BP’s Teesside scheme had been slated to deliver more than 10pc of Ed Miliband’s hydrogen production target - Wiktor Szymanowicz/Future Publishing via Getty Images

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.

Story Continues

It also means Mr Miliband may face a choice between allowing the project to collapse or promising even bigger subsidies at the expense of billpayers.

Amid warnings that sky-high energy prices are killing British manufacturing, he has promised to “revitalise our industrial communities” with almost £22bn of support for projects such as H2Teesside that will capture and store carbon dioxide emissions.

Under current boss Murray Auchincloss, who took the reins after Mr Looney left over an undisclosed office relationship in September 2023, BP has been slashing investment in green energy projects.

It follows pressure from Elliott Management, an activist investor, which accused the company of “abysmal” cost discipline.

One person briefed on the situation claimed that Elliott Management had signalled its opposition to the H2Teesside scheme in the past, although a source close to the investor denied that.

Hydrogen has been hailed as a possible green “superfuel” of the future, with investors touting its potential to replace other gases in heavy industry, fuel aircraft and heavy machinery, and be burned in power plants to generate electricity.

However, experts have warned that formidable obstacles remained to making it commercially viable.

On Friday, BP said it was “focused on a few high-graded projects in hydrogen and carbon capture and storage”.

The company has confirmed it is pressing ahead with the separate Net Zero Teesside Power scheme, which will see it build a flexible gas-fired power plant equipped with carbon capture technology.

It is also participating, alongside other firms, in the Northern Endurance Partnership, a network that will transport CO2 captured from sites along the east coast out to storage wells under the North Sea.

A BP spokesman said: “We continue to work with [the] Government to progress H2Teesside.”

A government spokesman said: “We are delivering first-of-a-kind carbon capture and hydrogen projects in the UK, including in Teesside, supporting thousands of jobs, securing the future of heavy industry and tackling the climate crisis.

“H2Teesside could provide hydrogen to both industry and potential hydrogen-to-power projects that could be operational from 2030, and we are continuing to work with BP on the project.”

View Comments