BP enters final negotiations on planned blue hydrogen plant with UK government

BP has entered the final stage of funding negotiations with the UK government on its planned 1.2-GW H2Teesside low-carbon hydrogen production plant in Teesside, the company said in a statement Aug. 8.

The company has agreed a statement of principles with the Department for Energy Security and Net Zero, it said.

It has also awarded front-end engineering design contracts with Costain and Technip Energies.

"These agreements mark further critical milestones for H2Teesside as the project continues to move towards EPC contracts and then construction," BP UK VP for hydrogen and CCUS Andy Lane said in the statement. "The project could play a critical role in decarbonizing industry on Teesside, helping to transform the region into a leading hydrogen hub and kickstart the UK's low-carbon hydrogen economy."

The statement of principles allows H2Teesside, part of the East Coast Cluster of industrial decarbonization projects, to start final negotiations for a low-carbon hydrogen production agreement with DESNZ.

Technip will deliver the FEED work for the planned hydrogen production and carbon capture plant, including engineering procurement and construction execution methodology, schedule and cost, while Costain will design pipeline infrastructure for the 31-km hydrogen distribution network. Both studies are due to be completed in 2025.

Platts, part of S&P Global Commodity Insights, assessed the cost of blue hydrogen production by autothermal reforming (including capex, CCS and carbon) at GBP2.38/kg ($3.02/kg) Aug. 7, based on month-ahead natural gas prices.

The UK is targeting 4 GW of blue hydrogen production capacity in operation or construction by 2030.

Project timelines

Final investment decisions and funding awards for the first projects under the Track 1 CCUS cluster program were expected in September, although industry representatives said this timeline could slip following the change in government after the UK election in July.

The planning approval process for H2Teesside is ongoing, with the projected timeline for a decision extending into 2025, according to the government planning inspectorate.

BP declined to comment on the planning process or project timelines.

Meanwhile, EET Hydrogen's planned 350-MW phase one blue hydrogen plant at Stanlow in the HyNet cluster in the northwest of England, the other production facility to receive backing from DESNZ under Track 1, has received planning permission approval and expects to take a final investment decision in 2024, CEO Joe Seifert said earlier in the year.

The Carbon Capture and Storage Association said in July that negotiations with the government had almost concluded and ministerial sign off was now required. DESNZ did not respond to a request for comment.

Winning Track 1 projects also include the associated CO2 transport and storage infrastructure to enable the CO2 capture and hydrogen projects.

However, Norway's Equinor has pushed back a target final investment decision date for its 600-MW H2H Saltend blue hydrogen plant, also part of the East Coast Cluster, to around 2027 after failing to be selected under Track 1.