Sinopec Group, alongside over a hundred Chinese companies, has announced a collaborative effort to accelerate the development of a green hydrogen supply chain in China.
This alliance, which includes major players like China Energy Investment Corp., State Grid Corp., PetroChina, and Cnooc, aims to transition the nation towards cleaner, non-polluting fuels.
Sinopec, already the world’s largest producer of green hydrogen, is spearheading this alliance. Green hydrogen, produced using renewable energy, is crucial for reducing emissions in sectors like steel, cement, and petrochemicals. However, despite its potential, green hydrogen has struggled to compete with cheaper, dirtier alternatives such as grey hydrogen, which is primarily derived from natural gas. Sinopec’s leadership in this nascent industry raises questions about whether their push is driven by environmental concerns or by shrinking refining margins as China nears peak oil demand.
One of the primary challenges facing the green hydrogen industry in China is the high cost of production, compounded by safety concerns and inefficient market structures. The alliance aims to address these issues, particularly in the storage and transportation of green hydrogen from remote renewable energy sources in western China to industrial hubs on the east coast. However, whether these efforts will be sufficient to overcome these hurdles remains uncertain. BloombergNEF projects that while global low-carbon hydrogen supply could increase 30-fold by 2030, it may still fall short of meeting most government targets.
Sinopec’s investment in advanced production technologies and the expansion of distribution networks suggests a strategic repositioning as the company anticipates a decline in oil demand. Yet, this shift also raises questions about the sustainability and long-term viability of their green hydrogen ambitions.
