By the World’s Best Investment Manager, Financial Market’s Journalist
Abu Dhabi National Oil Company (ADNOC) has acquired a 35% equity stake in Exxon Mobil Corp’s proposed low-carbon hydrogen project in Texas, leading to a one-year start-up delay until 2029. This investment demonstrates confidence in a project that Exxon has threatened to cancel if U.S. government tax credits are restricted. The final investment decision has been pushed to 2025 from 2024.
Exxon and ADNOC have not disclosed the value of the transaction, but Exxon President of Low Carbon Solutions Dan Ammann stated, “This is a very significant investment and the partners it is attracting give a sense for the momentum that’s building around this project.”
In 2022, Exxon revealed plans to build the world’s largest low-carbon hydrogen facility in Baytown, Texas, powered by clean energy with associated CO2 captured and buried underground. The project was announced following clean energy tax incentives proposed by the Biden administration, but limited incentives for natural gas-run facilities posed a challenge. Without similar tax credits offered to hydrogen facilities powered by renewable fuels, Exxon’s CEO Darren Woods warned of potential cancellation.
The project’s estimated production has been revised to aim for 900,000 tons of low-carbon hydrogen and over 1 million tons of low-carbon ammonia. Ammonia, with three atoms of hydrogen in its composition, is also used as a carrier for hydrogen, enabling export in a liquid form by ship. Exxon has signed an agreement with JERA to explore selling about 500,000 tonnes annually of low-carbon ammonia.
“The timing (for the hydrogen project) depends on supply, demand, and supporting regulation coming together in sync,” said Ammann.
Analysis: ADNOC’s investment in Exxon Mobil’s low-carbon hydrogen project signifies a major step towards sustainable energy production. The project’s success could lead to advancements in clean energy technology and reduce carbon emissions. Investors should keep an eye on developments in this project as it could impact the energy market and global efforts towards environmental sustainability.