UAE’s ADNOC Acquires 35% Stake in Exxon’s Texas Hydrogen Plant

UAE’s ADNOC Acquires 35% Stake in Exxon’s Texas Hydrogen Project

Abu Dhabi National Oil Company has agreed to take a 35% stake in Exxon Mobil Corp’s proposed hydrogen project in Baytown, Texas, which would be the world’s largest once built.

Support from the UAE’s national oil company is “another testament to the overall momentum” behind the project, Dan Amman, head of Exxon’s low-carbon division, said in an interview. Exxon sees the plant opening in 2029, about a year later than originally planned, due to disagreements with the Biden administration over whether the facility qualifies for tax credits under the Inflationary Reduction Act.

“We are clear in our vision with the administration and the relevant government agencies,” Amman said. “We’re obviously waiting to see the final resolution of that process.”

Hydrogen is one of the key pillars of Exxon and other Big Oil’s low-carbon strategy. They believe clean-burning fuel can be used to help decarbonize heavy industries, such as refineries and pipelines, and create ammonia that can be sent to fertilizer or fuel. But despite the potential, large projects around the world struggle to get off the ground due to a lack of customers.

Adnoc is the third largest industrial partner to join Exxon’s project, which will produce 1 billion cubic feet of hydrogen per day and 1 million tons of ammonia per year. The largest energy supplier in Japan, JERA Co., said in June that Air Liquide SA may utilize its pipes after signing a non-restrictive deal in March to purchase half of Ammonia.

Executive vice president of Adnac’s low-carbon solutions and business development Michael Fiorentino stated that the project will supply ammonia for export and hydrogen to the refinery and nearby consumers.
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“We’re really looking at building a portfolio of blue hydrogen delivery capabilities,” Fiorentino said in an interview. “We’re building productivity in what we rate as very competitive areas to do that.” They are Adnak’s home in the Persian Gulf and the United States, he said.

Second contract
The acquisition is Adnoc’s second in the U.S. after the UAE oil giant agreed in May to buy a stake in NextDecade Corp.’s liquefied natural gas export project in Texas. The UAE, the first of the major Gulf oil producers to announce a 2050 net-zero goal, is looking to technologies such as hydrogen and carbon capture to help reduce emissions, while looking for ways to sell hydrocarbons to new industries.

Adnoc and Exxon did not disclose the value of the proposed transaction, which Fiorentino described as “very material.” The project is one of the least expensive blue hydrogen projects, he added.

The main sticking point for the Texas facility is the government’s 45V tax credit. Under current guidelines, incentives are reserved for so-called green hydrogen projects using water and renewable energy. Exxon’s plant will produce blue hydrogen from natural gas, which will produce carbon dioxide emissions. However, executives believe it should qualify for tax credits because the accompanying carbon capture program would eliminate 98% of those emissions.

“We think the policy and incentives to support the creation of these new value chains should be technology agnostic,” Ammann said. “They need to focus on what level of carbon intensity they can deliver, regardless of what means.”