Investments in Hydrogen Capacity Continue to Rise, Exceeding $2 Billion in Future Spending

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Researched by Industrial Info Resources (Sugar Land, Texas)--Continued investments in the Petroleum Refining Industry to boost capacity of low-sulfur transportation fuels have kept the pressure on hydrogen producers to keep up investments on new capacity. Last summer, Industrial Info was tracking an estimated $1.2 billion in future investments as part of its North American Projects Database aimed at building new hydrogen capacity through grassroot construction, unit additions, plant expansions and debottlenecks. That figure has grown to an approximate $1.9 billion and continues to grow monthly.

The average total investment value (TIV) for these projects exceeds $50 million each, although at least 13 of the 36 projects in this analysis are that much or even more. Hydrogen producers in the Chemical Processing Industry have contributed largely to meeting hydrogen demand in recent years, although the majority of the future spending identified is proposed to take place by refiners inside the boundary of their plant sites. The CPI is expected to spend an estimated $549 million over the next few years for new hydrogen capacity compared with more than $1.3 billion by refinery owners. As some of these projects mature and get closer to execution, CPI companies are certain to bid for the opportunity to provide portions of this capacity from over the fence with the proposition of saving the refinery capital costs and long term operating expenses.

The largest refiner driven hydrogen project planned in the United States is currently that of Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) with plans to invest up to $300 million to build a hydrogen unit addition at its Benicia, California, refinery. If approved, this project would replace two old hydrogen units with a new unit operating with much newer and more efficient technology, producing an approximate 100 million standard cubic feet per day of product. In the CPI, several major projects of equal size are actively planned to begin construction this year, although plans by Air Products & Chemicals Incorporated (NYSE:APD) (Allentown, Pennsylvania) for a grassroot hydrogen plant planned for Garyville, Louisiana, appears to be the most likely to begin construction first. This plant would produce an estimated 120 million standard cubic feet per day of hydrogen and be located adjacent to a petroleum refinery owned and operated by Marathon Oil Corporation (NYSE:MRO) (Houston, Texas), providing it both hydrogen and process steam.

As evident from daily news headlines across the country, the demand for transportation fuels isn't diminishing despite the outrageous cost of its feedstock, crude oil. As long as this demand remains consistent as it has in recent years, there will continue to be investments in new refining capacity that ultimately drives the CPI and many other related industry sectors.

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