Blue Hydrogen Project Cancelled Amid Uncertain Financial Prospects

Air Products' massive blue hydrogen/blue ammonia project in Louisiana has been cancelled due to uncertain financial prospects. The $8 billion Louisiana Clean Energy Complex, announced in 2021, would have produced about 600,000 metric tons of hydrogen per year, with 95% carbon dioxide capture. The captured CO2 was planned for transportation by pipeline to a sequestration site under Lake Maurepas.

The project relied on cheap natural gas and generous production-side subsidies, including the 45Q credit. However, even these incentives were not enough to make the project viable without firm long-term offtake contracts or demand-side incentives. The European Union's Carbon Border Adjustment Mechanism (CBAM) rules also played a crucial role in Yara International's decision to pull out of the partnership.

Yara had planned to purchase 80% of the low-carbon hydrogen produced at the facility and operate the onsite ammonia production. However, with the suspension of CBAM for ammonia, imported blue ammonia became far more expensive than domestically produced grey. Despite this, Yara initially lobbied for favorable EU import terms but ultimately decided against moving forward with the project.

The cancellation highlights the uncertain financial prospects of many announced U.S. projects that rely on carbon capture and storage (CCS). To be viable, these projects now need to secure firm long-term offtake contracts or demand-side incentives, in addition to cheap natural gas and generous production-side subsidies.