BP walks away from epic $55bn Pilbara hydrogen dream

BP quitting the renewables megaproject whose price tag eclipses SunCable deals an irreparable blow to a hydrogen industry struggling with high costs, regulatory hurdles and lack of customers for the clean energy source.

The Australian Renewable Energy Hub has plans for huge solar and wind generation capacity. Picture: Brook Mitchell/Getty Images

Global energy major BP has quit a clean energy megaproject in Western Australia’s Pilbara region, dealing a huge setback to Australia’s ambition of becoming a green hydrogen superpower after Fortescue retired plans for a competing project in Gladstone.

BP’s decision to walk away from the Australian Renewable Energy Hub in iron ore heartland — just two years after acquiring a 40.5 per cent stake and assuming operatorship— underscores the growing challenges facing Australia’s nascent hydrogen industry, which is too expensive, unevenly regulated and lacks customers.

The Hub, first proposed in 2014, aims to build up to 26 gigawatts of wind and solar capacity across a 6600-square kilometre footprint in the Pilbara, generating hydrogen and ammonia for export to Asia.

It is a monster by any measure: 1753 wind turbines and up to 10,800 megawatts of solar capacity proposed over more than 660,000ha northeast of Port Hedland.

At scale, it would have ranked among the largest energy projects globally, rivalling the size of some of Australia’s legacy LNG operations and even Mike Cannon-Brookes’ SunCable in dollar terms.

BP inherited the project after buying into a consortium including InterContinental Energy, CWP Global and Macquarie’s Green Investment Group in mid-2022. At the time, BP described the hub as “one of the best renewable energy resources in the world” and a cornerstone of its pivot away from fossil fuels.

But in a statement on Thursday, BP said the project does not align with its current focus although it continues to believe wholeheartedly in the development.

“BP has advised the Australian Renewable Energy Hub partners of its intention to exit the project as operator and equity holder. This decision reflects BP’s recent strategy reset, which will see BP grow its upstream oil and gas business, focus its downstream business, and invest with increasing discipline into the transition,” a spokeswoman told The Australian.

“While [Australian Renewable Energy Hub] no longer aligns with BP’s strategy, it continues to present an important opportunity for Western Australia to decarbonise the Pilbara. BP will work with its [Australian Renewable Energy Hub] partners to ensure a safe and efficient transition of operatorship.”

Despite BP’s withdrawal, its holding was 63 per cent, the project’s remaining partners appear to be pushing ahead.

BP’s share will transfer to a holding entity, though it is not clear whether InterContinental Energy and CWP Global, both long-time proponents of mega-scale renewables, will continue or seek fresh investment.

Alexander Tancock, chief executive of InterContinental Energy, said the holding company will be the operator, guided by his firm.

“We are grateful for BP’s significant contributions and partnership, which have played a vital role in advancing the project to this stage,” said Mr Tancock.

“As the [Australian Renewable Energy Hub] project company assumes operatorship with the leadership and guidance of InterContinental Energy, we remain committed to working closely with the Government of Western Australia and all stakeholders to drive the next phase of development. We believe strongly in the project’s potential to decarbonise the Pilbara and diversify the State’s economy, and we look forward to delivering on this shared vision.”

Australia’s hydrogen industry can’t catch a break.

Fortescue’s H2 capitulation

It follows the collapse or delay of several other high-profile proposals, including Fortescue’s Queensland and NT ventures, and Total Eren’s plans in the Northern Territory, which were shelved following Woodside’s decision to withdraw earlier this year.

Andrew Forrest-led Fortescue on Thursday ditched plans to spend almost $900m on a hydrogen project in the US state of Arizona, blaming policy changes under the Trump administration for the move. The $140m Gladstone plant was also formally shelved having opened about 12 months ago but put on ice in May.

The plant had received about $60m in federal and Queensland government support.

Fortescue’s executive for growth and energy, Gus Pichot, said: “I want to make it clear we are not giving up on green energy, and green hydrogen is key to our future, including our green metals strategy.”

Green hydrogen — produced using renewable energy to split water molecules — has been pitched by both industry and government as a clean energy solution for hard-to-abate sectors such as steelmaking, shipping and fertiliser production. But despite billions in federal and state funding commitments, only a handful of small-scale projects have reached final investment decision.

In WA, where the McGowan and now Cook governments have championed green hydrogen as a pillar of the state’s post-mining future, BP’s exit raises questions about the viability of large-scale hydrogen exports.

In June, InterContinental Energy conceded today’s cost for delivering green energy was estimated at ­between $8 and $11 a kilogram, exceeding the price of rival energy sources it aimed to unseat. It expected green hydrogen costs to eventually fall to about $4 a kilogram, but even at those levels experts said it was unviable.