region. The deepwater harbour at Nord-West Oelleitung (NWO) terminal at Wilhelmshaven is perfect to support hydrogen activity.

“The development of this import facility complements bp’s global hydrogen project portfolio, as we develop a presence in a number of potential hydrogen and ammonia export locations in the Middle East, Africa and Australia, which could supply part of the European demand in the coming years. This is another critical step in developing and delivering low carbon hydrogen in communities throughout the world,” said Felipe Arbelaez, senior vice president hydrogen and CCS.

Patrick Wendeler, said he was confident in bp’s ability to deliver hydrogen infrastructure: “At bp we have the expertise and capacity to cover the entire value chain of green hydrogen production, including conversion into derivates like ammonia, transport, and then reconversion to supply green hydrogen to the customers and places who need it. This development would help create greater energy independence for our German customers across a range of low carbon energy products. Wilhelmshaven has a proud energy history, and we hope this hydrogen hub can help carve out its next chapter and help Germany meet its energy transition goals.”

In Aberdeen, the company has signed a JV agreement to develop a city hydrogen hub. Partnering with the local city council, a green hydrogen production, storage and distribution facility – powered by renewables – will be developed over three phases. The plan is to initially produce around 800 kg of green hydrogen for use in the transport sector. As the project scales up, more uses will be added. The hope is that, by 2030, 700 skilled jobs will be created.

“bp is investing across all the energy transition growth areas in the UK,” confirmed UK Head of Country and Senior Vice President for Europe, Louise Kingham CBE. “This announcement is evidence of that commitment in action and is supported by other ambitious plans to produce clean energy from UK offshore wind, develop carbon capture in Teesside and grow the country’s electric vehicle charging network.

“With these new business opportunities underpinned by our long-standing position in North Sea oil and gas, we are showing what an integrated energy company can do. And all of this couldn’t be possible without the skills and experience of a talented workforce and supply chain, eager to help make the UK’s net zero ambitions a reality,” she added.

INTEGRATED

In 2022, bp signed a Strategic Framework Agreement (SFA) in Oman to research and develop potential for renewable energy rollout and hydrogen production. By 2030, the Sultanate of Oman hopes to diversify the country’s energy mix to include renewable energy and take advantage of the desert sun as part of the Oman 2040 vision.

Initially, bp will capture and evaluate solar and wind data from 8,000km2 of land to identify areas for development of energy hubs. Solar and wind projects are the initial focus, but further down the line the aim is to create green hydrogen by using the renewable energy created. Oman will use hydrogen for export and domestically.

“This agreement represents what bp is able to offer as an integrated energy company,” said Looney. “These projects will build on our gas business, and bring wind, solar and green hydrogen together in a distinctive and integrated way supporting Oman’s low carbon energy goals. And we’re not just investing in energy. We are investing in Oman to create and develop infrastructure, support local supply chains and cultivate the skills and talent needed to usher in this next generation of energy leaders. We look forward to working closely with the Omani government to take this forward.”

Currently, bp operates Block 61 in Oman, a gas asset producing one third of Oman’s gas demand. The company’s local operations generated $610 million with Omani-registered companies in 2020.

FUTURE PROOF

In August 2023, bp ventures – the company’s investment arm focused on new technology – ploughed millions of dollars into Advanced Ionics, a developer of hydrogen electrolysers. The funding will help the business to grow and finetune its Symbion™ water vapor electrolyser technology for heavy industry. This concept reduces cost and electricity requirements for green hydrogen production. Typically, electrolysers require the use of dedicated materials, but the Advanced Ionics product uses steel and other widely available supplies. At scale, the company’s electrolyser could make green hydrogen accessible for less than $1 per kg.

“Advanced Ionics’ technology has the potential to drive down cost and disrupt the hydrogen market. bp has a global portfolio of hydrogen projects, and as the world transitions to a net zero future, it’s important to us to be investing in these technologies and advance the track to deploying green hydrogen. We look forward to working with Advanced Ionics on the next stage of its growth,” said bp ventures VP, Gareth Burns.

The first step will be to advance the team and deliver the first of its next-gen electrolysers to early customers. Other investors in the scheme include Clean Energy Ventures, Mitsubishi Heavy Industries, GVP Climate, and Aster, while Advanced Ionics is also participating in a pilot programme with Repsol.

Clearly, bp continues to back up its words and promises with action. The company is working with its wallet, and is making strategic investments today that will change the landscape in the future.

“Flexibility in exactly how we will execute the strategy is what allows us to maintain resilience and, therefore, our unwavering focus on the destination,” said Looney, highlighting progress to date.

Importantly, bp shareholders have approved the company’s strategy, understanding that secure, affordable, and low-carbon energy is an opportunity as well as a challenge. Thankfully, bp always thrives in times of challenge and always grasps opportunities to advance the energy landscape that serves us all.