Low-carbon hydrogen demand in refining could reach 50 Mtpa by 2050

Demand for low-carbon hydrogen, including blue and green forms, in the refining sector could reach 50 million tonnes per annum (Mtpa) by 2050 as part of green transition efforts, said Wood Mackenzie.

Green hydrogen is produced from renewable sources while natural gas produces blue and gray hydrogen. Gray hydrogen is a process similar to blue, but carbon dioxide is not captured, while pink hydrogen is produced by electrolysis from nuclear energy.

Petroleum refining is one of the largest markets for hydrogen, accounting for around 32 Mtpy, or 30-35% of global hydrogen demand in 2020, the consultancy said in a report on Thursday.

Hydrotreating and hydrocracking, processes used respectively to reduce the sulfur content of finished products and to increase the yield of transport fuels, are the major processes consuming more than 90% hydrogen in the refining sector.

However, more than 65% of hydrogen demand in refining is met by hydrogen supplied as a by-product from catalytic reformers and ethylene crackers, which is unlikely to be replaced by low-grade hydrogen. carbon, according to the report.

Any drop in hydrogen demand is met by “tailored production” from steam methane reforming (grey) and coal (brown), which together account for about 32% of refinery hydrogen demand .

“Low-carbon hydrogen has the potential to replace hydrogen on purpose as a feedstock if low-carbon hydrogen becomes cost-competitive and political support grows over time,” said Sushant Gupta, director of research at Wood Mackenzie.

“[The] the potential size of the global low-carbon hydrogen market in this segment could reach 10 Mtpy by 2050, resulting in a 10% or 100 Mtpy reduction in global carbon emissions from scope one and two refineries .

However, the real game changer will replace fossil fuels in combustion applications to generate heat and steam, he said.

“This will provide a larger market for low carbon hydrogen in refining with a potential market size reaching up to 40 Mtpa by 2050, and up to 300 Mtpa or a reduction of around 25% carbon emissions, so the total potential demand for low-carbon hydrogen in refining could reach 50 Mtpa by 2050.”

Hydrogen is expected to play a key role in the coming years as economies and industries transition to a low-carbon world to mitigate the effects of climate change.

Globally, the size of the hydrogen industry is expected to reach $183 billion by 2023, up from $129 billion in 2017, according to Fitch Solutions. French investment bank Natixis estimates that hydrogen investments will exceed $300 billion by 2030.

Global demand for low-carbon hydrogen is expected to reach 223 million tonnes by 2050, up from less than 1 million tonnes currently, Wood Mackenzie said in an earlier report.

This will initially be driven by ammonia, which will account for 48% of total demand by 2025, followed by the electricity sector from 2036, which will generate 31% of demand until 2050.

Ammonia is widely used in fertilizers as well as in industrial applications including the manufacture of plastics, textiles, pesticides, automobiles and cosmetics.

Lower costs and high carbon prices are needed to make low-carbon hydrogen competitive with fossil fuel-based hydrogen, the report said.

A much higher carbon price of $100 per tonne to $150 per tonne would be needed in the early 2030s for low-carbon hydrogen to be competitive in the refinery combustion sector.

Alternatively, the cost of green hydrogen must be less than $1.50 per kilogram to compete with burning gas and fuel oil in the long term.

“In addition to lower costs for low-carbon hydrogen, higher carbon prices, financial incentives and stronger policy support will be needed to accelerate adoption by the refining sector,” said Mr Gupta.

“Dedicated national hydrogen roadmaps will help increase the penetration of low-carbon hydrogen across many sectors.”

Refiners will also need to consider additional low-carbon technologies such as electric heating, carbon capture and storage on key carbon-emitting units, and biomass gasification for further decarbonization of the sector, according to The report.

Renewable energy and the use of low-carbon raw materials and products will also help reduce emissions.

Updated: June 09, 2022, 10:07 a.m.

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