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China’s Sinopec to accelerate push into hydrogen energy
Move by country’s biggest oil refiner follows Beijing pledge to cut emissions to near zero
yesterday
Sinopec’s quarterly performance was bolstered by the sale of pipeline assets to PipeChina, a newly formed state-owned company © Bloomberg
Sinopec says it will push deeper into China’s fast-growing hydrogen energy sector in a move that could reverberate through the global oil industry, as the country’s biggest refiner unveiled record quarterly earnings.
The state-backed company, which has Rmb87bn ($13bn) in cash, said on Thursday it planned to “reallocate some of our resources all along the hydrogen chain”, from refuelling stations to investing in production of the energy source itself. Sinopec did not provide specific details on the initiative.
The push from one of the world’s largest oil refiners into hydrogen energy comes after China, which emits more than a quarter of the world’s carbon dioxide, in September pledged to cut emissions to almost zero by 2060.
“Like solar, like wind, like batteries, this is a new clean energy business that China wants to dominate,” said Neil Beveridge, an analyst at Bernstein. “It’s still very, very early days, but clearly this is going to be a big, big industry in the future if China’s going to hit net zero.”
He estimated that the energy transition in China would cost about $6.5tn over the next three decades, and that the government would rely on the “enormous cash flow generation potential” of companies such as Sinopec to help fund it.
Sinopec’s net income in the third quarter was Rmb46.39bn ($6.92bn), bouncing back from its first ever half-year loss after the coronavirus pandemic weakened demand for fuel in China and battered commodity markets. Its net profits are down sharply over the nine-month period to the end of September.
The company’s performance was bolstered by the sale of pipeline assets to PipeChina, a newly formed state-owned company. A rise in refining margins compared with last year coincided with a period of low global oil prices, while Sinopec pointed to a “recovery of domestic demand”. Domestic sales of refined oil products were 45m tonnes in the third quarter, up slightly compared with the previous three months.
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Sinopec’s emphasis on hydrogen aligns with China’s push to reduce its reliance on imports of oil and other sources of energy — part of a drive for greater independence reflected in the country’s next five-year plan that is under discussion in Beijing this week.
China's shift to energy independence has global ramifications given it is the world's largest importer of oil. In September, its imports of crude oil leapt 18 per cent by volume year on year as the country's economic recovery from coronavirus gathered pace.
Sinopec, which has more than 30,000 petrol stations, last summer built the first hydrogen pumping station in China as part of a government plan to roll out 1,000 such facilities across the country over the next decade, which would support a million vehicles.
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It has also partnered with Shanghai Re-fire Technology, a producer of hydrogen fuel cell technology which in 2018 was deployed in 500 trucks in Shanghai.
Song Zhenguo, deputy director-general of the group’s corporate finance department, said its hydrogen plans were “a strong signal that Sinopec wants to be a major player in this area that’s going to be the future of energy”, in comments on an earnings call reported by Bloomberg News.
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