BP blames customer cold feet for withdrawal from $55bn Pilbara Australian Renewable Energy Hub

BP withdrew its support for a gigantic renewable energy project in WA citing a focus on oil and gas. But the head of the energy giant’s Australian operations has revealed it could have stayed on had buyers been ready.

BP Australia country president Lucy Nation said some of the project’s most likely customers delayed plans to commit to long-term offtake agreements. Picture: Brook Mitchell/Getty Images

BP has revealed its decision to walk away from the $55bn Australian Renewable Energy Hub megaproject was sealed by the reluctance of future customers to back up their support for green power with financial commitments.

The global energy major stunned the clean energy industry last week after confirming its exit from the Pilbara venture, just two years after acquiring a 40.5 per cent stake and assuming operatorship. The move has fuelled renewed scrutiny of Australia’s hydrogen ambitions, amid growing doubts about the commercial viability of large-scale green hydrogen exports.

While BP initially said its withdrawal reflected a reversion to oil and gas investments, it was open to keeping involvement in the hub alive had customer timelines not slipped so dramatically.

BP Australia country president Lucy Nation said its most likely customers — widely understood to include large iron ore miners operating in the Pilbara and countries such as Japan — had significantly delayed plans to commit to long-term offtake agreements.

Ms Nation did not specify which customer, nor whether these contracts centred on green hydrogen or renewable energy.

“There are very clear customers who need and want the product, but their timelines have all significantly moved to the right,” Ms Nation said, speaking at a clean energy summit in Sydney on Wednesday.

BP’s exit leaves the future of the Australian Renewable Energy Hub — first proposed in 2014 — in limbo. It planned up to 26 gigawatts of wind and solar generation capacity across a 6600-square kilometre stretch of the Pilbara. Once operational, it would produce green electricity, hydrogen and ammonia for export, with Japan and South Korea seen as primary destinations.

The project was touted as a flagship for Australia’s aspiration of becoming a major player in the global hydrogen economy. But its scale, cost and remote location have made it a challenging commercial proposition.

While Australia has a natural advantage in solar and wind resources, the economics of green hydrogen remain doubtful. High production costs, a lack of enabling infrastructure, and regulatory inconsistencies between state and federal governments have all contributed to delays in reaching final investment decisions for major projects.

Ms Nation’s comments add weight to concerns that the private sector remains hesitant to commit to offtake deals without more clarity on pricing, supply chain reliability and policy settings.

A delay or collapse of the Australian Renewable Energy Hub will leave a major hole in plans for some of WA’s miners to meet their clean energy targets.

The Pilbara is Australia’s most important economic region but it is also responsible for 41 per cent of WA’s emissions alone. Australia has committed to reaching net zero emissions by 2050, which will require substantial progress in reforming heavy emitters.

BP acquired its stake in the hub in 2022 from a consortium of developers including InterContinental Energy, CWP Global and Macquarie’s Green Investment Group. At the time, the UK oil and gas giant described it as a cornerstone of its transition strategy, with potential to become one of the largest renewable and hydrogen hubs in the world.

The remaining consortium members are now left to decide whether to proceed or seek new partners to replace BP’s investment and leadership.

The federal government has placed hydrogen at the centre of its decarbonisation objective, offering support through the $2 billion Hydrogen Headstart program. But critics say more needs to be done to bring prospective buyers and developers into alignment.

Originally published as BP blames customer cold feet for withdrawal from $55bn Pilbara Australian Renewable Energy Hub