ADNOC has agreed to take a 35% equity stake in ExxonMobil’s large-scale Baytown blue hydrogen project in Texas, in a deal that marks an acceleration of the Emirati NOC’s international expansion in clean energy.

Baytown is the world’s largest blue hydrogen project, with an expected output of 1bcf/d, and more than 1mt/yr of low-carbon ammonia, using US natural gas. The project is designed to achieve CO₂ capture rates of more than 98%.

"This strategic investment is a significant step for ADNOC as we grow our portfolio of lower-carbon energy sources and deliver on our international growth strategy,” said Sultan Ahmed al-Jaber, Emirati minister of industry and advanced technology and ADNOC CEO.

“We look forward to partnering with ExxonMobil on this low-carbon–intensity and technologically advanced project to meet rising demand and help decarbonise heavy-emitting sectors.”

Darren Woods, ExxonMobil CEO, described the partnership with ADNOC as “groundbreaking”. “Bringing on the right partners is key to accelerating market development, and we are pleased to add ADNOC’s proven experience and global market insights to our Baytown facility.”

Policy risk

However, the deal with ADNOC comes amid significant uncertainty around the extent of US government support potentially available to the Baytown project. Upcoming US presidential elections have further heightened the policy risk surrounding the project.

Baytown has yet to reach FID, although this is expected in 2025, with commissioning scheduled for 2029. However, completion of the project is “contingent on supportive government policy and necessary regulatory permits”, ADNOC said.

In recent months, ExxonMobil has stepped up its lobbying for greater support for blue hydrogen projects. In July it published a “call to action on US hydrogen”. The report called for the expansion of existing policy incentives for hydrogen production.

“This includes the extension of the [Inflation Reduction Act’s] 45V tax credit from ten to 20 years, and expansion of 45V language to incentivise the use of low-carbon–intensity natural gas as a hydrogen feedstock,” ExxonMobil said. Further recommendations to the government included the introduction of policies to incentivise low-carbon hydrogen demand.

“Low-carbon hydrogen is more expensive than today’s fuels. That cost gap will likely decrease as technologies improve. But in the meantime, in order to support sustained demand, we recommended well-designed, market-driven, technology-neutral policies,” ExxonMobil said.

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Author: Stuart Penson