New US export capacity to dampen pressure on VLGC rates

Low-carbon H2 hits the skids with offtake lagging

Low-carbon H2 hits the skids with offtake lagging

Houston, 5 May (Argus) — 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 is to use low-carbon hydrogen supplied by Linde. Air Products has delayed the start-up 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 an interview with Argus . "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, said Behrman. LSB partnered with industrial gas firm Air Liquide, Japanese oil company Inpex and Vopak to build the 1.1mn t/yr 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, while speaking at Argus' recent Green Ammonia North America conference in Houston. 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. Dow, which planned to build a hydrogen-fueled ethylene cracker at a petrochemical complex northeast of Edmonton, Alberta, paused its multibillion-dollar project citing uncertainty around US tariffs and the potential for retaliatory tariffs by US trading partners. Linde, which announced last year it would invest $2bn to build a low-carbon hydrogen facility to supply Dow's Path2Zero project, has not responded to questions about what Dow's pause means for its plans in Alberta. Linde has said it was working with Dow to them meet their goals while maintaining Linde's interest in the project. Air Products, meanwhile, further pushed back its $7bn Louisiana low-carbon hydrogen plant to late 2028 or early 2029 as it seeks to control costs by delegating CCS operations and ammonia production to partners. There have been some exceptions to the delays. Early last month, fertilizer producer CF Industries said it was moving ahead on a $4bn ammonia venture with Japan's Jera and investment firm Mitsui at its Blue Point complex in Louisiana. LSB similarly said it is forging ahead with plans to produce low-carbon ammonia at its existing plant in El Dorado, Arkansas, where it will decarbonize production by adding a CCS facility that will be operated by Lapis Carbon Solutions. "We're still big believers in global decarbonization," Behrman said. "I believe that new demand for power generation, power supply, and of course, the marine industry will evolve. I just think it's going to take longer than what everyone initially thought." By Jasmina Kelemen Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.