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The crown prince of Abu Dhabi has thrown his weight behind an enormous however unsure hydrogen project in Texas, providing to purchase 35 per cent of ExxonMobil’s plant in Baytown, Houston.
Sheikh Khaled bin Mohammed bin Zayed al-Nahyan, the son of the ruler of the United Arab Emirates, took half in the signing of a “multibillion-dollar” deal on Wednesday between Adnoc, Abu Dhabi’s state oil firm, and Exxon.
Michele Fiorentino, government vice-president of Adnoc’s low-carbon options, stated the Baytown project was each “the largest, and most importantly, one of the most cost-competitive” makes an attempt to make hydrogen with out releasing massive portions of carbon dioxide. He stated Adnoc’s funding was “very material, easily at the multibillion-dollar scale”.
He prompt that Adnoc would additionally invest additional “if the market develops faster and bigger than we planned” to develop the plant with extra capability.
Adnoc’s curiosity in Baytown might assist unlock a project that has been left in limbo over how a lot US authorities help it’s going to obtain, with added uncertainty due to the presidential election in November.
“How certain is the political landscape in the US? We will push on with the project on the assumption that everything will be good and well by [the time we take our] final investment decision,” stated Fiorentino, including that the US and UAE signed an settlement in December 2023 to co-operate on clear energy.
The deal shall be a lift to the Baytown project, which would be the largest low-carbon hydrogen plant in the world if it goes forward. The plant goals to produce 1bn cubic ft (bcf) a day of “blue” hydrogen, which is constructed from gas however with know-how to seize the ensuing carbon emissions.
Before the Adnoc deal, the way forward for the project had been in doubt. Last December, the US Treasury issued draft tips for the way it will allocate tax breaks to hydrogen crops, which didn’t point out blue hydrogen services resembling Baytown.
In March, Exxon’s chief government Darren Woods threatened to drop the project if it didn’t qualify for presidency incentives.
Martin Tengler, head of hydrogen analysis at BloombergNEF, stated the funding confirmed that Adnoc had “reasonable confidence to believe that this project will be making them some money down the line”. He stated Baytown would most likely be the most important US clear hydrogen project operational by the top of the last decade.
“Exxon is not the kind of company that needs a bailout at this moment,” stated Tengler.
A scarcity of readability over which hydrogen initiatives will qualify for profitable tax incentives accessible beneath President Joe Biden’s Inflation Reduction Act has already triggered delays. Nel Hydrogen, an electrolyser producer, lately paused its $400mn manufacturing unit project in Michigan over this uncertainty.
Tengler stated buyers are additionally ready to see if Donald Trump is re-elected president and makes massive modifications to US energy coverage. “We don’t think Trump or the Republicans would scrap it [tax breaks], but they might make the rules more lenient. If you know that that might happen as an investor, you’re going to wait.”
A press release from Exxon stated the cope with Abu Dhabi was “contingent on supportive government policy and necessary regulatory permits” and {that a} ultimate funding resolution on the project can be made subsequent 12 months, with manufacturing deliberate for 2029.
“We appreciate His Highness Sheikh Khaled bin Mohammed bin Zayed al-Nahyan’s support for this groundbreaking partnership,” stated Woods.
By 2030, the US is anticipated to turn out to be the world’s largest hydrogen producer, with blue hydrogen generated by gas, composed primarily of methane, making up greater than three-quarters of manufacturing, in accordance to BNEF. Green hydrogen, generated by renewable electrical energy, will make up the remaining quantity.
But analysts say hydrogen initiatives face a wrestle to safe funding and clients, with BNEF estimating that solely 6 per cent of US initiatives have secured binding provide agreements.
Fiorentino stated the Baytown plant would provide Japan and Korea with ammonia to burn in its energy sector and hydrogen to refineries in Europe.