Move over Twiggy, here’s why Santos’ (ASX:STO) boss is focused on blue hydrogen

Hydrogen bubble in blue

The Santos Ltd (ASX: STO) share price will likely have a captivated audience on Thursday. Australia’s second-largest independent oil and gas company has drawn some attention after its prominent display at the COP26 climate summit in Glasgow.

The event hosted appearances by several Australian companies seeking to display their climate-targeted efforts. Attendees included Andrew ‘Twiggy’ Forrest’s green-hydrogen protégé Fortescue Future Industries, alongside Sun Cable and Santos.

However, some criticism has been voiced regarding Santos’ prominent featuring at the event. Yet, Santos CEO Kevin Gallagher is adamant the company’s ‘blue’ hydrogen strategy is a winner.

Let’s take a look at what unfolded.

ASX-listed Santos turns up the heat at COP26

Santos has not been secretive about its ambitions to be net zero emissions by 2040. The 67-year-old Australian oil and gas giant believes it can reinvent itself by utilising new technologies. One important tool at its disposal is carbon capture storage. This is an essential ingredient for Santos in its proposed blue hydrogen production.

On Monday, Santos announced it had decided on proceeding with its $220 million Moomba carbon capture and store (CCS) project. The project, which is expected to be completed in 2024, is expected to capture 1.7 million tonnes of carbon dioxide per year. By using CCS, Santos will be able to burn natural gas in a low-emission manner.

Following the announcement, Santos CEO Kevin Gallagher has shared the opinion that fossil fuel companies will need to transition to new energy sources “or die”. In addition, the CEO pointed out that Santos is looking at green hydrogen plants. Although, Gallagher thinks that it won’t be economically viable for a decade.

Despite its endeavours to go net-zero, some participants at the COP26 summit weren’t happy with Santos’ featuring. In fact, former prime minister Malcolm Turnbull went as far as calling ASX-listed Santos’ appearance “a joke”.

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While the proposed project would enable the capturing of CO2, the company would likely be using this in conjunction with gas extraction. A concept that isn’t quite as green as producing energy directly through renewable sources.

What is blue hydrogen?

While green hydrogen is made by using renewable energy, blue hydrogen takes a different approach. Specifically, natural gas is burnt, with hydrogen being produced from the steam generated. From there, the carbon dioxide emissions are stored underground using carbon capture storage.

Gallagher is sceptical of renewables catering for all of the hydrogen required by 2050. Instead, blue hydrogen could fill this gap, as Gallagher stated, “We believe we can get it (blue hydrogen) to market quicker, and we have an abundance of natural gas in Australia which becomes a competitive advantage.”

Finally, ASX-listed Santos is trading at $6.86, down 2.83% at the time of writing.

The post Move over Twiggy, here’s why Santos’ (ASX:STO) boss is focused on blue hydrogen appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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