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Exxon, CF Industries, EnLink plan carbon transport, storage project for blue ammonia plant

October 12, 2022

Exxon Mobil Corp. (NYSE: XOM) is partnering with CF Industries Holdings Inc. (NYSE: CF) and EnLink Midstream (NYSE: ENLC) on a new emissions-reduction project in Louisiana.

Illinois-based CF Industries wants to produce ammonia from low-carbon "blue" hydrogen — hydrogen made with natural gas but whose carbon dioxide emissions are captured and permanently stored — from its existing ammonia production complex. CF Industries is investing $200 million to build a carbon dioxide dehydration and compression unit at its complex in Donaldsonville, Louisiana, to transport CO2 through pipelines to sequestration sites.

Under an agreement announced Oct. 12, Exxon will transport CO2 from CF Industries' Donaldsonville ammonia production complex to a geologic storage site in Vermilion Parish, Louisiana. Exxon said it will develop a 125,000-acre storage site in Vermilion Parish for the CCS project.

"As we leverage proven carbon capture and sequestration technology, CF Industries will be first-to-market with a significant volume of blue ammonia," said CF Industries President and CEO Tony Will. "This will enable us to supply this low-carbon energy source to hard-to-abate industries that increasingly view it as critical to their own decarbonization goals."

Exxon, which is moving its headquarters to the Houston area, also secured an agreement with Dallas-based EnLink Midstream LLC (NYSE: ENLC) to use EnLink's pipeline network to transport the CO2 for storage.

"EnLink has a system of over 4,000 miles of pipeline already in the ground in Louisiana," said EnLink CEO Jesse Arenivas. "Utilizing this extensive network enables us to provide the most timely and cost-effective solution to CO2 transportation, with a significantly lower environmental impact."

The companies aim to capture 2 million metric tons of CO2 emissions per year through the Donaldsonville project, which is scheduled to begin operations in early 2025.

CF Industries also plans to build a CO2 dehydration and compression unit at its production complex in Yazoo City, Mississippi, in order to capture and sequester another 500,000 tons of CO2 each year. The firm could sequester up to 2.5 million tons of CO2 per year once the units are online and sequestration is initiated, CF Industries said in its latest quarterly earnings report.

The company said it expects the projects to qualify for tax credits under Section 45Q of the Internal Revenue Code, which provides credits for each ton of CO2 sequestered. Under the Inflation Reduction Act, passed in August, 45Q tax credits for sequestering CO2 were increased to $85 per ton.

CF Industries aims to market up to 1.7 million tons of blue ammonia per year with CCS operations online. In May, CF Industries and Japan-based Mitsui & Co. Ltd. announced intentions to jointly develop a new blue ammonia production facility in the U.S. The joint venture expects to reach a final investment decision and begin front-end engineering and design efforts in 2023.

Exxon's Low Carbon Solutions business segment is focusing its CCS efforts on point-source emissions from industrial activity.

"ExxonMobil is providing a critical and scalable solution to reduce CO2 emissions, and we’re ready to offer the same service to other large industrial customers in the state of Louisiana and around the world," said Dan Ammann, president of Exxon Low Carbon Solutions. "We're encouraged by the momentum we see building for projects of this kind, thanks to supportive policies such as the Inflation Reduction Act."

Ammann, formerly president of Detroit-based General Motors Co. (NYSE: GM) and CEO of its Cruise autonomous vehicle subsidiary, stepped into the Low Carbon Solutions president role at Exxon earlier this year.

Exxon has pitched the Houston area as an ideal place to build a $100 billion CCS project, supported by both industry and government investment. More than a dozen companies have joined Exxon in advocating for such a CCS hub, which they conceive could capture and permanently store up to 100 million metric tons of CO2 annually by 2040.

Meanwhile, Exxon is reportedly considering a takeover of Plano-based Denbury Inc. (NYSE: DEN), according to Bloomberg. Denbury has the nation's largest pipeline network for transporting CO2, including over 1,300 miles of pipelines in the Gulf Coast and the Rocky Mountains.

Exxon announced in January that it is moving its headquarters from Irving, Texas, to its Houston campus in City Place, the master-planned community formerly known as Springwoods Village, by the middle of 2023.

By Chris Mathews, Houston Business Journal