Air Products delays Louisiana hydrogen project and wants to shrink risks

Industrial gas major Air Products has delayed the start-up of its multi-billion-dollar Louisiana blue hydrogen project and is looking to divest its stakes in the carbon sequestration and ammonia production elements.

The Louisiana project was initially expected to be operational in 2026 but has now been delayed to late 2028 or early 2029.

Under the original plan, Air Products was leading on all elements of the project. The plant is expected to produce 1,700 tonnes of blue hydrogen per day. The company originally planned to inject much of the output into its 700-mile US Gulf Coast hydrogen pipeline, with a portion being turned into ammonia for export.

However, in a bid to reassure investors and reduce investment risks, the firm is now trying to scale back its involvement.

CEO Eduardo Menezes, who has been at the helm for about 90 days now, confirmed the plans on an earnings call to present the company’s Q2 2024 results, which include a net loss of $1.7bn after a £3bn write-down on three canned projects.

In February this year investment firm Mantle Ridge, which backed Menezes’ ascension to the top of Air Products, argued that the firm had taken on a far larger scope on the Louisiana project than other industrial gas players on their large-scale projects.

That is because Air Products initially planned to build, own and operate the plant’s air separation unit (ASU), hydrogen production, carbon capture, carbon sequestration and ammonia production in Louisiana, which the investors argued inflated its scope from the announced $4.5bn ticket price to something around $7bn.

Menezes has now said the company will concentrate on the hydrogen and nitrogen production elements of the development and is continuing discussions to bring on partners to deliver the ammonia production and carbon storage.

Menezes said the move was part of a wider goal to reduce the total cost of the project. The full-scope cost was initially estimated at $8bn but is now targeted at between $5bn and $6bn, he said on the call.

“We’ve announced two ammonia trains [at the project site], and ammonia production accounts for around 80% to 85% of the total hydrogen output. The remaining hydrogen is equivalent to the capacity of one steam methane reformer,” he said.

The pivot comes as Air Products looks to get “back to basics” and its core industrial gas business.

The company said it won’t make any additional investment in the project while it determines how to derisk the multi-billion-dollar project and also looks for partners.

“Air Products will only move forward with this project when we have firm offtake agreements for hydrogen and nitrogen,” Menezes added.