Lucy has worked for bp since 1998 in Australia, the US, UK, Europe and Singapore. In January 2021 Lucy was appointed to the position of vice president of regions, cities and solutions, Asia Pacific – a division of bp focused on providing integrated and decarbonized energy solutions to corporations, cities, regions and bp’s own businesses in support of bp’s net zero commitments. This speech was delivered at the Australian Hydrogen Conference in Perth.
Good morning and welcome.
Please let me begin by acknowledging the Whadjuk Noongar people, the traditional owners of this land; their elders, past, present, and emerging, and all other Indigenous people here today.
This conference, which is looking at a sustainable future, is a reminder to us that Indigenous people have cared for this land for tens of thousands of years. We have an obligation to them and to future generations to continue that care.
Today, I‘d like to talk to you about bp’s ambitions for Australia, of which hydrogen is one of the cornerstones, and why it makes sense for a company like ours to play a role in scaling up this important energy system of the future.As with historical resource booms, Australia once again finds itself blessed with the natural resources, capability, and enthusiasm needed to build a new industry for the future.
We, at bp, are working collaboratively with our partners and customers to accelerate solutions that will help to solve the energy trilemma; that’s delivering secure, affordable and lower carbon energy that our region and the world needs.
bp analysis shows that while hydrogen growth before 2030 may be relatively modest, the pace of growth accelerates sharply in the following decades.
Electrification is the most efficient way to decarbonize but as we all know, there are many applications of fossil fuels today which can’t be easily replaced with electrification and a molecular way of moving energy is needed which is where hydrogen comes into its own. But hydrogen presents a lot of challenges too. As pointed out in various articles in recent days, moving energy as liquified hydrogen is unlikely to be the most efficient or environmentally beneficial but turning hydrogen into other forms that allow it to be transported and used is a big part of what large scale hydrogen supply projects are working on.
By 2050 hydrogen could account for 5-10% of total final energy used in industry, and hydrogen or hydrogen-derived fuels could account for up to15% of total final energy used by the transport sector. And that’s not counting the additional hydrogen demand that could be used for power systems.
So, what is bp doing?
At bp, we own the problem and are working hard to be part of the solution.
We’re aiming to be a triple net zero company by 2050 – or sooner – that’s net zero across our operations, production, and sales, and we also want to help the world get to net zero. bp is proud to have been operating in Australia for over 100 years – providing the energy needs of our customers, which to date have mainly been fossil derived fuels and products. But we understand the urgency of transition.
For the Paris Climate Agreement target of 1.5C to be met, we need to have clean, affordable and reliable energy solutions for energy-intensive sectors to start using as quickly as possible. And this is not easy. A successful transition will require the scale and engineering know-how of large companies like ours that are working hard to become greener. We are leveraging our global experiences in developing large and complex projects, trading and shipping businesses and operating complex assets to diversify our products and enable us to help keep our customers moving and powered for the next 100 years.
We’re already investing in the projects, technology, and partnerships here and abroad, to unlock a low-emissions future – with hydrogen playing a crucial role.
Let me speak about some of the projects we are developing in Australia.
The AREH project offers a significant decarbonisation opportunity for the Pilbara, the largest iron-ore producing region in the world. Here there is significant potential for emissions reductions through the greening of iron ore mining and processing, green steel production, diesel fuel displacement and bunkering of green shipping fuels at Port Hedland.
We are honoured and excited to have taken on the operatorship of AREH, alongside our project partners: InterContinental Energy, CWP Global, Macquarie Capital, and Macquarie’s Green Investment Group and collectively along with the Nyangumarta People, we have agreed to rename the project the – Australian Renewable Energy Hub.
We decided we wanted to reflect AREH’s prime location better, and showcase Australia’s natural assets, and highlight Australia’s aspiration to be a renewable energy superpower.
Subject to regulatory approvals and entering an Indigenous Land Use Agreement with the Nyangumarta People based on the principle of free, prior, and informed consent, the project plans to deliver onshore wind and solar power generation for use to help decarbonize the Pilbara at scale and to power green hydrogen production which can then be used to produce hydrogen transport vectors to export globally at scale.
Our priority is to ensure we are working closely with the Nyangumarta People, the Traditional Owners and custodians of the land on which we plan to develop the AREH generation.
It is critical that we put the views of the Nyangumarta Traditional Owners at the centre of how the AREH project is planned and established.AREH is truly world scale. When you consider that the largest power generation facility in the world (the Three Gorges Dam in China), produces 12GW of power, AREH has the potential to deliver a total generating capacity of 26 gigawatts (GW). The existing environmental permit has approved the installation of up to 1743 wind turbines which is three times larger than the largest wind farm in the USA and this is before we get to solar generating capacity.
At full scale, AREH could produce around 1.6 million tonnes of green hydrogen per annum, or the equivalent in a hydrogen export vector molecule.
AREH is a mega-scale project… but it will need to be built out in phases, with each phase passing FID separately. We are working extremely hard with our partners to accelerate the development timeline of the project with the aim of green power generation being made available into the Pilbara as soon as 2027.
This is not an easy challenge, but we are very committed, with the support of all our stakeholders, to making this happen.
Down in the Southwest, following the decision in 2020 to close the bp Kwinana refinery, bp declared its intent to explore clean energy options and transform the site for the future.
This started with looking at how we could establish a renewable fuels plant to produce sustainable fuels for the growing market in Western Australia and regionally. This transition work is powering ahead. I’m pleased to note that the project is heading towards FEED and the commencement of the environmental approvals process and associated stakeholder engagement is well underway. When operational, the plant will be capable of producing sustainable aviation fuel, biodiesel and bionaphtha, all critical drop-in fuels that can be substituted to help reduce emissions in existing aircraft and vehicles.
The production of renewable fuels requires hydrogen, so we are using this as an opportunity to build a green hydrogen production facility on the same site and integrate the plants. Whilst the renewable fuels plant will provide the foundation offtake for H2Kwinana, there is further potential demand for green hydrogen in the Kwinana industrial area, for use in hydrogen for mobility and exported to our customers in the region.
Kwinana fits our vision for an integrated energy hub that will produce and distribute renewable fuel and green energy for the future. It demonstrates our strategy to be the partner of choice for our customers and provide flexibility for them to meet their own emission reduction commitments. Renewable fuels can be used in the vehicles we are all familiar with today, and hydrogen can power the hydrogen fuel cell trucks and trains of the future, as well helping decarbonise this important industrial region.
In October, bp was granted land by the state government to progress a green hydrogen and hydrogen export vector project at Oakajee near Geraldton. And I would like to express our thanks to the government once again, and to Minister MacTiernan, for this.
Phase 1 of the project targets deployment in the second half of this decade, scaling to 5GW electrolysis by 2031.
The Mid-West has world-class wind and solar energy potential, ideal for producing renewable hydrogen for domestic and commercial use, advanced manufacturing and export.
As you might have realised, bp is serious about hydrogen.
We believe that we can make a significant contribution to Australia as it works collectively to establish a strong role in this new industry. The scale up of hydrogen plays to our strengths as a company and developer of large-scale projects right across the energy spectrum.
We’re already putting these capabilities into action by developing significant hydrogen projects, like our planned green and blue hydrogen production facilities in Teesside in the UK. It has the potential to deliver 30% of the UK's 2030 target for hydrogen production.
These are deeply complex projects which require partnerships and collaboration along the value chain. Which leads me to discuss the importance of collaboration.
It’s clear that building such a transformative new industry is a huge challenge that will take new approaches and collaboration to bring it to reality at the pace that is needed. The Australian Hydrogen Industry will gain a reputation based on how we deliver collectively.
It’s a case of making this work holistically – because we must.
I’ve previously spoken about the six columns of the hydrogen industry:
All are supported by the foundations of government policy that create the conditions for success.
And to succeed, all those elements need to work together in a manner we haven’t seen since previous national issues or crises. Team Australia is more important than ever.
bp acknowledges the tireless work of Minister MacTiernan and her team in working to solve this problem. I don’t quite believe the Minister will fully embrace retirement, but I wish her all the best in the next chapter. The State Government’s achievement of meeting its 2022 Renewable Hydrogen Strategy goals is a testament to her passion and a collective effort across government and industry development. Yet, of course, there is a great deal more to do.
bp welcomes the Western Australian Government’s Renewable Hydrogen Target as the start of a broader demand-side mechanism to facilitate hydrogen production in the State. Mechanisms that bring on supply for the most ready-to-use clean hydrogen will get the sector to scale.
And Government support will be crucial in the early stages of the hydrogen industry, until it scales up sufficiently to be economically competitive and we applaud the announcements the minister made this morning that head in that direction.
We are competing in a global environment, and the race is heating up.
We need to set the conditions for success. The infrastructure, ports, roads, pipelines, storage, the electricity transmission upgrades and enormous scaling of renewable generation are all needed to make the hydrogen industry a reality.
This brings me to the US legislation – the Inflation Reduction Act specifically, and its impact on Australia.
Recently, some analysts have said countries like Australia should run up the white flag on green hydrogen, surrender to the USA’s heavily subsidized hydrogen production, and consider developing alternative industries instead.
As we know, things can change very quickly, so I firmly believe that clean hydrogen can help deliver the energy transition and create a thriving industry for this country.
The US won’t be able to deliver energy transition on its own; countries like Australia with many natural advantages will need to do a lot of the heavy lifting.
However, the IRA has the potential to slow projects getting to Final Investment Decisions if there is no response from Australia. The US will be the first port of call for importing customers due to the material advantages of supply economics that the IRA provides.
The IRA changes the game that is resulting in other countries such as Canada feeling the need to implement policies to allow them to compete with US produced Hydrogen. And Ursula von der Leyen (the President of the EU) gave a speech in Belgium in the last couple of days that the EU will need to “adjust its own rules” to ensure that European businesses and projects are not disadvantaged by the IRA. In her words the IRA means that it is no longer a level playing field.
It raises the question, what is the Australian response? What is the Australian way of doing things?
The IRA is a very US response – apply broad settings rapidly and let the market deliver emissions reduction and industry development objectives.
In Europe and North Asia, we see a greater top-down approach, with a closer link between government and industry and initiatives that are often years in the making.
When we look at the history of new industries in Australia requiring multi-billion dollars of investment, it has involved strong public-private partnerships and sharing of risk.
Partnerships have been at the heart of Western Australia's industrial history; from a State Development Agreement underpinning the establishment of the Kwinana Refinery, to the Dampier Bunbury Pipeline connecting offshore gas reserves to industry in the Southwest.
Today’s partnerships will differ in several ways from the past, and it is here that we can deliver an Australian version of success.
We expect reforms to Australia’s emissions reduction policies will increase the incentive for domestic customers to use hydrogen. And we are encouraged by efforts from State Governments, including Western Australia, to develop demand-side initiatives for hydrogen. We would like to see these explored federally.
Looking at supply chains is just as important as demand in responding to the IRA with policy settings. The IRA has fortified US domestic supply chains across the breadth of the energy transition: for solar, wind components, transmission building, electrolysers, and converters. They understand the importance of supply chains for energy security.
Australia’s response is crucial. We need to consider how we can build our own competitive supply chains rather than looking across the globe for them, where the rapid pace of the transition means everything will be in short supply.
We are encouraged by integrated energy system planning, Renewable Energy Zones and investment in common user infrastructure. This will be critical for hydrogen exports.
This and more needs to be done to ensure the pipeline of projects in Australia are all constructed and that Australia delivers on its potential of being a leading playing in renewables generation and the production of hydrogen and hydrogen derivatives that allow the planet to have economically competitive means to decarbonize at the pace that is needed to meet the Paris Climate Targets.
Our trading partners in the region and in Europe are considering Australian hydrogen in their future energy plans, where our current reputation for quality products and reliability of supply hold us in strong regard.
So, what would help in the short term? Policies to make Australian green hydrogen production globally competitive, and they are needed promptly to ensure that the current momentum is maintained.
Two years ago, bp embarked on what is the biggest transformation in its history – to transform from an international oil and gas company to an integrated energy company, with net zero at its heart.
Australia is key to that transformation. Let’s remember we are in the right place at the right time. This is Australia’s moment.
Australian industry knows that action on climate change is good for jobs and the economy. And that genuine engagement and substantial partnership between business and government is how we will get things done.
We’re not saying it will be easy, but as bp CEO Bernard Looney told the media last month, “We are all in on Australia”. There is a reason for that – Australia has a really important role to play in supplying advantaged green energy to the world. So many of us here are working incredibly hard to make this a reality – there is so much for us to collectively do but energy transition on the scale it is needed can only happen if we are all pulling hard in the same direction.