Exxon agrees to sell stake in Baytown hydrogen facility to Abu Dhabi energy group
September 4, 2024
Exxon Mobil agreed Wednesday to sell a 35% stake in its planned Baytown hydrogen facility to Adnoc, the energy and petrochemicals group wholly owned by the Emirate of Abu Dhabi.
The value of the deal was not disclosed, but was reported to be “easily at the multibillion-dollar scale.”
The funding comes at a fraught time for the nascent hydrogen energy industry.
In March, the U.S. Department of Energy said it would award $332 million for Exxon Mobil’s hydrogen project in Baytown, part of a broader funding of hundreds of millions of dollars to industrial projects in East Texas that aim to reduce their carbon footprints.
Exxon had warned before the department's announcement that plans to build the clean hydrogen facility along the Houston Ship Channel might not happen.
It argued that draft rules issued by the Treasury Department late last year would limit Baytown and other proposed blue hydrogen projects, which convert natural gas to hydrogen fuel and store the resulting carbon emissions underground, to the lowest tier of hydrogen tax credit, making them less economic. Treasury's rules include no incentive to produce clean hydrogen fuel using natural gas with reduced methane emissions, “If we’re not able to differentiate natural gas production, it’s highly unlikely Baytown would proceed,” said Mark Klewpatinond, global business manager for hydrogen at Exxon Mobil said in February. “It needs to compete for capital against other projects we have.”
Exxon has described the Baytown project as the world’s largest clean hydrogen facility, and has also cautioned that it is in jeopardy given the structure of federal hydrogen incentives. The federal funding was to support Exxon as it swapped out natural gas-powered equipment for hydrogen to make ethylene, a common chemical building block used to make everyday products such as packaging, textiles and synthetic rubbers.
The proposed low-carbon hydrogen and ammonia production facility in Baytown was promoted in Exxon’s announcement of the transaction as contributing to the effort to “reduce greenhouse gas emissions across hard-to-decarbonize sectors, including industry, energy and transportation, meet rising demand for lower-carbon fuels, and accelerate a net-zero future.”
Sultan Ahmed Al Jaber, minister of Industry and Advanced Technology and Adnoc Group CEO, said in a statement that the investment was a “significant step for Adnoc as we grow our portfolio of lower-carbon energy sources and deliver on our international growth strategy.”