Earlier this month, Abu Dhabi National Oil Company (ADNOC) signed a deal with ExxonMobil Corporation that may see the realization of the world’s largest low-carbon hydrogen plant. However, as the project’s go-ahead is contingent on the currently uncertain United States political landscape, the final decision regarding this collaboration has been postponed to 2025.
ADNOC and ExxonMobil’s Commitment to Blue Hydrogen
On September 4, ADNOC signed a deal with ExxonMobil, securing a 35 per cent stake in a proposed collaborative project to build a low-carbon hydrogen plant. The UAE ruler’s son Sheikh Khaled bin Mohammed bin Zayed al-Nahyan was present at the signing ceremony.
The agreement underscores significant joint efforts from the United Arab Emirates and the United States to combat climate change and reduce greenhouse gas emissions, especially within the hard-to-decarbonise energy sectors. The plant would be located in Baytown, Houston, Texas, and is slated to produce one billion cubic feet of low-carbon hydrogen a day, should it receive the green light in 2025.
The hydrogen would be produced with gas, but with the appropriate technology, will have approximately 98% of the carbon removed. Additionally, through this process, ADNOC and ExxonMobil will be able to produce one million tonnes of low-carbon ammonia annually. Should things go accordingly, the facility’s construction will begin in 2029.
United States Political Landscape Poses Significant Uncertainty on The Project
The deal follows the United States and United Arab Emirates’ official agreement to collaborate in clean energy efforts, signed in December 2023. In addition to reducing greenhouse gas emissions, the construction of the plant would boost economic growth in Baytown and the state of Texas overall, with the creation of jobs and community development.
However, as the project promises many long-term environmental, economic, and social benefits, it faces uncertainty due to the current political landscape in the United States. In a news release, ExxonMobil said the facility’s construction was “contingent on supportive government policy and necessary regulatory permits.” In March this year, ExxonMobil CEO Darren Woods warned that this project wouldn’t move forward if natural gas energy facilities were excluded from the Biden administration’s Inflation Reduction Act.
The current guidelines list “green” hydrogen facilities, which use water and renewable energy, as qualifiers for tax incentives. However, because the proposed ADNOC and ExxonMobil project would remove most of the carbon emissions from the hydrogen gas, Woods believes it could still qualify under the Inflation Reduction Act. Still, this part remains unclear, as there appears to be a divide in support between green and blue hydrogen.
“If we find the regulation gets heavily influenced by the lobbying and what I would say is people trying to pick winners and losers then we won’t move forward with it,” Woods said. Furthering the uncertainty surrounding the project are the upcoming November elections as experts expect the results will affect the project’s success.
Still, there is hope, as ADNOC Executive Vice President of Low-Carbon Emissions Michele Fiorentino declared, “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.”
This is the oil of the 21st century, according to experts
Both ADNOC and ExxonMobil are giants within the oil and gas industry and their joint low-carbon hydrogen initiative, first disclosed in 2022, responds to the ever-rising demand for clean and renewable energy. Both companies aim to reach net zero with greenhouse gas emissions from their operations; ExxonMobil by 2045, and ADNOC by 2050.
Alongside the low-carbon hydrogen said to be produced by the proposed Baytown plant, ExxonMobil plans to supply the additional ammonia to Korea and Japan. In March again this year, Japan’s largest power generator, JERA, shared aims of investing in the project by buying 500,000 tons of low-carbon ammonia.
Despite a final decision only coming in 2025 and the clear obstacles that may very well halt the blue hydrogen project indefinitely, ADNOC and ExxonMobil seem confident that the decision will favor both sides, especially as the companies’ deal invites lucrative investors from across the globe.