Panic At Nabisco

BP to Join $2 Billion Abu Dhabi Hydrogen Project (Update1)

By Ayesha Daya

Jan. 16 (Bloomberg) -- BP Plc will begin a study to construct the world's largest hydrogen power plant in the United Arab Emirates capital Abu Dhabi, which would be able to meet 7 percent of the emirate's current power demand.

``We estimate the cost to be $2 billion,'' Steve Geiger, head of special projects at state-owned Abu Dhabi Future Energy Co., said in a telephone interview from Abu Dhabi today. ``A final decision will be made by the end of the year.''

The engineering and design work for the plant is under way and should be completed at the end of 2008, Geiger said.

Abu Dhabi will officially announce BP as its partner next week for the 500-megawatt plant, he said. Abu Dhabi's power demand is expected to double to 16 gigawatts in the next six years, according to Geiger, as the oil-rich emirate uses windfall crude revenue to develop infrastructure and industries.

BP and Rio Tinto Group, the world's third-biggest mining company, last year agreed to examine an A$2 billion ($1.8 billion) power plant in Western Australia that will capture and store carbon from coal and burn hydrogen for power generation. The two partners have set up a Weybridge, England-based joint venture Hydrogen Energy.

The venture ``is already working on projects in America and Australia and continues to look for opportunities elsewhere in the world,'' David Nicholas, a London-based spokesman for BP, said today by phone. He declined to comment on Geiger's comments.

California Project

In the U.S., Hydrogen Energy is working in California to use hydrogen derived from coal or natural gas to generate power and capture carbon for storage to minimize greenhouse gas emissions, Nicholas said. ``There aren't any of these projects in existence yet,'' he said.

Abu Dhabi Future, also know as Masdar, is also developing 500 megawatts of solar power. A 400-megawatt photovoltaic facility is expected to be built by 2010 at cost of $1 billion, Geiger said. Another $500 million will be invested in developing 100 megawatts of thin-film photovoltaic products, which will be ready by 2009.

The company will announce its latest overseas asset, a mid- size solar technology and development company, next week. ``We think we can bring costs down by integrating technology and manufacturing in one location,'' Geiger said. ``We are pushing for scale to make renewables economically feasible.''

Masdar was set up in 2006 and is responsible for developing renewable energy as the Organization of Petroleum Exporting Countries' third-largest oil exporter looks to reduce its dependence on conventional hydrocarbons revenue. A zero- emissions city in Abu Dhabi will begin housing 50,000 residents from 2009, Geiger said.

To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net

Last Updated: January 16, 2008 12:55 EST