By Sabrina Valle
HOUSTON (Multibagger) - Abu Dhabi National Oil Company (ADNOC) has made a strategic move by acquiring a 35% equity stake in Exxon Mobil Corp's groundbreaking low-carbon hydrogen project in Texas. The project, initially scheduled to start in 2028, has been delayed by a year until 2029.
This investment from ADNOC highlights their confidence in this multi-billion dollar venture, which Exxon had threatened to cancel if U.S. tax credits were restricted. The final investment decision has been postponed to 2025 from the original target of 2024.
The precise value of the transaction between Exxon and ADNOC has not been disclosed.
"This is a major investment, and the caliber of partners involved reflects the momentum behind this project," said Exxon's President of Low Carbon Solutions, Dan Ammann, in an interview with Multibagger.
Tax Incentives and Project Details
Exxon had unveiled plans in 2022 to construct the world's largest low-carbon hydrogen facility at its Baytown site in Texas. Hydrogen is a clean fuel that produces water when burned.
The project is designed to be powered by clean energy sources, with associated carbon dioxide (CO2) captured and stored underground. This initiative was announced in response to clean energy tax incentives proposed by President Joe Biden's administration.
However, the government's limitations on incentives for natural gas-run facilities posed a challenge. Exxon's CEO, Darren Woods, had earlier expressed concerns that without similar tax credits for hydrogen facilities powered by renewable fuels, the project might face cancellation.
Production Adjustments and Ammonia Output
The estimated production output of the project has been revised since its initial announcement. Originally planned to produce 1 million tons of hydrogen annually, the project now aims to produce 900,000 tons of low-carbon hydrogen and over 1 million tons of low-carbon ammonia.
Ammonia, a well-established industrial product commonly used as fertilizer, contains three atoms of hydrogen in its composition. It also serves as a carrier for hydrogen, enabling its export in liquid form via ships.
Exxon recently inked a deal with JERA, Japan's leading power generator, to explore selling approximately 500,000 tonnes of low-carbon ammonia annually.
"The timing of the hydrogen project hinges on the alignment of supply, demand, and supportive regulations," remarked Ammann.
Analysis and Impact
This partnership between ADNOC and Exxon in the low-carbon hydrogen project signifies a major step towards sustainable energy production. The delay in the project start-up to 2029 showcases the complexities and challenges involved in transitioning to cleaner energy sources.
For investors, this development highlights the growing interest and investments in low-carbon technologies, indicating potential opportunities for future growth and returns. The reliance on tax incentives and regulatory support underscores the importance of government policies in driving sustainable energy initiatives.
Overall, the shift towards low-carbon hydrogen and ammonia production not only aligns with global decarbonization goals but also presents economic and environmental benefits. As these projects progress, they have the potential to reshape the energy landscape and contribute to a more sustainable future for all.