SLB is at the forefront of heavy industry’s push to drive down emissions through the use of low-carbon hydrogen in multiple processes ranging from steelmaking to petrochemicals production. Hydrogen Economist spoke recently with Gavin Rennick, president of the company’s New Energy business, about the technologies and strategies in play as industrials prepare to deploy hydrogen at scale.
How would you characterise the challenge of scaling up the low-carbon hydrogen sector?
Rennick: With hydrogen, you are starting up a new value chain, and this requires all of the pieces to come into play. Our position is that the whole value chain needs to be established. Demand needs to be established, and we are very focused on use cases—we want to target use cases that will enable a certain amount of demand, and then the supply will follow.
And the technology around production is really important because it gets you to an economic tipping point where companies can use the hydrogen as part of their energy mix. But having that whole value chain incentivised and moving at the right speed is what is necessary for the industry to grow.
Tell us about SLB’s approach to the deployment of hydrogen.
Rennick: The way we are approaching it is that we are working very closely with specific industries. For instance, we are working in close collaboration with steel industry leader ArcelorMittal through a joint venture called Genvia, which we created with the CEA and other partners in France to develop a solid oxide electrolyser. Through this close collaboration, we are already designing the very first units to go into a steel plant. That is really important because the way that you design technology is not independent of use cases; in fact, I think the most successful innovation is when you are solving a very specific customer problem. In our case, this will be in a very specific use case within the steel industry. We also have other engagements for other use cases in the chemical and cement industries.
In every case, we will be creating a system that addresses the needs of the customer and that will allow them to decarbonise. Being able to work really closely with customers is going to be key to understand and shift the economics.
How do you improve the economics of hydrogen production?
Rennick: Shifting the economics is pretty simple at the high level, but it is complicated to do. You have got to look at your input costs—the price of gas, the price of electricity. Do you have gas infrastructure, CO₂ infrastructure? And do you have electrical transmission infrastructure that you can bring to bear?
Those inputs are really important. Once you establish where they are, then it is all about the cost of conversion: how can I bring down the lifetime cost of converting electricity into molecules at the right quality to be able to use the hydrogen in whatever process it needs to be used in? Or what is the process that can bring down the cost of splitting gas molecules and being able to produce hydrogen? In both of those cases, there is a big role for technology to play if you are going to get anywhere near the cost targets that people believe are necessary.
If you look at the cost of a molecule today, anywhere between 50% and 70% of that cost is the input commodity cost, and the rest of it is the actual cost of the production plant. We could do a lot with that 30%, but the input commodity cost plays a big role.
How will the technology landscape evolve as the industry matures?
Rennick: We do not think it is going to be a one-technology play. We think there is going to be really a significant spread across the types of technology needed to produce hydrogen or derivates. The main role technology has to play here is to reduce the lifetime cost of production as well as the carbon intensity.
In the case of gas, we have invested in a company called ZEG Power, and now we are working on demonstration projects for deployment of an innovative lower-cost and high-efficiency methane reforming technology at scale, globally. And we like that technology because it integrates the production of hydrogen with carbon capture, so the overall capital costs come down and the energy costs come down.
This cost reduction is also what we are trying to do with the electrolyser technology. Personally, I believe every type of electrolyser has a use case.
Even technologies that have existed for many decades like alkaline and PEM have not yet been deployed at scale, which is key to drive further innovation in tech development and manufacturing processes to drive cost down.
We focus on where you get the most bang for your buck in terms of taking carbon out of the atmosphere. If you look at us and our profile as a company, we are used to dealing with large industrial companies and so working with them on a scale project that can take megatons of emissions out of the atmosphere is important.
The technology choices we make are not because we like a particular technology, they are because we can see the problems that the technology is best placed to solve.
The whole narrative needs to shift a little bit from the type of technology to the way it is going to be used to a deliver something that is economical for the decarbonisation efforts of a steelmaker or petrochemical producer.
How quickly can hydrogen production scale up?
Rennick: Looking at some of the most recent numbers, there are 1,200 projects out there in the world today, and about 950 of them are designed to produce more than 50kg/d, so something reasonable in size. Then if you look at what has reached FID, about 10% of that segment are at or around 50kg/d, but that only represents 4% of the volume of all of the projects, so that means people are doing little projects.
And that is really important because these big heavy industries have huge capital investments to change their processes—billions of dollars. So, what they do is they bring in a small-to-medium-size unit. It produces hydrogen. They blend it with wherever they are getting their hydrogen from today, they run it for a period of time, they get comfortable and when they de-risk the technology they start to deploy it at scale.
And it makes sense from a capital perspective. We are seeing this everywhere—there are a lot of small-to-medium-scale tech pilot plants going at the moment.
Some of the processes that are out there today only work and are economic when they are very big. So, there is work to be done in the market at scale. We will see a lot of those distributed markets of smaller projects between now and 2030, and then after 2030 we will start to see a lot more of the bigger projects going in because people are much more comfortable that the project is bankable. They de-risk it, and they feel good with the technologies and their integration into the use case. We think the market will then really accelerate.