BP faces a “high complexity” challenge to get the vast Asian Renewable Energy Hub (AREH) green power and hydrogen project established as an international clean fuels export centre, said the supermajor’s chief financial officer (CFO).
Murray Auchincloss said that locking in customers and securing electrolyser capacity are among the big obstacles to the oil & gas giant's plans to by 2030 create an “international play” at what is slated to become one of the largest clean energy projects on the planet.
BP in September closed a deal to become the AREH’s operator and largest shareholder with 40.5% of the multi-phase project in Western Australia that aims to eventually deploy 26GW of wind and solar with potential to power production of 1.6 million tonnes of hydrogen or nine million tonnes of ammonia annually.
Auchincloss told financial analysts today (Tuesday) that the mega-project has two distinct aspects presenting different levels of challenge.
The first is to bring green hydrogen and electricity to mining and other industries operating in the desert Pilbara region, which he estimated could begin to “start happening in “2025/26/27”.
That would form the base project to turn AREH into “a big export hub, hopefully by the end of the decade – it would be brilliant if we could achieve that”.
But Auchincloss said while the “complexity of the domestic play is relatively low, the complexity of the international play is quite high.
“We’ll have to lock in customers, lock in stakeholder rights, lock in some pretty serious capacity for electrolysers and secure debt financing for what would be a very very big investment.”
BP and its partners in the AREH – developers InterContinental Energy and CWP Global, and finance giant Macquarie – hope to make the project a key supply base for green fuels needed for the wider Asia-Pacific energy transition, helped by the supermajor's international profile and trading expertise.
BP renewable energy chief Anja-Isabel Dotzenrath told Recharge in June when its investment was first announced that the scale of renewable generation and estimated 14GW of electrolysers foreseen at AREH – whose build cost has previously been reported as $36bn – would require a “strategic” relationship with equipment suppliers and “a different approach committing to volume and a strategic approach to a [supply chain] market that is very constrained”.
Auchincloss’ comments to analysts came as BP reported underlying replacement cost profit of $8.2bn for the third quarter, joining peers such as Shell and TotalEnergies in reaping huge returns from high oil & gas prices.
The UK-based group is also among the most active in its sector in embracing renewables, with a target to advance 50GW net of renewables projects by 2030 and a big presence in offshore wind and solar, the latter through its Lightsource BP joint venture.
By the end of Q3 BP had a net renewables pipeline of 26.9GW, up by 3.8GW on a year earlier, helped by its success with partner EnBW in securing a 2.9GW offshore wind project in the ScotWind round.