Chevron Corporation is cementing its position in LNG markets while working with customers on a future pivot to hydrogen once transportation technology is commercially available.
Speaking at CERAWeek in Houston, Chevron chief executive officer Mike Wirth said there is a danger of chaos if the ‘old’ energy system was turned off.
“We need an orderly transition,” he told the conference, a sentiment echoed by other leaders including Tengku Muhammad Taufik of PETRONAS.
Taufik highlighted the fact that in Asia meeting growing energy demand for economic development was challenging, while there is limiting capital available for energy transition technologies.
Meanwhile, European oil and gas majors Shell plc and BP plc have reduced oil and gas investment as they shift focus to transition technologies.
This shift has created space for more portfolio players in the global LNG market to step in and meet both Asian and European demand.
Chevron — already the operator of the Gorgon and Wheatstone projects in Australia, along with an Angola LNG plant — is perhaps the biggest amongst these players. The firm plans to expand its LNG portfolio in the second half of this decade, developing options to supply LNG into both the EU and Asia, Nigel Hearne, executive vice president of oil, products & gas, said at the firm’s investor day.
One option is in the Eastern Mediterranean, where Chevron now has a large gas position following its acquisition of Noble Energy in 2020. Chevron is evaluating its options to establish floating LNG liquefaction for export to European markets.
Another option is exporting more LNG from the U.S. Gulf coast, and potentially in the future from Venezuela.
But there are still concerns — raised at both Chevron’s investor day and by panelists at CERAWeek — about stranded natural gas supply and LNG assets as customers begin the transition to lower carbon fuels like hydrogen.
Chevron is currently working with Japanese utility JERA to replace some of its LNG imports with hydrogen.
Hydrogen transportation on water is a key issue. Because it has a relatively low volumetric energy density, hydrogen transportation and storage costs are far higher than those of LNG.
The capital costs of storing liquid hydrogen are currently much higher than those for LNG. (Source: IEA)
There are different options for transportation including methanol, liquefied hydrogen, ammonia, or attachment to a liquid organic hydrogen carrier (LOHC) molecule.
Chevron is interested in the last two options because they have existing storage and transport infrastructure in place, said Eimear Bonner, vice president and chief technology officer, at the investor day. Ammonia is an established market, while LOHCs can be carried and stored using the same infrastructure as oil products. LOHC is not commercialized but has the potential to offer low vessel capital costs and could use large capacity vessels that would help lower transport costs.
Chevron and JERA are involved in a joint study on LOHC and both companies are investors in Hydrogenious LOHC Technologies, a firm that is pioneering the technology.
PETRONAS is also looking to LOHC technology to carry hydrogen to its refineries in the form of methylcyclohexane (MCH). South Korean importers — currently big LNG customers — are hopeful that LOHC technology could be commercialized soon.
Meanwhile, BP is also evaluating the technology as one option for shipping hydrogen from its export-focused Asian Renewable Energy Hub in Western Australia.
“Not everyone wants ammonia,” BP chief executive officer Bernard Looney noted last year.
Making the switch
The switch from LNG to hydrogen is being driven by power generation and other high emissions industries looking for alternatives to reduce emissions.
On the supply side, if low-carbon ammonia made using natural gas combined with CCS is shipped to Asia (the option currently being pursued by Chevron and JERA), this will displace some natural gas from the LNG value chain.
Although natural gas and hydrogen are different molecules, the LNG industry is experienced in the challenges of converting a gas and shipping it around the world — not just on the technology side but in the development of contracts, markets and commercial arrangements.
There is already talk in the hydrogen sector about how initial development will happen along the lines of LNG in the late 1970s — with long-term off-take agreements providing the security that projects need to raise debt and get built.