China's Sinopec has embarked on a diversification spree by launching the construction of the world's biggest solar-based green hydrogen plant, a sign that leading oil refiners in Asia are accelerating efforts to ensure they are well prepared for the changing energy landscape.
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The state-owned oil giant, which owns around 30% of China's refining capacity, has started building the 20,000 mt/year carbon-free project in Kuqa, Xinjiang Uygur Autonomous Regions and is expected to commission the plant and start production in June 2023, according to a company statement on Nov. 30.
This will be one of Sinopec's four green hydrogen projects that are in the pipeline. The Yuan 3 billion ($471 million) demonstrated project will also be China's first solar-powered hydrogen plant, with an annual production capacity of over 10,000 mt.
The project would cover the whole process of green hydrogen production and utilization, from solar power generation, transformation, electrolytic production, storage and transport. The green hydrogen will be supplied to the neighboring 5 million mt/year Sinopec Tahe Petrochemical.
It would include a solar power plant, with 300 megawatts installed capacity, a water electrolysis hydrogen production plant, hydrogen storage tanks and a hydrogen pipeline.
Green hydrogen from the project will replace the current natural-gas-based hydrogen in Tahe Petrochemical for desulfurization.
The carbon-free project will help cut about 485,000 mt/year of carbon emissions, Sinopec said.
China's refineries mainly rely on hydrogen produced either from coal and natural gas. According to market sources, only about 4% of the country's hydrogen comes from renewable resources.
Sinopec has over 296.9 million mt/year of primary refining capacity and its hydrogen production capacity is only 3.9 million mt/year, accounting for 11% of China's hydrogen output, the company said.
With the aim to become China's top hydrogen supplier, Sinopec plans to invest Yuan 30 billion ($4.71 billion) in developing carbon-free gas business between 2021 and 2025, while targeting to boost green hydrogen production capacity to 500,000 mt/year by 2025, Platts reported earlier.
Rocky road ahead
Analysts said Sinopec's green hydrogen ambitions and the dream to become a net zero company won't be free of hurdles.
"Most of the solar power resources are in northwest China, such as Xinjiang and Inner Mongolia. But Sinopec's refineries are mainly in the east and south China along the coast, which needs hydrogen in the refining process. Meanwhile, east and south areas are also the key consumption centers for hydrogen-fuel vehicles. The long distance will lead to high transportation and storage costs, which would take a toll on production economics," a Beijing-based analyst said.
Hydrogen is flammable and combustible and it requires costly safety control infrastructure for transportation and storage.
Among Sinopec's four green hydrogen production projects in the pipeline, the 10,000 mt/year offshore wind-based hydrogen production project is in the coastal city of Zhangzhou in Fujian province.
Other than the new solar-powered Kuqa project in Xinjiang, the rest two projects are in Inner Mongolia. They are the 10,000 mt/year of wind and solar-based hydrogen production project in Ordos and the 100,000 mt/year of renewables-based hydrogen production in Ulanqab.
China has been boosting its hydrogen development plans as a path to hit its 2060 carbon neutrality target. Beijing is expected to release it hydrogen industry development plan soon.