Fortescue Metals (ASX:FMG) share price slips despite green light for hydrogen plant

Green hydrogen and liquefied natural gas are duking it out to replace coal…

| More on:
Lakes in the form of footsteps among the green trees, indicating steps towards a healthier planet

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Fortescue Metals Group Limited (ASX: FMG) share price slipped lower today. This, despite Fortescue Future Industries (FFI) receiving Queensland Government approval for its first global green energy manufacturing (GEM) centre in Gladstone today.

While the notable progression in the green hydrogen roadmap is positive for FFI, it seems it wasn't enough to counteract comments made by Woodside Petroleum Limited (ASX: WPL) climate vice-president Tom Ridsdill-Smith yesterday.

Fortescue share price takes a hit amid Woodside's LNG pitch

The excitement around green hydrogen has been palpable in recent weeks. A true sense of urgency has only heightened following the COP26 climate summit in Glasgow, which wrapped up last week.

However, comments from a Woodside VP might have deflated some of the hype for a quick green transition. Contrary to the green dream, one of Australia's largest oil and gas companies is betting on natural gas as the near-term replacement for coal.

Commenting on why LNG might be a better bet than hydrogen, for now, Woodside's Ridsdill-Smith said:

If we're going to replace the energy exports of the North West Shelf project today with green hydrogen it would require about 120 gigawatts of renewables. That's ultimately why LNG isn't going to go away overnight … it's going to take time.

The argument is founded on the immense level of capital and time required to scale green hydrogen to meet existing energy demand. In a previous article, I covered how Fortescue (through FFI) plans to plough an estimated US$500 billion into its own projects to reach its target of 15 million tonnes of hydrogen production annually.

A tall figure that hasn't done the Fortescue Metals share price any favours since being reported.

As such, the oil and gas giant considers LNG as a necessary transitory energy source. Eventually, the company even foresees LNG being used alongside renewables.

First green step for FFI

Despite Woodside's position, Fortescue was optimistic about today's plant development. Although, this wasn't reflected in the Fortescue Metals share price, FFI chair Dr Andrew Forrest marked the milestone, saying:

Gladstone is going to be at the centre of Queensland's green energy revolution with the first electrolysers scheduled to enter production in 2023.

This project will not only be a gamechanger for green manufacturing in regional Queensland, it will also provide a major boost for the local economy and indelibly put Queensland as an epicentre of the coming green industry revolution.

From here, the company will work towards starting construction on its first stage in February 2022. Upon completion, the facility will be the first in Australia capable of making multi-gigawatt electrolysers. These pieces of equipment are used in the production of hydrogen.

Finally, the Fortescue Metals share price is down 37% since the beginning of the year. The resource company currently holds a market capitalisation of $48 billion.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Energy Shares

Woman refuelling the gas tank at fuel pump, symbolising the Ampol share price.
Energy Shares

Why is the Ampol share price tumbling 5% on Friday?

The Ampol share price is taking a big fall on Friday.

Read more »

A woman wearing a hard hat holds two sparking wires together as energy surges between them. representing the rising Li-S Energy share price today
Energy Shares

2 ASX energy shares to supercharge your returns

Analysts are tipping big returns from these energy stocks.

Read more »

Two workers at an oil rig discuss operations.
Earnings Results

2 ASX energy shares going gangbusters on today's earnings results

The ASX energy shares are drawing investor interest today after releasing their half-year earnings results.

Read more »

Red buy button on an apple keyboard with a finger on it representing asx tech shares to buy today
Energy Shares

Bell Potter just upgraded this ASX uranium stock

The broker believes recent weakness has created a buying opportunity.

Read more »

An oil worker in front of a pumpjack using a tablet PC.
Dividend Investing

Here's everything you need to know about the Woodside dividend

This energy giant is rewarding shareholders with a big dividend again this year.

Read more »

A smiling woman puts fuel into her car at a petrol pump.
Dividend Investing

Looking to bank the record Ampol dividend? Time is running out!

Ampol declared an all-time high final dividend when the ASX 200 energy company reported its full-year results on Monday.

Read more »

Worker at a gas and oil pipeline.
Energy Shares

Woodside share price rises despite 74% decline in FY23 profits

How did this energy giant perform in FY 2023?

Read more »

Worker at a gas and oil pipeline.
Energy Shares

Woodside shares rise on $2.1 billion sale and partnership

Woodside has struck a deal with JERA. Here's what you need to know.

Read more »