Background to the Study

The global demand for hydrogen is about 90 Mt in 2020. It has conventionally been produced from fossil fuel sources with an associated CO₂ emission of almost 900 Mt per year. In light of the shift towards a low carbon economy IEAGHG has undertaken two parallel studies in 2021 to investigate alternative routes for the decarbonised production of hydrogen. The first, is the ‘blue hydrogen: global roadmap’ study, which is focused on the hydrogen production technologies from natural gas and secondly, this report, which is based on low carbon hydrogen production from oil and oil-based products as feedstocks. Further, these studies build on the IEAGHG published study on ‘Techno-Economic Evaluation of SMR Based Standalone (Merchant) Hydrogen Plant with CCS’ in 2017.

The primary objective of this study is to review the comparative analysis of blue hydrogen production (that is hydrogen derived from fossil fuels and associated CCS) technologies from oil and oil-based feedstocks as well as the supply chain implication. Further, this study includes techno-economic and life cycle assessments of different technology production configurations in regions that have access to oil resources and potential for the deployment of CCS infrastructure at scale.

Key messages

·        Analysis in this study highlighted that the total demand for hydrogen could be nearly 2,000Mtoe by 2050. This quantity could be delivered from all sources of hydrogen production, especially from blue hydrogen derived from oil and oil-based feedstocks, while addressing GHG emissions.

·        The three blue hydrogen production pathways which use oil-based feedstocks selected for detailed analysis in this study are steam naphtha reforming (SNR) + CCS, partial oxidation (POX) and hygienic earth energy (HEE). These technologies exhibit lower carbon footprints by between 58-67%, 47-77% and 71-78% respectively against the benchmark steam methane reforming (SMR) without CCS in 2020.

·        The carbon footprints of all the technologies vary because of regional differences due to the carbon footprint of the feedstock, fuel, and electricity source, and type of technology deployment.    

·        The total carbon footprint of the selected hydrogen production pathways was heavily influenced by the carbon footprint of the electricity source. This factor underscores the importance of employing low carbon electricity even if a high capture rate is implemented in the production of the blue hydrogen. Changes in the carbon footprint of electricity production was established to have the biggest impact on POX and HEE, to a lesser extent on SNR.

·       All the studied oil-based hydrogen production technologies exhibited a higher cost than both the reference grey hydrogen (hydrogen from SMR without CCS) production case and natural gas based blue hydrogen production in the Netherlands via SMR in 2020. However, by 2050, the cost of most of the blue hydrogen pathways from oil-based feedstocks substantially decreases due to larger markets in the oil-producing regions, including to achieve their climate action targets, and economies of scale in hydrogen distribution and CO₂ T&S (transport and storage). If higher carbon prices are applied, blue hydrogen costs will be lower than hydrogen derived from SMR without CCS in the long term.

·       In the longer term, the falling cost of renewable electricity and alignment with net zero ambitions is likely to make green hydrogen production increasingly competitive and lower cost than blue hydrogen production in cases where low-cost electricity is available.

·       One potential competitive pathway for hydrogen derived from oil and oil-based products against other mainstream alternatives could be achieved if the hydrocarbon feedstock is treated as a waste product (vacuum residue) or assuming it has no inherent economic value (retained within a depleted reservoir).

This report is available to download.