Oil majors’ ‘big bet’ on hydrogen is not so big in reality as they invest 8 times more in biofuels, T&E says

While European oil majors are taking a gamble on hydrogen as the transport fuel for the future, this ‘big bet’ is not so big in reality, according to a new study on behalf of Transport & Environment (T&E), which shows that investments in biofuels refining are eight times bigger.

Ricardo Energy & Environment, a global environmental consultancy, carried out the study on behalf of T&E, a European umbrella for non-governmental organisations working in the field of transport and the environment.

T&E believes that oil producers are not being serious about investing in genuinely clean fuels but choosing the “easy, unsustainable biofuels option”.

Where Europe’s oil giants Shell, BP, Total, ENI and Repsol are investing in hydrogen, only part of this is said to be truly ‘green’. Most of their investments are going towards decreasing the carbon intensity of their refinery operations, not to developing green transport fuels, the study shows.

Geert Decock, Electricity and Energy Manager at T&E, said: “Oil producers are promoting hydrogen as their big bet for the future, but in reality their investments in green hydrogen are pitiful. Instead, they are focusing their new refining capacity on biofuels which cannot sustainably supply the world’s transport needs. This is not an industry pushing the boundaries of clean technology.“

The study points out that oil demand for road transport in the EU will fall by almost a third in 2035 as more cars switch to electric. From 2035, demand for petrol will continue to drop 5% year on year. Much current refining capacity will need to close or, to avoid becoming stranded assets, be converted into processing alternative fuels.

Of the refining sector’s €39 billion in planned investments for alternative fuels up until 2030, almost 75% will go towards increasing biofuels production. €2 to €3 billion will be invested in new advanced biofuels (HVO) plants alone, doubling production capacity to 10 megatonnes by 2030, the study shows.

This is four times higher than what can be sustainably sourced in the EU, according to T&E’s analysis. This will likely lead to limited ‘waste’ products like animal fats being taken from other industries, as well as mass imports of dubious used cooking oil from abroad.

Oil refining is one the main users of hydrogen today, with most using carbon-intensive grey hydrogen made from fossil fuels. According to the study, oil companies are investing around €6.5 billion in so-called ‘low carbon’ blue hydrogen to clean up their production processes. This is double what they are spending on producing green hydrogen and e-fuels, which could be used to clean up aviation and shipping, T&E notes.

“Where oil producers are investing in hydrogen, most is going towards replacing dirty grey hydrogen operations with blue hydrogen, which still uses polluting fossil gas. Instead of wasting their time on easy, short-term solutions, oil refiners should switch to producing green hydrogen and e-fuels for ships and planes today”, concluded Geert Decock.