How Hydrogen Can Reshape Big Oil’s Future
For decades, oil companies have dominated global energy markets, shaping economies and geopolitics alike. But as the world shifts toward decarbonization, traditional energy sources are losing their foothold. Enter hydrogen: a fuel that is versatile, scalable, and poised to play a central role in the low-carbon economy.
Hydrogen isn’t just a clean fuel—it’s a strategic pivot for Big Oil. From decarbonizing industries like steel and cement to enabling energy storage for renewables, hydrogen fills critical gaps that neither fossil fuels nor existing renewables can address alone.
Oil companies are uniquely positioned to lead this transformation, leveraging their expertise, infrastructure, and global networks to integrate hydrogen into the energy landscape.
What we’re essentially talking about is diversification. By investing in hydrogen, oil companies can future-proof their operations while maintaining their role as energy leaders in a rapidly changing world.
But to succeed, leaders must navigate questions of cost, viability, and market demand with precision.

Can Hydrogen Really Replace Fossil Fuels in Steelmaking?
Yes, and it’s already happening. Traditional steelmaking relies on fossil fuels to create the extreme heat needed for production, emitting massive amounts of CO₂. Hydrogen-based direct reduction of iron (DRI) offers a cleaner, scalable alternative. Pilot projects across Europe are proving hydrogen’s potential to revolutionize the steel industry.
How Can Oil Companies Lead the Hydrogen Revolution?
Big Oil has the infrastructure and expertise to connect hydrogen production with industrial demand:
- Establishing supply chains that link hydrogen with nearby factories and industrial clusters.
- Partnering with governments to co-develop hydrogen ecosystems around existing oil and gas facilities.
What’s the Real Difference Between Blue and Green Hydrogen?
It’s fair to say that hydrogen isn’t just fuel—it’s industrial energy. Decarbonizing heavy industry is one of hydrogen’s greatest opportunities. Oil companies that embrace this shift will lead the next phase of the energy transition.
So, for oil companies navigating hydrogen investments, understanding the differences between blue, green, and other hydrogens now becomes strategic. Each type of hydrogen offers unique opportunities and challenges, and Big Oil’s ability to balance both will determine their role in a low-carbon future.
Why Is Blue Hydrogen a Practical First Step?
Blue hydrogen is produced from natural gas, with carbon emissions captured and stored (CCUS). For oil companies, this option leverages existing assets, such as natural gas fields and pipelines, making it a cost-effective way to enter the hydrogen market. Blue hydrogen also serves as a transitional solution while green hydrogen scales up.
Is Green Hydrogen Production the Ultimate Goal?
Green hydrogen is produced using renewable electricity to split water into hydrogen and oxygen, resulting in zero emissions. While this process is environmentally ideal, it’s currently more expensive due to the high cost of renewable energy and electrolyzers. However, as renewable costs drop, green hydrogen is poised to dominate long-term, aligning with global decarbonization goals.
What About the Other Colors of Hydrogen?
While blue and green dominate the conversation, other types like turquoise hydrogen (methane pyrolysis) and pink hydrogen (nuclear-powered electrolysis) are emerging as alternatives. These technologies could offer lower emissions and costs, giving oil companies more diversification options.
How Can Oil Companies Repurpose Their Infrastructure for Hydrogen?
We have established that a balanced hydrogen portfolio is key. Oil companies that invest in both blue and green hydrogen hedge their bets, positioning themselves for immediate gains while preparing for the future.
Diversification into emerging hydrogen technologies adds resilience and flexibility to their strategies. But diversification isn’t easy to come by. Luckily, investing in hydrogen doesn’t mean starting from scratch.
In an earlier blog we’ve discussed how oil companies are uniquely positioned to leverage their existing infrastructure—pipelines, storage facilities, and refineries—to support hydrogen production, transport, and distribution.
By adapting these assets, they can cut costs and accelerate their role in the hydrogen economy.
Can Pipelines Built for Natural Gas Handle Hydrogen?
Yes, but with some modifications. Hydrogen is lighter and more corrosive than natural gas, so existing pipelines may require upgrades, such as protective coatings or new materials. However, retrofitting pipelines is far cheaper and faster than building entirely new hydrogen networks, making it a practical solution.
What About Refineries and Storage Facilities?
Oil refineries can be repurposed to produce hydrogen through steam methane reforming (SMR) with carbon capture, creating blue hydrogen. Additionally, underutilized storage tanks originally built for natural gas or oil can be adapted to store hydrogen or hydrogen-derived fuels like ammonia, supporting growing demand.
Could Hydrogen Hubs Reshape Industrial Clusters?
Oil companies can create hydrogen hubs by integrating production facilities with nearby industrial clusters. For example, hydrogen produced at refineries can be piped to steel plants or chemical manufacturers, creating localized demand and reducing transportation costs.
What Challenges Are Holding Back Hydrogen Investments?
Big Oil’s existing infrastructure is one of its greatest assets in the hydrogen transition. But there are barriers to realizing the full value of their hydrogen investments.
Why Is Green Hydrogen So Expensive?
Green hydrogen relies on renewable electricity, and while solar and wind costs are dropping, the capital required for electrolyzers remains high. Additionally, the intermittent nature of renewables complicates scaling production. Oil companies can address this by investing in hybrid solutions, such as pairing production of hyrdogen with existing fossil fuel assets or integrating with nuclear energy for stable power.
Is There Enough Demand for Hydrogen?
Hydrogen markets are still developing, and demand remains uncertain in many regions. Industries like steelmaking and shipping are showing promise, but scaling depends on governments and corporations adopting hydrogen-friendly policies. Oil companies can actively shape demand by:
- Partnering with industrial players to build early hydrogen ecosystems.
- Promoting hydrogen purchase agreements (HPAs), which de-risk investments by securing long-term buyers.
How Do Regulations Add Complexity?
Hydrogen regulations vary widely across regions, from incentives in Europe to fragmented policies in North America. Oil companies face uncertainty about global standards, trade rules, and subsidies. By collaborating with policymakers and aligning with international frameworks, leaders can reduce regulatory risks and help shape hydrogen-friendly policies.
Are Supply Chain Issues a Bottleneck?
From sourcing electrolyzers to transporting hydrogen-compatible materials, supply chain limitations are a significant challenge. Oil companies can mitigate this by investing in localized production of hydrogen and forging partnerships with equipment manufacturers to ensure reliable supply.
What’s the Business Case for Investing in Hydrogen?
For oil companies, hydrogen isn’t just an environmental commitment—it’s a strategic investment in long-term profitability and market relevance. The business case for hydrogen goes beyond decarbonization, touching on new revenue streams, market expansion, and the ability to shape the future of energy.
What Are the Long-Term ROI Opportunities?
While initial investments in hydrogen infrastructure and technology may be high, the return on investment is driven by:
- Economies of Scale: As production costs drop with larger facilities and technology improvements, margins improve.
- Premium Pricing: Low-carbon fuels like hydrogen can command higher prices, especially in regions with stringent emissions targets.
How Does Hydrogen Future-Proof Oil Companies?
Hydrogen positions oil companies to:
- Diversify Revenue Streams: Reducing reliance on traditional oil and gas markets, which face long-term decline.
- Align With Global Policies: Meet tightening regulations and decarbonization mandates while staying competitive in international markets.
- Lead Emerging Markets: By acting early, oil companies can shape hydrogen trade agreements and market structures, securing a leadership role.
What About Non-Fuel Hydrogen Opportunities?
Hydrogen is more than a fuel—it’s a building block for value-added products like:
- Ammonia: Used in agriculture and shipping.
- Synthetic Fuels: A cleaner alternative for aviation and other industries.
- Hydrogen-Derived Feedstocks: Essential for producing chemicals and materials in a low-carbon economy.
Hydrogen Is Big Oil’s Gateway to the Future
The hydrogen economy for oil companies is the next chapter in their evolution
Delaying hydrogen investments could leave oil companies lagging behind as demand accelerates. Competitors, both within the industry and from renewable energy companies, are already staking claims in production of hydrogen and its distribution.
Acting early allows oil companies to:
- Establish market leadership.
- Secure partnerships with high-demand sectors like steel and aviation.
- Influence global standards and trade agreements.
What are you going to do?
FAQs
1. Why are oil companies investing in hydrogen, and how does it align with decarbonization goals?
Hydrogen is essential for decarbonizing sectors like steelmaking, cement production, and heavy transport, which are difficult to transition using traditional renewables alone. For oil companies, hydrogen offers a strategic opportunity to diversify their portfolios, meet global emissions targets, and tap into emerging markets while maintaining profitability.
2. What is the difference between blue and green hydrogen, and how are oil companies investing in both?
- Blue Hydrogen: Produced from natural gas with carbon capture, leveraging existing oil and gas infrastructure. It’s a cost-effective, transitional solution for decarbonization.
- Green Hydrogen: Produced using renewable electricity and water, offering zero emissions but requiring more upfront investment. Oil companies are investing in both to balance short-term scalability with long-term sustainability.
3. How can oil companies repurpose existing infrastructure for hydrogen production and distribution?
Existing pipelines, refineries, and storage tanks can be retrofitted for hydrogen with modifications to handle its unique properties. For example:
- Pipelines can transport hydrogen or hydrogen blends.
- Refineries can be adapted for blue hydrogen production with carbon capture systems.
- Storage tanks can store hydrogen or hydrogen-derived fuels like ammonia.
4. What challenges do oil companies face in hydrogen investments, and how can they overcome them?
Oil companies face challenges like:
- High production costs: Investing in scalable technologies and hybrid solutions can reduce these costs over time.
- Regulatory fragmentation: Collaborating with governments to shape policies can reduce risks and create incentives.
- Supply chain issues: Building local hydrogen hubs and forging partnerships with equipment manufacturers can ensure a reliable supply chain.
5. What are the long-term business opportunities in hydrogen?
Hydrogen offers oil companies multiple revenue streams:
- Supplying hydrogen to decarbonize industrial sectors and transport.
- Producing value-added products like ammonia, synthetic fuels, and hydrogen feedstocks for chemicals.
- Establishing leadership in international hydrogen trade as global demand accelerates.