Sinopec Plans to Spend $4.6 Billion on Hydrogen Energy by 2025

China‘s oil giants are going green – with Sinopec announcing plans to boost investment in green hydrogen and solar power, while offshore producer CNOOC has launched a carbon capture and storage project in the South China Sea.

Sinopec Corp plans to spend 30 billion yuan ($4.6 billion) on hydrogen energy by 2025 as the state oil and gas major pivots to producing natural gas and hydrogen as part of becoming a carbon-neutral energy provider by 2050.

Asia’s biggest oil refiner said on Monday it plans to become China‘s largest company to produce hydrogen for use as a fuel for transportation. It is targeting an annual capacity of 200,000 tonnes of hydrogen refuelling by 2025.

“Sinopec will expand forcefully into making hydrogen from renewable energy, and zero in on hydrogen for transportation fuel and using green hydrogen for refining,” acting Chairman Ma Yongsheng said.

The company aims to produce more than 1 million tonnes of so-called ‘green hydrogen’ from renewable energy sources between 2021 and 2025, as well as add 400 megawatts of solar power generation capacity for supplying electricity to charge vehicles.

Sinopec has so far built 20 hydrogen filling stations, with another 60 under construction or in the planning and approval stage.

The company produces about 3 million tonnes per year of hydrogen from non-renewable energy sources that is mainly used in oil refinery and petrochemical processes.

The company on Sunday reported its highest first-half net profit since 2018, at $6.05 billion, on rebounding oil and gas prices as well as steady domestic fuel demand.

CNOOC launches carbon capture project

Meanwhile, CNOOC, China‘s top offshore oil and gas producer, has launched the country’s first offshore carbon capture and storage (CCS) project in South China Sea. This is expected to store more than 1.46 million tonnes of carbon dioxide, it has said.

As an auxiliary facility at the Enping 15-1 oilfield in the Pearl River Mouth basin of the South China Sea, about 190 km southeast of Hong Kong, the CCS project is designed to re-inject as much as 300,000 tonnes of CO2 per year into seabed reservoirs.

“The greenhouse gases associated with Enping 15-1 oilfield development will be sealed in a saltwater layer at a depth of 80 metres,” CCTV, the state television outlet said, citing Zhang Wei, chief engineer at CNOOC’s Shenzhen firm.

CNOOC Ltd, a listed arm of CNOOC, announced last week that it would channel up to 10% of annual spending to green energy by 2025 as the firm seeks to reduce its carbon footprint.

Other major Chinese oil firms have also been exploring carbon capture, utilisation and storage (CCUS) at their oilfields onshore. Sinopec is also planning a project in east China which is estimated to inject 10.68 million tonnes of the climate warming gas into an oilfield over the next 15 years.

China – the world’s biggest CO2 emitter by a substantial margin – has vowed to reach carbon neutrality by around 2060. To achieve that goal, as much as 1.82 billion tonnes of CO2 needs to be cut via CCUS each year by that time, according to a study conducted by a research institute affiliated to China‘s environment ministry in July.

Gas consumption rising

The country’s natural gas consumption is expected to rise 13.3% this year amid a strong economic recovery and Beijing’s push to replace coal with lower-carbon gas, Ma Yongsheng said. That level of growth should continue over the next three years.

Like state-run peers PetroChina and CNOOC Ltd that are prioritising natural gas development over oil, Sinopec plans to boost gas output in the second half of 2021 by 13.5% from a year earlier, compared with 13.7% growth in the first six months.

Sinopec maximized its refinery operations in the first half, pushing throughput to 126.11 million tonnes of oil, or about 5.1 million barrels per day, up 13.7% from a year earlier when demand was curtailed by the outbreak of Covid-19.

Domestic fuel sales in the period rose by 8.1% on strong demand for gasoline and other light fuels such as naphtha used as petrochemical feedstocks.

Refinery throughput in the second half of the year is forecast to be flat to the first-half and year-earlier periods, remaining at about 126 million tonnes.

Its trading arm Unipec posted a profit of 3.5 billion yuan during the period, the firm said, without giving a comparison.

Amid Beijing’s broad policy to limit China‘s refined fuel exports, Sinopec’s first-half fuel exports fell 10% from a year earlier to about 9 million tonnes.

• Jim Pollard and Reuters

This report was updated on August 30.