How hydrogen, the fuel of the future, got bogged down in the bayou

Mint

5 hours ago

The chief executive of Air Products & Chemicals visited the Louisiana governor's mansion in 2021 to unveil the industrial-gases supplier's biggest-ever investment: a $4.5 billion facility that would make the fuel of the future by the Mississippi River.
Seifi Ghasemi's plan was to produce hydrogen from natural gas, capture the carbon dioxide, pipe it through wildlife-rich wetland and sequester it below picturesque Lake Maurepas.
Ghasemi had a grand vision. Beyond its regular uses in oil refining and ammonia for fertilizers, hydrogen would power buses, trucks, trains, ships, planes and steel mills after the plant opened in 2026, he predicted.
Nearly five years after his visit, the project's price tag has swelled to $8 billion, the construction timeline has slipped and the company is still seeking customers. Ghasemi has been ousted as CEO, and his successor is reining in spending.
The idea that low-carbon hydrogen could replace oil and gas in many applications was taking off when Ghasemi visited Baton Rouge, La., as politicians and executives were vowing to slash emissions.
But sentiment has since soured. This fossil-fuel alternative remains stubbornly expensive, and governments in the U.S. and elsewhere have shied away from putting their weight behind it.
The tax bill approved by House Republicans would cut off hydrogen production tax credits, part of an effort to undo many Biden-era climate programs and reduce funding for wind and solar power. President Trump, meanwhile, has cast himself as the savior of U.S. oil and gas.
Companies that once looked like early movers—such as the steel producer ArcelorMittal and Airbus, the plane maker—have delayed plans to use hydrogen.
'The main challenge right now is finding buyers," said Martin Tengler, a BloombergNEF analyst who estimates that just 4% of the announced low-carbon hydrogen production capacity had secured funding as of 2024.
Hydrogen hype isn't new. High oil prices spurred an earlier wave in the 1970s. But high costs and impracticality—hydrogen is explosive and can leak through gold—meant that the plans fizzled.
When climate worries revived the dream, few dove in more eagerly than Ghasemi. Air Products stood out for starting projects before it had customers and embracing technical challenges that rivals handed off to experienced partners.
'If you don't take the risk, you always lose," he said in a 2017 interview.
Today, most hydrogen is extracted from natural gas, a process that adds carbon dioxide to the atmosphere. There are two main alternative methods—and Air Products pursued both.
The Louisiana plant intends to make blue hydrogen. It is produced the traditional way, but the carbon is captured and kept out of the atmosphere—forever, if possible. Green hydrogen is made by splitting water into oxygen and hydrogen using renewable electricity.
Blue hydrogen is more controversial. Carbon-capture facilities often catch less pollution than hoped—Air Products says it will capture more than 95%—and using natural gas ties this ostensible climate solution to a source of emissions.
The House tax bill would eliminate tax credits for hydrogen production, which would kill most green-hydrogen projects, Tengler expects, but not the carbon-capture credits that benefit blue-hydrogen producers.
'It was a feeding frenzy" of a wave of blue-hydrogen projects that were drawn to Louisiana by tax credits and rocks suitable for storing carbon dioxide, said Corinne Van Dalen, a lawyer at the nonprofit Earthjustice.
Air Products' ventures, from the bayou to a mostly unbuilt megacity in the Middle East, track hydrogen's growing pains.
At Neom, Saudi Arabia's under-construction desert metropolis, Air Products has an unusual double role in the largest green-hydrogen project being built. As well as being a shareholder, the company committed to buy the hydrogen from the plant in the form of ammonia, which is easier to export.
That puts the company on the hook to find customers.
Air Products has announced just one: TotalEnergies, which plans to use green hydrogen in European refineries. Eduardo Menezes, who became Air Products' chief executive in February, said he is talking to other potential buyers.
Saudi Arabia has the abundant sunshine, wind, space and labor needed to make relatively low-cost green hydrogen, but 'it's still a premium product," Menezes said.
The plant is on course to start production in 2027, but Air Products now plans to delay its investment in facilities in Europe designed to handle hydrogen from Neom.
More than 2,000 miles away, uncertain demand is slowing down a plan to turn the Dutch port of Rotterdam into Europe's hydrogen hub.
Three years ago, Air Products and the trading group Gunvor said they would build a terminal to import ammonia and convert it back into hydrogen. It was one of several planned at the port, which also set aside space for green-hydrogen factories.
Most of those projects, including Air Products', still await investors' go-ahead. A hydrogen pipeline network has been delayed. Shell is building a green-hydrogen factory, but BP recently pulled out of a similar effort, according to a spokesman for a former partner, HyCC. BP has been scaling back its low-carbon spending.
'We have to be realistic about the time frame," said Boudewijn Siemons, the chief executive of the Port of Rotterdam Authority. 'A couple of years ago, there was no steel in the ground, and there is now."
Progress is being slowed by Europe's high electricity prices, which increase the cost of producing green hydrogen, and regulatory uncertainty.
The European Union has set mandates that will require the use of green hydrogen in refining and other sectors. But Tengler at BloombergNEF said they aren't nearly stringent enough to fulfill the bloc's target of consuming 20 million tons of green hydrogen a year by 2030.
Some hydrogen applications are losing to other fossil-fuel alternatives. Hydrogen buses have been left behind by electric vehicles. Other applications, such as hydrogen-based steelmaking and shipping fuel, are moving forward, but slowly.
'If it was easy it would be done a long time ago," Menezes said.
Menezes pulled out of a plan to produce hydrogen-based jet fuel in Paramount, Calif., and a proposed green-hydrogen plant in Massena, N.Y. The company wrote off $2.9 billion for those projects and other cost cutting.
In Louisiana, Air Products is trying to limit its exposure. Its risky strategy was criticized by activist investors who began calling for a change of course last year.
The company is now seeking buyers for the ammonia-production and carbon-sequestration parts of the project, which could reduce its share of the cost by as much as $3 billion, Menezes said. Work won't continue until customers are found.
Van Dalen, the environmental lawyer, would be pleased if Air Products' vision for the bayou crumbles. The hydrogen-production site is near a school, and the 40-mile carbon-dioxide pipeline would pass through rare wetland occupied by ospreys, largemouth bass and migratory birds.
At Lake Maurepas, the plan to sequester carbon dioxide troubles some nature lovers and crabbers. Air Products says it consulted with government agencies on its project and is funding environmental-monitoring efforts.
While Menezes looks for customers, Ghasemi's legacy in Louisiana can be seen in projects funded through Air Products' $1 million-a-year plan to secure communities' support, such as $200,000 for Lake Maurepas field trips and $50,000 for neutering feral cats.