US oil major Chevron launched its lower-carbon and alternative fuels unit Chevron New Energies just over a year ago. Since then, it has developed a portfolio of projects across the renewable fuels and carbon capture and storage (CCS) sectors, with hydrogen playing a key role in its strategy.

Hydrogen Economist spoke to Matias Saettone, general manager of hydrogen business development at Chevron, during the recent Gastech conference in Milan.

Tell us in broad terms about Chevron’s approach to the energy transition.

Saettone: At Chevron, we believe the future of energy is low carbon, and when it comes to this energy evolution, we take a pragmatic but optimistic view. We are very focused on leveraging our capabilities, assets, partnerships and customer relationships to build energy solutions that can be reliable, affordable and ever cleaner.

So we approach this in two ways: by focusing on decarbonising our own assets and operations, and by investing in and starting up new businesses. And this is what Chevron New Energies is all about.

When it comes to our commitment to this energy evolution, it is not only financial—we have announced $10bn of investments by 2028—but also the fact that we started up an organisation, a separate business unit: Chevron New Energies. Our first anniversary was in July and we started with the president. Today we have an organisation of 100+ employees.

Where is Chevron New Energies focusing its efforts?

Saettone: Chevron New Energies has business lines that cover renewable fuels and products, that cover offsets and emerging technology, such as geothermal, and that cover CCS and hydrogen. We look at many, many projects. We have many ideas, all focused on delivering lower-carbon solutions. 

It is very entrepreneurial because that is a way that we can capture top talent, and that is one of the critical resources we think will help us in this transformation. And it is been fun being part of this, because you can see that change also in culture, that entrepreneurial type of behaviour. 

How will the Inflation Reduction Act (IRA) impact your strategy and the wider US low-carbon energy sector?

Saettone: It is a step in the right direction and positive for industry, but positive also for the country because it is positioning the US as a very strong competitor in the global trade in low-carbon intensive energy.

There is a lot of interest now from Europe and from Asia in the US because of all the numbers that people are running: they are seeing that, with the IRA, actually, the cost of supply from US is going to be very competitive. It is also positive for industry because it will accelerate the implementation or execution of many of the parts of the value chain that needed that support.

So from a strategic perspective, we remain committed to our long-term strategy. That has not changed, but the execution or implementation of many projects or opportunities will be accelerated.

Turning specifically to hydrogen, how do you see demand developing?

Saettone: When we look at the hydrogen demand segments, you have mobility, industrial and the harder-to-abate sectors such as cement and steel. It is also dependent sometimes on geographies because some geographies may have different priorities as we transition towards hydrogen in a longer-term future.

“We think Europe as well as Asia will be the initial markets that will pull a lot of these new commodities such as ammonia and hydrogen”

Asia Pacific is looking at replacing what are quite new coal-fired power plants with ammonia. So, in Asia Pacific, there is a lot of desire to start that transition to ammonia, as there is in Europe.

When it comes to the US, mobility has been seen as a first priority, particularly on the West Coast. In Texas there is a combination of power and industrial use for petchems or refineries or steel and cement plants.

We think Europe will be one of the large demand centres, as it is in LNG, and we are leveraging our experiences in the value chain from natural gas to LNG from the past decades because we believe those will be the same routes that ammonia and hydrogen will follow. We think Europe as well as Asia will be the initial markets that will pull a lot of these new commodities such as ammonia and hydrogen.

Chevron New Energies is involved in hydrogen refuelling projects in the West Coast. Tell us about this side of the business.

Saettone: Our focus now is on California. We are leveraging our assets at the Richmond refinery and developing the hydrogen fuel that can be used across networks in partnership with [Japan’s] Iwatani and Toyota so we can develop those hydrogen highways that they are also envisioning in the state of California.

Will Chevron New Energies be a producer of green and/or blue hydrogen?

Saettone: We are trying to move away from colours, and we prefer to talk about the carbon intensity. Our intent is to supply low-carbon-intense fuel. There could be a blend of supply sources that would yield that fuel with the intent of always lowering that intensity as we evolve.

So, maybe in the earlier days, you could start at one side of the spectrum and progress towards the lower end as the industry evolves too. In the particular case of hydrogen, we also working with waste-to-hydrogen technology, so that already brings the carbon intensity of hydrogen pretty low. And we could also blend that with the hydrogen from a refinery to then fuel trucks as part of the heavy-duty programme. So it is a portfolio approach. 

Setting aside the colour definitions, how do you see the role of natural gas and renewables evolving in terms of hydrogen production?

Saettone: The nature of the hydrogen supply that could be developed eventually in Europe or the US is different because the US has abundant natural gas. 

“A vast majority of scalable supply will end up coming from the US”

Natural gas, in our view, will be a critical component in the decarbonisation of the industry because producing hydrogen from natural gas will achieve scales that will fit the rising demand and the needs of customers in Europe and Asia. Renewable hydrogen will soon be part of that mix, but it will not be able to reach that scale.

A vast majority of scalable supply will end up coming from the US, and this follows in many ways the LNG trade routes and how the US also has a very strong position in the export of LNG to the world.

Transporting hydrogen between regions is a challenge for the industry. How do you see this playing out at the market matures?

Saettone: Based on the conversations we have with our customers and partners, the evolution will probably pass first by low-carbon intensity ammonia, and that will be used for power generation as well as for transportation, especially marine transportation, and the fertiliser industry. And as technology gets further developed, eventually that transition to hydrogen will happen.

But initially, ammonia can serve not only as a marine fuel but also as a carrier for hydrogen.  That ammonia then has to be cracked again to convert it back to hydrogen. The customers will look at the cracking technology and they will probably consume ammonia, while those technologies get scaled and the costs come down.

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Author: Stuart Penson