Is BP’s Flagship Hydrogen Project at Risk?

Teesside hydrogen project could be in jeopardy due to costs and may need subsidy to survive

BP’s H2Teesside project – a centrepiece of Ed Miliband’s net zero strategy – could be dramatically scaled back or scrapped altogether, says The Telegraph.

The blue hydrogen scheme, first announced in 2021, was intended to deliver more than 10% of the government’s 2030 hydrogen target.

But insiders say the oil giant is now considering a 75% reduction in scope or a full withdrawal unless ministers offer more state support.

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The 1.2GW project was set to produce hydrogen from natural gas and capture associated emissions, contributing heavily to the decarbonisation of industry and power. It formed a key plank of BP’s £2bn pledge to transform Teesside into a low-carbon hub.

But according to the report, the scheme has hit serious roadblocks. BP is struggling to secure enough customers to justify investment – partly due to uncertainty over the future of a nearby Sabic-owned chemical plant.

The facility was tipped to be a major hydrogen off-taker but its upgrade has been paused and closure is now under consideration.

Tees Valley Mayor Ben Houchen called the setback “highly concerning” and demanded urgent talks with BP. "Asking for increased government subsidy in this way is not a sound basis for an investment of such scale," he said. "There remains a high level of interest for this site from alternative investors and we will continue to pursue all options."

BP has already scrapped its other local project, HyGreen Teesside, which would have produced green hydrogen via electrolysis.

H2Teesside’s collapse would mark a full reversal of the green ambitions once championed by former CEO Bernard Looney, who personally launched the projects.

The Department for Energy Security and Net Zero said H2Teesside "could provide hydrogen to both industry and potential hydrogen-to-power projects that could be operational from 2030" and that it was "continuing to work with ****BP***** on the project"*.

BP confirmed it is still advancing the separate Net Zero Teesside Power project – a gas-fired power plant with carbon capture – and said it remains "focused on a few high-graded projects in hydrogen and carbon capture and storage".

As the government weighs up whether to protect the project with further subsidies, Miliband may face a tough choice: let H2Teesside fail or commit even more taxpayer support to keep it alive.