INTERVIEW: Indian Oil balances conventional with renewables for decarbonization goal

State-owned Indian Oil Corp. is adopting several methods to decarbonize its operations, such as advancing renewable hydrogen projects and tapping low-carbon energy sources, while maintaining growth in its conventional business, Chairman Shrikant Vaidya told S&P Global Commodity Insights Feb. 7.

IOC, with a net-zero target at 2046, has a presence in crude oil, natural gas, petrochemicals and alternative energy.

"Our strategy involves investing in various mitigation technologies to minimise operational emissions, majorly from our refineries and petrochemical plants which together constitute more than 97% of our operational emissions," Vaidya said in written replies to a questionnaire.

"We are also focusing on maximising efficiencies and transitioning to low-carbon energy sources, with the remaining emissions being addressed through Carbon Capture Utilisation and Storage, tree plantations, or carbon markets."

Vaidya is attending the India Energy Week Feb. 6-9 in Goa, where he is participating in discussions with other stakeholders.

IOC plans to invest over Rupees 2 trillion ($24 billion) in mitigation efforts to achieve its net-zero goal, a plan that also includes pursuing renewable hydrogen, biofuels, renewable power and natural gas, he added.

Indian Oil has developed a renewables portfolio of over 240 MW in wind and solar energy and has also invested in energy storage systems, ranging from batteries to pumped hydropower or thermal storage, for ensuring grid stability, according to Vaidya.

The company has a joint venture -- GH4India -- with engineering company L&T and renewables company ReNew with plans for a large-scale renewable hydrogen business for domestic and export sales.

"We are strategically planning to establish green hydrogen projects along India's east and west coasts to meet global demands," he said. "Our focus is on hydrogen and its derivatives for export, particularly targeting the European market. We are currently working on two such export projects."

IOC will target industrial users in the oil and gas, fertilizer and steel sectors as consumers, he said.

In an auction for renewable hydrogen incentives by the Indian government, results of which were announced in January, GH4India's bid for subsidizing 10,000 mt/year of renewable hydrogen at an average of Rupees 40/kg, did not feature among the 10 winners.

Planned projects

Vaidya did not give a target for renewable hydrogen production, but the 2022-23 annual report said 20 mt/d renewable hydrogen production capacity was under development.

"By 2030, we aim to substantially increase our production of green hydrogen, targeting to convert 50% of our refineries' hydrogen requirement from gray to green," Vaidya said.

Indian Oil is developing a 10,000 mt/year green hydrogen plant at the Panipat Refinery, the annual report said. It is collaborating with Italy's Snam to explore the possibility of converting the existing natural gas pipelines for hydrogen transportation.

Technology for hydrogen generation has come from France's Technip, the annual report added.

Its research and development center has been assessing multiple hydrogen production pathways, including solar electrolysis, biomass gasification and biomethanation.

IOC has India's first hydrogen refueling station for mobility in Faridabad, near New Delhi.

The company is also collaborating with SJVN for expanding its renewable portfolio with solar, wind, hydropower and hybrid power, the annual report added.

A binding term sheet for a JV has been signed with L&T for foray into electrolyzer manufacturing in India, the report said.

Hydrogen pricing

The cost of producing renewable hydrogen is significantly higher than conventional hydrogen, currently ranging Rupees 350-550/kg ($4.22-$6.62/kg) "based on current renewable electricity costs at our refineries," Vaidya said.

"To reduce these costs, we're focusing on increasing production scale, improving efficiency in the value chain, and leveraging advancements in technology."

The cost of renewable hydrogen could reduce in the next 5-10 years, making it more competitive than hydrogen produced from natural gas. Around this time, renewable hydrogen would become more attractive and find takers across various end-use segments, he said.

As the cost differential between renewable and conventional hydrogen narrows, renewable hydrogen will gain momentum. Green finance and a mature carbon trading market will strengthen the trend, he said.

Platts, part of S&P Global Commodity Insights, assessed New South Wales hydrogen produced by alkaline electrolysis at $2.73/kg Feb. 6, two times higher from a month ago, according to data from S&P Global.

Platts assessed Saudi Arabia hydrogen produced via alkaline electrolysis at $2.31/kg Feb. 6, unchanged month on month, S&P Global data showed.

Conventional foothold

IOC will increase its contribution to 12.5% from 9% of India's energy demand by 2050, Vaidya said.

"Indian Oil is deeply committed to realising India's unique transition blueprint that balances conventional fuel usage with renewable options to have a robust energy mix," he said.

"To achieve that, we have scaled up our renewable energy capacity in addition to strengthening our core business."