Multiple North American proposals to make hydrogen from natural gas with carbon capture have taken a pause as tariffs add to cost uncertainties and potential buyers balk at making long-term commitments at current prices.
Dow has iced its Path2Zero ethylene plant in Alberta that was to use low-carbon hydrogen supplied by Linde. Air Products has delayed the startup of a hydrogen and ammonia plant in Louisiana. And US nitrogen fertilizer producer LSB Industries said it is pausing development of an ammonia project on the Houston Ship Channel in Texas.
Lower-carbon hydrogen produced from autothermal reforming with carbon capture and sequestration (CCS) is still expected to lead the nascent sector's development, with renewable-powered production seen as too costly for general takeoff. Most large-scale low-carbon hydrogen projects in the US have focused on exports in the form of ammonia or methanol to Asia and Europe, where governments have promised more support to implement decarbonization mandates.
Long-term offtake agreements have so far lagged as regulatory uncertainty, cost concerns, and now the added threat of US import tariffs muddle demand perspectives.
"Demand has certainly ramped up slower than expected," said LSB chief executive Mark Behrman. "In the conversations that we've had with many offtakers in Asia and Europe, and even here domestically, there's been a lack of willingness to commit at the prices that we were able to talk about based on our capital costs," said Behrman, who also cited uncertainty around tariffs as a complicating factor. For long-term supply contracts, buyers were seeking prices below $600/metric tonne fob, Behrman said.
LSB partnered with industrial gas firm Air Liquide, Japanese oil company Inpex, and Vopak to build the ammonia facility in Texas. Air Liquide would supply the project with low-carbon hydrogen. The project's costs were largely calculated using 45Q tax credits that are awarded to companies using CCS to reduce emissions.
But the release of 45V guidelines in January seemed to offer the possibility of accessing the more lucrative hydrogen production incentive because of a new section pertaining to cryogenic separation, a process that captures carbon dioxide from industrial gas streams, said LSB vice-president of clean energy, Jakob Krummenacher.
Cryogenic separation generates more steam than conventional solvent absorption and, if that steam is exported to another process, it may lower the carbon intensity of the resulting hydrogen to such an extent that the project could potentially qualify for 45V, Krummenacher said. As a result, many of the assumptions baked into the engineering studies related to the Houston ammonia venture have to go back to the drawing board. Air Liquide did not respond to requests for comment.
If Air Liquide can avail itself of 45V, capital costs may decline and result in more competitive offers to the market. But Berhman cautioned against concluding the project will resume if it is found to qualify for 45V.
"We still need a customer to move forward," Behrman said.