Majors, Others Continue Rush to Blue Hydrogen on Texas Gulf Coast

Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--With expectations of it being the "world's largest low-carbon hydrogen production facility" when it opens in 2027-28, Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) has announced another step in its proposed Baytown low-carbon hydrogen/ammonia plant's development. The company joins Chevron (NYSE:CVX) (San Ramon, California) and a number of other supermajors in leveraging existing facilities to speed their investment in cleaner energy.

On January 30 ExxonMobil announced a "contract award for front-end engineering and design (FEED). A final investment decision for the project is expected by 2024, subject to stakeholder support, regulatory permitting, and market conditions" according to a press release.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Chemical Processing Project Database can click here for the project report.

When fully operational, the operators expect the facility to generate 1 billion cubic feet of low-carbon hydrogen daily. It would reach the low-carbon designation by capturing "more than 98% of associated CO2 emissions." The company is in the process of lining up buyers for the plant's produced hydrogen, one of which would be ExxonMobil's existing Baytown olefins plant.

Earlier in 2022, BP (NYSE:BP) (London, England) and Linde plc (NYSE:LIN) (Dublin, Ireland) announced plans for a carbon capture and storage (CCS) facility to capture and store CO2 from Linde's hydrogen production facilities in and around Houston, as well as from other industrial facilities.

For the project, BP will appraise, develop and permit the geological storage sites for sequestration. They also plan to provide renewable power, among other projects. The parties expect the new facility to begin operations in 2026, and "could ultimately store up to 15 MM metric tons per year across multiple onshore geologic storage sites," according to BP. Subscribers can click here for a preliminary report, with more details to come.

Over the last two years the Texas Gulf Coast has been a hotbed of activity for blue hydrogen and the carbon capture and storage (CCS) it requires. Ammonia projects have also grown, with the passage of the Inflation Reduction Act in 2022, the Bipartisan Infrastructure Act and the 2021 clarifications of how to apply 45Q carbon sequestration credits.

The Treasury Department issued the tax clarifications on January 6, 2021. Congress had initiated Section 45Q of the U.S. Tax Code way back in 2008, but it was rarely used because of its unclear language.

In 2018's Bipartisan Budget Act, Congress updated and clarified the law. The Treasury Department's 2021 updates followed a period of public input.

New rules expanded what types of CCS projects were covered and extended the credit's time frame to 12 years, among other changes and clarifications. Now CCS-interested companies have a clear framework in which to plan their financial commitments, giving them confidence to move ahead.

The Inflation Reduction Act of 2022 further enhanced the CCS incentives, raising the credit from $50 to $85 per metric ton. Industry insiders have opined that this could push a number of marginally profitable CCS projects into the black.

Funding from the U.S. Department of Enegy's (DOE) Hydrogen Hub initiative is further incentivizing this development.

CCS subsidies are critical to the creation of environmentally friendly hydrogen supplies because about 95% of today's hydrogen comes from natural gas--in a process that releases gas' carbon molecules if not captured. CCS turns that to "blue" hydrogen, as opposed to the "green" variety, processing power for which comes from carbon-free renewable sources.

Once the DOE announces the finalists and begins issuing money, planning and construction are likely to increase further.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).