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A massive hydrogen project at the heart of Ed Miliband’s net zero plans risks being cancelled as BP retreats from green targets.
The H2Teesside scheme, announced in 2021 by the company’s then chief executive Bernard Looney, was designed to produce “blue” hydrogen from natural gas, and then capture and store the carbon emissions.
It had been slated to deliver more than 10pc of the 2030 target set by Mr Miliband, the Energy Security and Net Zero Secretary, for hydrogen production and was expected to come online by the late 2020s.
But sources have warned that BP is now likely to scale back or even cancel the 1.2 gigawatt project as it struggles to secure enough customers to make the investment worthwhile.
The FTSE 100 company is currently in talks with the Government about whether greater state support can be provided, with Mr Miliband’s department viewing the scheme as a potentially important source of hydrogen for both industrial uses and power plants.
On Friday, Ben Houchen, the Tees Valley mayor, said he was seeking urgent talks with BP about the “highly concerning” potential setback.
He said: “Asking for increased government subsidy in this way is not a sound basis for an investment of such scale and BP must now be clear in setting out a coherent plan for the project.
“There remains a high level of interest for this site from alternative investors and we will continue to pursue all options.”
The H2Teesside project is thought to have run into trouble because of doubts about the future of a nearby chemical facility run by Sabic, the Saudi-owned petrochemicals giant. The plant was expected to be an anchor customer, providing a steady source of demand.
But a major upgrade of the facility, that would have made it capable of using hydrogen feedstock, was recently paused and Sabic is understood to be considering the site’s closure.
Against this backdrop, The Telegraph understands BP has been considering reducing the scope of H2Teesside by as much as 75pc or scrapping it altogether.
A source said BP had warned the Government that the project was now unlikely to be viable unless the state agreed to support both the hydrogen factory and its customers.
BP has already cancelled the other hydrogen scheme it had proposed in the area, HyGreen Teesside, which would have made “green” hydrogen via electrolysis.
A decision to scrap H2Teesside as well would represent a complete reversal of the company’s pledge under Mr Looney to invest £2bn in regional hydrogen projects. Mr Looney travelled to Teesside to announce both schemes personally as part of his quest to reinvent BP as a net zero champion.