Fertiglobe CEO confident of winning tax credits for Texas hydrogen project despite Trump's return

The head of Adnoc’s low-carbon ammonia unit is “confident” that ExxonMobil’s planned blue hydrogen facility in Baytown, Texas will win tax credits under the Inflation Reduction Act (IRA) despite the re-election of Donald Trump as the next US president.

The project will produce up to one billion cubic feet of blue hydrogen daily and more than one million tonnes of low-carbon ammonia annually once it becomes operational in 2029. Nearly all of the carbon dioxide produced during the process will be captured and stored.

Two key tax credits from the IRA, the 45V and 45Q, are essential for projects producing blue hydrogen. These credits incentivise projects that produce hydrogen from fossil fuels using carbon capture and storage.

“There's actually direct pay from the US government for the first five years, [and] then it becomes tax credits, so it's actually very lucrative,” Ahmed El Hoshy, chief executive of Fertiglobe, told The National.

“Because of the amount of carbon-dioxide we [will be] abating in partnership with Exxon, it's getting a lot of support from the IRA. With the elections last week, there's a big focus on what happens to the IRA [next].”

Adnoc, which increased its share in Fertiglobe to 86.2 per cent last month, will transfer its shareholding in all current and future low-carbon ammonia projects to the company, and this includes a 35 per cent stake in the Baytown project.

ExxonMobil, the biggest stakeholder, wants to ensure that the project qualifies for the 45V tax credit. However, the specific criteria for qualifying for the credit has been a contentious issue for blue hydrogen producers.

While green hydrogen – produced using renewable electricity – meets qualifications in a more straightforward manner, blue hydrogen involves more complex carbon footprint calculations.

The final investment decision for the project, expected in 2025, is contingent on whether the project qualifies for the tax credits, Mr El Hoshy said.

“We're waiting for either this administration or the next administration to clarify where we qualify in terms of those credits," he said.

“We see that … [there’s] bipartisan support towards this element of the IRA [and] this [project] is focused on advancing very clean production of molecules, so we do feel confident about [being eligible].”

The IRA, a landmark climate law passed by the Biden administration in 2022, pledged billions of dollars in new spending and tax breaks to boost clean energy and electric vehicle ownership.

Earlier in his presidential campaign, Mr Trump pledged to revoke any unused funds under the IRA.

Export markets

The ammonia production will primarily be for export markets, including the US Gulf Coast, Europe and Asia, Mr El Hoshy said.

He said the low-carbon ammonia produced by the plant would be favoured by buyers in Europe, with carbon tariffs set to take effect in 2026.

The EU will fully implement the Carbon Border Adjustment Mechanism (CBAM), which seeks to protect European companies that pay for their emissions under the EU's trading system from unfair competition, will impose a carbon price on certain goods imported into the bloc.

The regulation currently focuses on carbon-intensive goods such as cement, iron and steel, aluminium, fertilisers, electricity and hydrogen products.

“The effect of the carbon-dioxide pricing will continue to get higher and higher towards the end of the decade and through the next decade,” Mr El Hoshy said. "So, that definitely puts us an advantage over normal kind of non-abated products."

He said that, in addition to capturing carbon emissions generated from operations, the plant can reduce its scope 2 emissions – those associated with electricity consumption – by using power sourced from renewable energy.

“Texas is one of the biggest producers of wind and solar in the US, so we can get renewable electricity to take our emissions there basically to zero,” Mr El Hoshy said.