Investments in Future Hydrogen Capacity Remain Limited in 2011

---

Researched by Industrial Info Resources (Sugar Land, Texas)--In the past two years, investments in the industrial gases segment of the Chemical Processing Industry (CPI) of North America have declined by $200 million or more annually. The decline has been largely due to reduced operating rates of industrial plants across the continent, a result of the global recession.

A major component of the investment spending in the industrial gases segment is made up of hydrogen, which is largely consumed in both petrochemical processes and petroleum refineries. A significant reduction in demand from petroleum refiners, one of the largest consumers of hydrogen, has dramatically changed the level of potential future spending in this CPI segment. In 2010, total investments in capital projects in the hydrogen units and plants identified as part of Industrial Info's North American Project Database totaled only $287 million.

Only a couple of years ago, annual capital investments in hydrogen capacity reached $500 million or more annually, driven mostly by petroleum refiners who were looking for over-the-fence hydrogen to support significant investments in new hydrotreater capacity. The addition of hydrotreaters for refiners is incredibly expensive, but necessary to meet stricter environmental mandates on fuel requirements, making the long-term purchase of dedicated hydrogen capacity more equitable than having to cover the capital cost of building the new hydrogen capacity.

In 2010, the demand for new hydrogen capacity decreased sharply, with only two major hydrogen projects planned or beginning. Air Products and Chemicals Incorporated (NYSE:APD) is expected to begin construction this quarter for the construction of a grassroot hydrogen plant in Detroit, Michigan. This new plant will provide an estimated 50 million standard cubic feet per day of hydrogen to a neighboring refinery owned by Marathon Petroleum Company LLC (Findlay, Ohio), a subsidiary of Marathon Oil Corporation (NYSE:MRO) (Houston, Texas). The biggest hydrogen capacity project to begin construction this year is owned by Air Liquide Industrial U.S. LP (Houston, Texas) for a hydrogen unit addition at the company's Bayport plant in Pasadena, Texas. This new unit will have an estimated capacity of 120 million standard cubic feet per day when completed in late 2011.

Looking ahead to 2011, spending for new hydrogen capacity identified by Industrial Info is expected to reach an estimated $280 million in capital projects, with a great deal of that spending from just one project. Air Products and Chemicals plans to begin construction during the first quarter of 2011 on a grassroot hydrogen plant in Luling, Louisiana, which will serve the company's Gulf Coast pipeline network.

View Plant Profile - 10851505 1079659
View Project Report - 18002849 1011648

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.