US-based industrial natural gas firm Air Products has withdrawn from a planned $4.5bn renewable hydrogen joint venture in northern Texas citing the lack of an anchor customer for the plant.
Air Product has cancelled any ongoing commitment and engineering for the project and has sold its development rights to its partners, chief executive officer Seifi Ghasemi said on an earnings call.
Air Products had previously said it was waiting for US Treasury Department guidance on the 45V renewable hydrogen tax credits to make an investment decision.
Ghasemi puts the Texas project costs at $4.5bn, which marks a rise from previous guidance of $4bn, but he did not list this as a factor in the decision to exit.
Air Products planned to be the sole offtaker for the project on a 30-year contract when it announced the plan with partner utility company AES in 2022. This would have been a similar model to Air Product's Neom project in Saudi Arabia, where it has responsibility as sole offtaker and will then re-sell to the market.
Air Products has more recently chosen not to take more investment decisions on projects unless there is an anchor customer and until it sells 75pc of output from ongoing projects such as Neom, Ghasemi said. This would be closer to the model it has at its established industrial gas plants, where it sells half of the output to an adjacent customer and trades the rest, he said.
Some Air Products investors have pressured the company to sign more long-term deals and take less merchant risk on its clean hydrogen projects.
Air Products has secured more customers for its Neom project, in addition to an existing deal with France's TotalEnergies, Ghasemi said today. Its other customers prefer not to be named publicly yet, he said.
Air Products has also pre-sold 60pc of the output from its Canadian Edmonton CCS-hydrogen project on a long-term take-or-pay contract and is in "active discussion for the remainder of the capacity", Ghasemi said. He said earlier this year that the firm had committed almost all of its capacity at Edmonton.
Air Products will focus on projects at Neom, Edmonton, Louisiana and "one or two other projects in Texas," he said, but no other "major projects".
