BP and Petronas Compete for Up to $2 Billion Investment in Greenko Founders' Latest Venture

Malaysia: BP is vying with Malaysia's state-owned energy company, Petroliam Nasional Bhd (Petronas), to invest $1.5-2 billion in a new platform fully owned by Greenko's co-founders, Anil Chalamalasetty and Mahesh Kolli. The discussions have progressed with both parties, and Greenko is anticipated to choose one of the two energy giants as their partner. Upon completion, this will mark the most extensive foreign investment in an eco-friendly Hydrogen and Ammonia initiative to date in India.

BP is facing scrutiny from two major UK pension funds with a combined £130 billion in assets. The funds have threatened to vote against the renewal of top directors' terms at BP and Shell unless both companies improve their commitments to reducing Carbon emissions. BP had previously committed to achieving net-zero Carbon emissions by 2050, but CEO Bernard Looney recently announced that the company would only reduce its oil and gas output by 25% from 2019 levels by 2030, instead of the previously set target of 40%.

Plans to produce 4-5 MTPA of Green Ammonia, Green methanol, and electrolysers at Kakinada in Andhra Pradesh have been announced by a new platform. This project will require a capital expenditure of $10 billion. The platform has already secured offtake agreements with Posco from South Korea, Uniper SE from Germany, and state-owned ONGC for green molecules starting in 2025. Furthermore, the platform has partnered with Keppel Infrastructure Holdings Pte of Singapore to explore building a factory together. The platform is teaming up with Belgium-based John Cockerill to set up a giga factory aimed at producing electrolysers capable of efficiently dividing water into its Hydrogen and Oxygen constituents.

The Kakinada project is a comprehensive export facility consisting of multiple phases, intended to increase the capacity of Green Ammonia production by up to 1 MTPA by 2027. This initiative aligns with India's target of producing 5 million tonnes of Green Hydrogen annually by 2030.

In the first phase of its construction, the facility will utilize a state-of-the-art electrolyser powered by round-the-clock energy from 2.5 GW of renewable assets sourced from the upcoming $3.5 billion Pinnapuram Integrated Renewable Energy Storage Plant located in Kurnool district of Andhra Pradesh. The project will convert 4,000 MW of intermittent solar and wind energy into firm, schedulable power using eight turbines which generate energy via water released from a manmade reservoir. This pumped-storage hydropower system involves pumping water from a lower level to an upper lake using energy harvested from solar and wind sources before being released.

The upcoming platform will remain separate from Greenko Energy Holdings, which is predominantly owned by GIC of Singapore (52%), Orix Corp of Japan (22%), Abu Dhabi Investment Authority (14%), and Greenko Energy Holdings' co-founders, Chalamalasetty and Kolli (12%). The co-founders are reportedly planning to involve some of their current financial investors as well as new ones for the venture. Additionally, there is a possibility that the strategic partner may increase their stake in the platform in the future.

Due to geopolitical shifts following the Ukraine war, the Hydrogen-focused economy is receiving significant investment, with multi-billion-dollar funding flowing in. Experts predict that the yearly demand for Hydrogen could increase five-fold, reaching 500 million tonnes by 2050. In support of this movement, the US government has dedicated $9.5 billion in grants, along with production tax credits under the Inflation Reduction Act. Additionally, Germany has committed $21 billion toward this venture by 2026. Meanwhile, the Port of Rotterdam is looking into an Ammonia cracker and South Korea is constructing a Green Ammonia import terminal.

Petronas and BP are actively pursuing environmentally friendly alternatives in India and globally. In 2019, Petronas acquired Amplus Energy Solutions Pvt. Ltd, a top producer of rooftop solar power in India, from I Squared Capital of New York for Rs 2,700 crore. This move demonstrates Petronas' commitment to investing in one of the world's most promising emerging green economies to expand its portfolio.

For almost a year, Petronas engaged in unsuccessful negotiations with Tata Group regarding investment opportunities in the latter's green energy business. However, Petronas is still active in India through its lubricants business and has a more than 20-year-old joint venture with Indian Oil Corp. called Indian Oil Petronas Pvt Ltd (IPPL) for LPG imports. In 2021, the scope of this partnership was expanded to include marketing for fuel and Natural gas. Prior to 2021, the sale of crude oil, condensates, and petroleum products in India only contributed 2% to Petronas' revenue, according to their annual report.

Reliance Industries and BP have been collaborating since 2011 in India Gas Solutions, a joint venture aimed at retailing and marketing natural gas. The duo has extended their partnership to Reliance BP Mobility Ltd, which operates a chain of over 1,400 retail sites and 30 aviation fuel stations across India. With a view to expanding their business, they aim to increase the number of retail sites to 5,500 and aviation fuel stations to 45 in the coming years.