During an eventful earnings call last week, Air Products shared news about several hydrogen projects with Porthos, the largest European blue hydrogen facility, grabbing the headlines. But the company also confirmed that the board has given final investment approval to build an equally important and large project in the U.S. – the Louisiana Clean Energy Complex, a plant located in Darrow, Ascencion Parish, that will produce over 750 million standard cubic feet per day of blue hydrogen for the U.S., as well as blue ammonia for international buyers.
The project was unveiled back in 2021 with a price tag of $4.5 billion and Air Products CEO Seifi Ghasemi commented on the latest developments during the call by saying: “As we moved forward with detailed planning to execute this project, a significant positive event happened in August of 2022 when the United States Congress passed the IRA legislation which created tax incentives for the production of blue and green hydrogen.”
First-mover advantage was also highlighted by Mr Ghasemi, as well as the increased demand both in terms of industries, as well as specific regions. Heavy duty transport and ship fuel were mentioned, as well as the demand signals coming from Europe and Japan.
The project has another important feature – its “low carbon” tag will also be achieved thanks to carbon capture technology and will be one of the largest facilities to utilize this approach.
Nick Jones, an analyst at BTU Analytics, a FactSet company, commented on the project’s economics and scale by saying: “The Darrow blue ammonia project would capture 5 Mtpa of CO2 to be sequestered at Lake Maurepas, a short distance away. The relatively low-cost of capturing from auto-thermal reforming (ATR) should mean that capture and sequestration will be cashflow positive. BTU models that 45Q tax incentives would defray roughly half the levelized cost of hydrogen production.
Of course, this is not the first hydrogen or ammonia plant to use carbon capture, but it is the largest such project to have ever advanced past FID. In comparison, it will be more than double the size of the OCI-Linde blue ammonia plant currently being constructed in Texas.”
The additional capital will be used to make land purchases to accommodate the larger footprint of the project and to employ technologies and approaches that allow it to qualify for IRA credits.
The carbon storage location under Lake Maurepas has caused concern among local communities and there have been various attempts to slow down or stop the groundworks and geologic research by the company. The latest ruling on the matter was on May, 2023 when the state house decided that the project will proceed.
Nick Jones also pointed out the importance of regulation: “The Darrow plant will not only test the economics of large-scale production and the market for blue products, but also the regulatory and political support for CCUS projects along the US Gulf. Despite the region generally being favorable to energy development, this project has already drawn activist opposition, including from groups who previously halted a $12B petrochemical project nearby. The developers of other projects will be watching closely to see if Air Products can avoid a risky and expensive regulatory quagmire.”
According to Jones there are at least 16 other blue hydrogen and ammonia projects being developed in Texas and Louisiana alone. The success or failure of this Air Products endeavor will very likely be seen as a showcase for the potential of the hydrogen industry not only in the Gulf Coast region but also in the U.S. as a whole.