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Market News

 May 23, 2007
Energy Giants unite in Hydrogen venture

 London, UK -- Two of the world's largest companies have announced a joint venture to pursue hydrogen and low-carbon energy projects. BP and Rio Tinto have formed a new jointly-owned company named Hydrogen Energy to develop projects around the world based on hydrogen-fuelled power generation using fossil fuels and carbon capture and storage (CCS) technology.

For the new venture, the 'decarbonised' energy projects will be based on the conversion of fossil fuels such as coal, petroleum coke (a refinery by-product) or natural gas, to hydrogen and carbon dioxide gases, with the carbon dioxide being captured and stored in geological formations.

In power projects, the hydrogen would be used to fuel a gas turbine for generation of industrial-scale supplies of electrical power. Full integration with CCS technology would capture and store 90 per cent of the carbon dioxide which would otherwise have been emitted to the atmosphere.

The venture's first planned project is a US$1.5 billion coal-fired power generation project at Kwinana in Western Australia that would include carbon capture and storage to reduce its emissions of greenhouse gases. The companies have begun feasibility studies for a plant that would generate enough electricity to meet 15 per cent of the demand of south west Western Australia, while capturing around 90 percent of its CO2 emissions.

The companies are responding to a rapid worldwide development of new power generating capacity as older power stations are replaced and new plants built to meet growth in demand, particularly in the rapidly expanding economies of the developing world. According to the International Energy Agency, about two-thirds of the generating capacity that will be needed in the next 25 years has yet to be built. Much of the growth will be in countries where coal is abundant and so the fuel is expected to be a significant part of the energy mix.

Tom Albanese, Chief Executive, Rio Tinto, said: "Coal is a key part of Rio Tinto's energy business and we believe it has an essential role in generating clean power in the future. The investment we are making in Hydrogen Energy will allow us to deliver decarbonised energy and carbon capture and storage. Although initial projects may be based on non-coal feedstocks, they will be significant building blocks in the development of coal gasification on an industrial scale. Investing now means we will be well-placed to create value for shareholders from opportunities in the emerging clean power market."

Tony Hayward, BP group chief executive, said: "Projects such as these have the potential to help deliver the carbon emission reductions which companies and countries around the world are now seeking. This will only be possible if companies work together and work alongside governments. The combination of skills and experience which BP and Rio Tinto bring will allow us to accelerate the development and deployment of these important new technologies and projects."

Hydrogen Energy, whose final formation will be subject to regulatory approvals, will identify and secure opportunities for decarbonised energy projects worldwide, working with governments to determine appropriate policies and regulatory regimes, and develop and operate the assets, with partners where appropriate. The projects will typically use coal or petroleum coke as feedstock; although in some cases natural gas may be used.

The previously announced hydrogen-fuelled power projects in Peterhead, Scotland and Carson, California will become part of Hydrogen Energy. As part of the agreement, Rio Tinto will make a cash payment to BP of some $32million, subject to post-completion adjustments.

Hydrogen Energy will be headquartered in Weybridge in the south-east of England and will initially have a staff of 75 seconded from the parent companies. The chief executive of Hydrogen Energy was today named as Lewis Gillies, formerly head of BP's hydrogen power business and its chief financial officer as Peter Cunningham, formerly head of business evaluation for Rio Tinto.

Hydrogen Energy will be equally-owned by BP and Rio Tinto.



For More Information: BP