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2024

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03

ExxonMobil unveils plans to export half a million tonnes of ammonia to Japan from revamped Texas blue hydrogen project

Author:

Hydrogeninsight


 

Japanese giant JERA signs early-stage deal to offtake half the NH3 supply from Baytown complex, and take a future stake in the scheme

 

US oil major ExxonMobil has confirmed a new iteration of its flagship blue hydrogen project at the Baytown refining complex in Texas, as well as plans to export half a million tonnes of blue ammonia to Japan — despite warning that the project may not go ahead if it is not granted US tax credits.

 

A project framework agreement signed today (Monday) between ExxonMobil and Japanese energy firm JERA envisages the Japanese company taking a taking a stake in the revamped Baytown project and offtaking half the low-carbon ammonia produced at the plant.

 

If realised, the agreement would see JERA purchasing of 500,000 tonnes of low-carbon ammonia a year from the project from 2028.

 

The agreement also revealed a new spec for the Baytown hydrogen project: it would produce 900,000 tonnes per year of blue H2, as well as a million tonnes of low-carbon ammonia, which amounts to a significant overhaul of the project since it was first announced in March 2022.

 

The initial version of the Baytown project made no mention of ammonia production, outlining a plan for blue hydrogen only. ExxonMobil had earmarked the facility’s billion cubic feet of daily hydrogen production for its olefins plant in order to reduce emissions by 30%.

 

The oil major has not given an exact figure for demand from the olefins plant. However, it only produces around 1.5 billion cubic feet a day of grey hydrogen across its portfolio — suggesting a likely surplus from the blue hydrogen facility which could be used for export as ammonia.

 

ExxonMobil had already touted the possibility of producing and exporting blue ammonia from Baytown project, signing a heads of agreement with South Korean conglomerate SK to export blue ammonia to Korea in February 2023. However, the two companies have not confirmed any volumes, nor the extent of SK's involvement in the project.

 

ExxonMobil said in its initial announcement in March 2022 that excess volumes of clean hydrogen, as well as spare carbon capture and storage network capacity, would also be available for the local industry.

 

However, its CEO Darren Woods recently told the CERAWeek conference that there is “a hesitancy for people to sign up for low-carbon hydrogen” in the US based on cost.

 

JERA, which is the country’s largest utility by power generation capacity, is this week set to begin co-firing 20% ammonia with coal at a thermal power plant in Japan.

 

While this strategy has been long criticised as an inefficient and expensive way to decarbonise the power sector, which will extend the lifetime of polluting coal-fired power plants, the Japanese firm has previously defended the practice as an immediate route to reduce emissions from existing assets.

 

The company has already inked deals with ammonia producers Yara and CF Industries for a combined one million tonnes of NH3 a year from 2027.

 

Tax credit blues

 

ExxonMobil has warned that its final investment decision on the Baytown blue hydrogen project could depend on access to the 45V clean hydrogen production tax credit of up to $3/kg.

 

Under the Treasury’s draft guidelines, the method for calculating carbon intensity calculations for blue hydrogen uses a fixed value for upstream methane emissions, while it is unclear whether the gas reforming equipment’s electricity consumption will also have to be sourced from newly built, time-matched renewables in the same region to count as “zero carbon”.

 

The Department of Energy had warned in a report published at the end of last year that based on estimated upstream methane emissions and the use of grid electricity, autothermal reforming (ATR) — the type of technology ExxonMobil plans to use at Baytown — could have a carbon intensity higher than what would qualify for even the $0.60/kg bottom rung of the 45V tax credit.

 

However, it is unclear whether ExxonMobil will instead seek to claim the 45Q tax credit for carbon capture and storage, which offers $85 per tonne of CO2 permanently sequestered.

 

Hydrogen Insight has reached out to JERA to confirm whether it plans to seek subsidies from the Japanese government to cover the cost difference between blue ammonia and grey NH3.

 

Source:Hydrogeninsight

 

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