Ampol has unveiled a strategy to eventually shift from a traditional petrol and diesel retailer to a low-carbon provider of power for electric vehicles and hydrogen, utilising its refining sites and nationwide distribution network.

The former Caltex Australia is making a major move into electricity as part of its strategy to reach net zero emissions by 2040 and tap into new low-carbon sectors such as hydrogen and batteries.

The strategy includes a range of new alliances Ampol has struck with players in the “future energy” space including Tesla, as it seeks to develop energy products that align with customers’ appetite for cleaner fuels.

Among the ventures included in Ampol’s decarbonisation strategy is a virtual power plant trial with Tesla at petrol stations that could launch it into electricity generation and trading, and providing grid stabilisation services to the power network.

It is also planning a green hydrogen plant next to its Brisbane oil refinery, partnering with a start-up in hydrogen-based micro-generation and storage, and envisaging a longer-term national rollout of an electric vehicle charging network.

Chief executive Matt Halliday said while Ampol expects petrol and diesel to be needed for years to come, the strategy reflects the changing needs of customers as they seek out lower-carbon alternatives.

He said Ampol’s supply chain and assets, including both its Lytton site and its Kurnell former refining site in Sydney, were in a unique position to play a role in the shift to cleaner energy.

The strategy commits Ampol to spending at least $100 million on “future energy” projects by 2025, representing 5-10 per cent of its total investment.

Mr Halliday said that was still “a meaningful amount of investment that recognises the transition will take time”.

nvestors are advised that growth investments in new energies will be lower and take longer to recoup: “Our investments in future energy will be return-seeking. However, we expect payback periods to be longer given the uncertain pace and development of energy transition,” the strategy document says.

“Different technologies will play a different role. Ultimately there will be some that make it and some that don’t and we need to time our investment accordingly,” Mr Halliday told The Australian Financial Review.

The news of the strategy comes three days after Ampol committed to keeping its Lytton oil refinery in Brisbane open until at least mid-2027 thanks to a generous subsidy package from the federal government intended to shore up security of supply in liquid transport fuels.

Analysts said then that the government package, which includes measures that put a floor under refining earnings and a 50 per cent subsidy on a refinery upgrade, would free up funding for Ampol and rival refiner Viva Energy to invest in lower-carbon energy projects. Viva is already investing to transform its Geelong refinery site into a low-carbon energy hub, starting with LNG imports but also including hydrogen, batteries and solar power.

The strategy also comes after the International Energy Agency’s landmark report this week advised no new investment should be made to develop new oil, gas and coal supplies if the world is to reach net zero emissions by 2050.

Ampol committed to use 40 per cent renewable energy by 2025, and 50 per cent by 2030, to be achieved through renewable power purchase agreements and some solar generation.

Emissions in convenience retailing are to fall by 25 per cent by mid-decade and by 50 per cent by 2030, while the fuels and infrastructure division is targeting reductions in emissions intensity by 5 per cent by 2025 and 10 per cent by the end of the decade.

Mr Halliday noted ”fairly good alignment” between Ampol’s scenario analysis and the IEA’s work on the likely change in the energy mix and pointed to the huge investment the Paris-based agency advises is required to drive the energy transition.

“When you look at money that will have to be invested to enable the energy transition, you are going to need to repurpose existing strategic assets,” he said.

Shares in Ampol closed up 0.5 per cent at $27.97, reflecting views from analysts that the decarbonisation strategy does not move the market in the short term.

Keeping the Lytton refinery open makes Ampol’s task to reach net zero emissions harder, but Mr Halliday said the 2040 target assumes that by then either the refinery would have closed “or we’ve found a pathway to decarbonise” the plant.

The collaboration with Tesla also involves electricity infrastructure specialist Enerven, owned by SA Power Networks, and will result in the three partners piloting a virtual power plant at three retail sites. Solar power generation and storage at the sites will be “orchestrated” to reduce emissions and with the aim of providing dispatchable power to the grid and for electricity trading.

Ampol will also work with Fusion Fuel Green Plc to install a demonstration green hydrogen plant at the Lytton site, to be commissioned over the next 12 months. If successful it would be used to pursue green hydrogen projects through a joint venture.

Another new partnership involves an early-stage Australian developer of hydrogen-based micro-generation and storage technology. Ampol said the technology has the potential to deliver energy that is “economically and functionally competitive with diesel generators”, offering diesel customers a low-carbon alternative to remove diesel power generation.

Extracted in full from: Ampol targets batteries, hydrogen in green push (