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UPDATE 2-Sinopec aims for carbon neutrality by 2050, plans pivot to hydrogen

(Adds analyst comment on China’s hydrogen for transport)

SINGAPORE, March 29 (Reuters) - China’s Sinopec Corp , Asia’s largest oil refiner, aims to be carbon neutral by 2050, with its near-term strategy focused on natural gas development and a long-term pivot to hydrogen, top executives said on Monday.

As China’s largest hydrogen producer, Sinopec will focus on fossil fuel-based hydrogen production over the next five years and also start introducing “green” hydrogen using solar and wind power, Chairman Zhang Yuzhuo said in an earnings call.

Sinopec plans to build 100 hydrogen filling stations this year, part of the firm’s goal to set up 1,000 stations by 2025, including standalone hydrogen kiosks and those combined with traditional fuels.

“Hydrogen will be a core in Sinopec’s energy transition... We want to become China’s number-one hydrogen firm,” said Zhang.

Sinopec will first focus on its existing fossil fuel-based production of hydrogen, which carries the lowest cost since it is a by-product of its refining and petrochemical processing, said Zhang.

It is also planning to cap its carbon emissions at peak levels prior to a national timeline set by the government for 2030, both through its work to increase hydrogen output and the treatment and capture of carbon dioxide.

With the use of hydrogen as a fuel still in its infancy, China had at the end of 2020 less than 10,000 hydrogen-powered vehicles - trucks and buses - most of which were on pilot programmes, with total annual hydrogen use at 3,000 tonnes, the second-largest after the United States, IHS Markit data showed.

“Sinopec is bidding to build the network first, though it may take a fairly long period of time for the sector to take off because of bottlenecks in the cost of producing green hydrogen and fuel cells,” said IHS Beijing-based consultant Harry Liu.

Another key area for spending will be natural gas, of which Sinopec is China’s second-largest producer. Demand for the fuel is set for strong growth over the next decade under Beijing’s campaign to burn less coal.

Following a “significant” increase in replacement of gas reserves last year, Sinopec expects to grow its natural gas production by an average of more than 10% a year over the next three years, said company president Ma Yongsheng.

Sinopec expects its gas output to reach 34 billion cubic meters (bcm) this year, and 38 bcm and 42 bcm for 2022 and 2023 respectively, said Ma, against 30.2 bcm last year. (Reporting by Chen Aizhu; Editing by Tom Hogue and Christopher Cushing)

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