Oil giant BP is stopping 18 hydrogen projects, scaring off the emerging industry

In a 32-page earnings report, oil and gas giant BP revealed it is abandoning 18 early-stage hydrogen projects, a move that could have a chilling effect on the emerging hydrogen industry.

This decision, along with the sale of the company’s onshore wind energy operations in the US, will save BP $200 million annually and help boost its bottom line. The hydrogen industry, which relies on oil and gas companies both financially and through lobbying, is bracing for a bleaker outcome.

BP has been a proponent of hydrogen. The company’s venture capital arm has invested in several green hydrogen startups, including Electric Hydrogen and Advanced Ionics. Earlier this year, BP said it would develop “more than 10” hydrogen projects in the US, Europe and Australia.

Now BP is scaling back these plans and announcing the development of five to ten projects. The company remains silent about whoever gets the green light.

Hydrogen has the potential to significantly reduce carbon pollution across a range of industries, including petrochemical refining, steelmaking and long-haul shipping. But the infrastructure for hydrogen, especially green hydrogen, which is produced using renewable electricity, is still insufficiently developed. That’s partly because green hydrogen is the most expensive form of the gas to produce and transporting hydrogen is costly compared to fossil fuels.

The hydrogen industry sees oil and gas companies as one of the best growth paths. Many already produce hydrogen from natural gas in their refineries, making them logical customers for startups developing electrolyzers that can produce hydrogen from water and electricity. In addition, oil and gas companies have decades of experience developing large infrastructure projects, such as those needed if hydrogen is to reduce industrial emissions.

At the same time, oil and gas companies rely on the fossil fuel business to generate profits, providing significant incentive to slowly transition to alternatives. BP’s decision to scale back its hydrogen ambitions is unlikely to be the last in the industry.