Who Will Do the Heavylifting on China’s Paltry Hydrogen Pipelines?

While China is seeing a private sector frenzy in hydrogen electrolyzer production and fuel-cell electric vehicles (FCEVs), it’s all quiet on the midstream infrastructure front. That is, compared to the 2,600 km of hydrogen pipelines in operation in the United States and 2,000 km in Europe, China has merely 100 km in operation.

The deficiency of pipeline infrastructure will be a serious bottleneck for the hydrogen industry. Like most natural resources in China, hydrogen production is concentrated in the Western hinterlands, while the demand center will be along the coast (see Figure 1). And the best way to transport that hydrogen fuel over such a long distance will be through a network of pipes, similar to natural gas.

Figure 1. China’s Uneven Energy Landscape Makes Hydrogen Pipelines A Necessity

Note: Provincial hydrogen production targets for 2025 in metric tons; Shaanxi target is for 2024. Guizhou target is for non-green hydrogen, and Inner Mongolia and Hebei include 1,120,000 mt and 200,000 mt of non-green hydrogen, respectively; all other numbers are for green hydrogen.
Source: Provincial 14th Five Year Plans.

But like most countries, enthusiasm for building a national network of hydrogen pipelines won’t be found in the private sector. It will be up to the public sector, particularly China’s national oil companies (NOCs), to build those pipelines, especially in the absence of Beijing. This will be similar to how China’s State Grid took on the role of building out a massive network of ultra high-voltage transmission lines and abundant public EV charging stations—the crucial infrastructure needed for the EV industry to prosper. Indeed, there are already signs China’s NOCs are entering the pipeline fray.

Local Governments Building Pipelines Is a Pipedream

Predictably, China’s 33 provinces and regions all rushed to have their own disparate hydrogen five-year plans, the vast majority of which stipulated targets for FCEVs, refueling stations, and hydrogen production (see Figure 2). Only one province specified a very modest pipeline buildout target.

Figure 2. Chinese Regional Governments Are Chasing Hydrogen Up-and-Downstream, Ignoring Pipelines

Source: Pronvicial 14th Five-year Plans; Municipality Hydrogen Industry Development Action Plans; Municipality Hydrogen Industry Medium and Long-Term Development Plans.

That province is Ningxia, which has aimed for an intraprovincial goal of just 45km of hydrogen pipes. With provincial governments already under significant revenue strains and lackluster fiscal support from Beijing, the capital-intensive nature of pipeline infrastructure is not attractive for local investment. For instance, repurposing existing piplines costs anywhere from $0.6 to $1.2 million/km and new pipeline construction can cost up to $4.5 million/km. Local governments are more inclinced to rely on NOCs and state-owned enterprises (SOEs) to undertake the not-small upfront investment cost.

Moreover, local governments are too preoccupied with competing in the EV industry—the hottest industry in China right now—to care much about hydrogen pipelines, especially as they appear to have priced in the fact that public investment in pipelines is a given, it’s just a matter of when. For instance, hydrogen-powered FCEVs are projected to surge 77-fold from roughly 13,000 vehicles today to over a million by 2035, and local governments want to capitalize on that action and build local industries.

The NOCs are Jumping In

Now, it looks like SOEs are stepping up as proxies for Beijing on China’s hydrogen infrastructure. For instance, at the 2023 World Hydrogen Technology Convention, China’s SOE representative discussed putting a total of 6,000 km hydrogen pipelines in place by 2050. In April, Sinopec also rolled out plans to build a pioneering long-distance 400-km hydrogen pipeline between Inner Mongolia and Beijing to transport 100 kilo tons (kt) of green hydrogen per year.

Further, there are signs that Beijing will designate a single NOC—most likely PipeChina—as the de facto leader of China’s hydrogen pipeline buildout. China’s NOCs already transferred their oil and gas infrastructure assets, including existing pipelines, to PipeChina in 2020 one year after it was established. As China’s newest oil and gas infrastructure monopoly, PipeChina seems like the logical choice for “pipeline builder-in-chief” for hydrogen. The NOC has included hydrogen pipeline research in its 14th five-year plan and has already made progress in pipeline technology testing.

As NOCs see less activity in natural gas, it’s only natural that they’ll increasingly pivot to hydrogen—the gas of the future. NOCs can easily take their expertise in oil and gas pipelines and shift focus to research on hydrogen and natural gas-hydrogen blending pipelines. PipeChina’s Institute of Science and Technology and Sinopec’s Petroleum Engineering Technology Research Institute, having long been centers of oil and gas research, are ideally positioned to do just that.

That existing expertise, combined with their broad support from government and banks, puts NOCs in a prime position to kickstart China’s hydrogen infrastructure. Whether that will involve more joint ventures or private sector partnership in the future is anyone’s guess. But for China’s hydrogen pipelines, it’s only a question of when and how fast before they’re built.

Amy Ouyang is a research associate at MacroPolo. You can find her work on the global energy transition and its intersection with the economy, technology and industrial policy here.