BP to walk out of 26-GW Australian renewable hydrogen, ammonia project

BP intends to walk out of the 26-GW Australian Renewable Energy Hub, a prominent renewable hydrogen project in Western Australia, it said July 24.

This is the latest challenge facing Australia's renewable hydrogen industry after Woodside and Fortescue both exited key projects this week.

AREH, the second largest renewable hydrogen project in Australia, planned to produce around 1.6 million mt/year of electrolytic hydrogen or 9 million mt/year of renewable ammonia in the Pilbara region, to cater to the export and domestic industrial market.

"BP has advised the AREH partners of its intention to exit the project as operator and equity holder," BP's spokesperson said. "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."

BP's partner in AREH, Australian hydrogen developer InterContinental Energy, said July 24 it would support the transition of AREH and will provide leadership and guidance as the operatorship transitions to the AREH project company.

"We are grateful for BP's significant contributions and partnership, which have played a vital role in advancing the project to this stage," Alexander Tancock, CEO of InterContinental Energy, told Platts, part of S&P Global Commodity Insights, in an email. "We remain committed to working closely with the government of Western Australia and all stakeholders to drive the next phase of development."

Tancock said the firm, which has been at the forefront of giga-scale renewable fuels development since 2014, believed in the project's potential to decarbonize the Pilbara and diversify the state's economy.

AREH's other project participant is European firm CWP Global.

Significant project for Pilbara

AREH remains a significant project for Western Australia, the BP spokesperson said.

"While AREH no longer aligns with BP's strategy, it continues to present an important opportunity for Western Australia to decarbonize the Pilbara," the spokesperson said. "BP will work with its AREH partners to ensure a safe and efficient transition of operatorship."

AREH was expecting a financial close for the project in 2025, with exports seen ahead of 2030, Lucy Nation, BP's vice president for hydrogen, Australia and Asia Pacific, said in 2023.

BP had purchased a 40.5% stake in AREH in 2022 with plans to target industrial and mining users in the vicinity in the initial stages before expanding to the global markets.

Although Australia was an early starter in renewable hydrogen development, its projects -- numbering more than 150 -- were hit by high costs of producing the environment-friendly fuel globally, which kept offtakers and investors at bay, industry members and analysts have said.

Elsewhere, Australian mining and energy firm Fortescue said July 24 it is not proceeding with a renewable hydrogen project in the US and an electrolyzer project in Australia, while asserting its commitment to renewable hydrogen and a pipeline of global clean energy projects.

A day prior, Woodside Energy said it had exited its proposed low-carbon hydrogen project in Oklahoma, US, citing cost escalation and weaker-than-expected demand, while advancing its low-carbon ammonia project in Beaumont in the same country, the Australian firm said.

Platts assessed Western Australia hydrogen produced via alkaline electrolysis (with capital expenditures) at $4.87/kg on July 23, down 2.41% on the month.

Platts assessed Japan hydrogen produced via alkaline electrolysis (including capex) at $5.97/kg on July 24, down 14.71% on the month.