About a year and a half ago I posted the question as to whether or not the large industrial gas companies could replace Big Oil at some point in the future. My thinking was that if we transition from a petroleum based transportation system to one based upon hydrogen, what companies would be most likely to build the infrastructure?
Some of the big oil companies, to their credit, such as Shell and Chevron have put up a few hydrogen fueling stations even though it’s not in their best financial interests to do so (and have been scaling back recently). Oil is cheap and there is already a system in place for pumping oil, producing gasoline or diesel fuels and delivering it to stations for a low price.
Hydrogen, on the other hand, as an emerging technology is not yet cheap to produce, or distribute and there are few fueling stations in which to deliver it. These are just the facts as they stand now. So, Big Oil has no financial incentives to build a hydrogen fueling infrastructure. But how about Big Gas?
Some of the major industrial gas companies such as Air Products, Praxair, Linde and Air Liquide sell most of the hydrogen they currently produce to Big Oil’s refineries to desulfur petroleum.
There is already a vast network of hydrogen pipelines along the Gulf Coast region of the U. S. supplying hydrogen to refineries. And, according to Linde, “Hydrogen demand will increase in the upcoming years as a result of stricter environmental legislation, more extensive processing of residues and higher diesel demand compared with gasoline.”
This makes me wonder about the inherent conflict of interest that Big Gas may have with Big Oil. If Big Oil is one of the biggest customers of Big Gas and Big Oil is a major competitor in regard to the fueling stations as well, how will this scenario play out in the months and years to come?
Right now, all of the big gas companies I’ve mentioned have hydrogen fueling stations and pumps in some regions of the world, supplying H2 to vehicles. But, this isn’t real competition yet for Big Oil.
Building thousand of hydrogen fueling stations or even just hydrogen fueling pumps for current stations will be seen as a threat to Big Oil profits. And the Big Oil companies are not going to let this happen without a fight, perhaps changing vendors to the Big Gas companies that competes less with them.
This means that some Big Gas company will have to take a huge risk and have the financial backing to start putting up hydrogen fueling infrastructure knowing that their contracts may be dumped by Big Oil.
Which Big Gas company will be willing to take this risk? Of course no one knows for sure, but what if none of the big gas companies decide to take this risk – where does that leave us?
The upside to this scenario is that the market will be wide open for smaller players to build infrastructure and reap big profits especially if aided by government incentives. This also leaves the market open for hydrogen coops to form and buy their own hydrogen stations.
The manufacturers of hydrogen on demand pumps like ITM Power or Hydrogenics or the makers of hydrogen slurries may step in to fill the void. On another positive note, Big Gas may not build hydrogen stations, but may build hydrogen pumps and sell them to other parties. Air Products has developed a modular series production system for their hydrogen pumps that will bring the cost of these pumps down considerably.
But, when Air Products starts selling too many of these H2 pumps and they start cutting into the profits of Big Oil, then at that point, Big Oil is sure to notice and take action. This, however, will leave the market open for another smaller company with no ties to Big Oil and step in to take over the market.
Like FedEx did for the shipping industry, some smaller hydrogen fueling company may do for the hydrogen transportation system. Starting small with some Big Idea we may see an unknown company come out of nowhere to become a transformational company for the building of the upcoming nationwide hydrogen highway network.