By Sabrina Valle
HOUSTON (Reuters) – Abu Dhabi National Oil Company (ADNOC) will acquire a 35% stake in ExxonMobil Corp (NYSE:) proposed a low-carbon hydrogen project in Texas, and the companies announced a one-year delay in startup, until 2029.
ADNOC’s investment is a sign of confidence in a multi-billion-dollar project that Exxon has threatened to cancel if the US government restricts tax credits for it. The final investment decision has been postponed until 2025, instead of 2024.
Exxon and ADNOC declined to disclose the value of the transaction.
“This is a very significant investment and the partners it is attracting give an idea of the momentum that is building around this project,” Dan Ammann, president of Exxon’s Low Carbon Solutions, told Reuters.
TAX INCENTIVES
In 2022, Exxon revealed plans to build the world’s largest low-carbon hydrogen plant at its Baytown, Texas, refining plant. Hydrogen is a fuel that produces water when burned.
The project would be powered by CO2, which would be captured and buried underground. It was announced against the backdrop of tax incentives for clean energy proposed by the administration of US President Joe Biden.
But the government has limited incentives for natural gas-powered facilities. Exxon Chief Executive Darren Woods said earlier this year that the project could be scrapped without similar tax credits offered to hydrogen facilities powered by renewable fuels.
INCREASE IN AMMONIA
The project’s estimated output has been revised since its initial announcement. Initially, it had been planned to produce one million tons of hydrogen per year.
The goal now is to produce 900,000 tons of low-carbon hydrogen and more than one million tons of low-carbon ammonia, a well-established industrial product commonly used as fertilizer.
Ammonia, which has three hydrogen atoms in its composition, is also used as a hydrogen carrier, allowing it to be exported by ship in liquid form.
Earlier this year, Exxon signed a deal with JERA, Japan’s largest power generator, to explore the sale of about 500,000 tons per year of low-carbon ammonia.
“The timing (for the hydrogen project) depends on supply, demand and the regulation behind it all coming together,” Ammann said.