Hydrogen demand is expected to continue to grow, according to speakers at CERAWeek by S&P Global, particularly from the maritime and transport industry, as hydrogen-based e-fuels become a leading alternative in markets that cannot be easily electrified. However, hurdles remain to scale.

 “Sentiment is pretty muted. There are a lot of questions about resetting expectations, timing, and scalability,” Margaux Moore, head of the energy transition group at trader Trafigura said during a panel at CERAWeek by S&P Global.

Hydrogen and hydrogen-based fuels are nevertheless highly complementary, according to Moore, who said Trafigura wants to tackle scalability and is taking steps to enhance access.

“There has been difficulty in launching large-scale projects due to inflation and high interest rates, but we remain optimistic there is a market for these products”, Zeino-Mahmalat, OCP

Executives acknowledged the barriers to scalability are primarily price discovery and the lack of ability to immediately adopt hydrogen as a long-term replacement fuel, but they said the market is transforming.

“There has been difficulty in launching large-scale projects due to inflation and high interest rates, but we remain optimistic there is a market for these products,” Till Zeino-Mahmalat, vice-president of green hydrogen and derivatives at OCP Group, said on the same panel.

Hydrogen is commonly produced via electrolysis, and when it is paired with recycled carbon dioxide, “you can produce synthetic hydrocarbons like methanol or refined gasoline”, said Brooke Vandygriff, COO at e-fuel company HIF Global. “They are fungible, drop-in replacements of fossil-based fuels; gas stations do not change, car engines do not have to change, pipelines and infrastructure does not have to change,” she said.

“We want to lean on existing manufacturing capacity and existing supply chains,” she added. The process can also produce ammonia, commonly used for fertiliser production. Vandygriff noted that HIF’s Matagorda plant in Texas is expected to produce 1.4mt/yr of green methanol. Originally, the company was set out on processing it into gasoline to be sold in California as a low-carbon fuel, but due to hesitancy around competition with electric vehicles, HIF instead looked to the shipping industry.

“The global maritime industry is signalling strong demand for low-carbon fuels; ammonia and methanol are going to be fuels of the future,” Vandygriff said, adding aviation was a similar path to scalability given the industries cannot be electrified. “There is 250mt of demand for sustainable aviation fuel by 2035,” she added.

Reducing the cost of production technologies is key to making hydrogen cost-competitive as compared with conventional transportation fuels, which so far in the US is possible only through the Clean Hydrogen Production Tax Credit. The credit is a ten-year incentive included in the Inflation Reduction Act that would provide up to $3/kg to clean hydrogen producers and is based on carbon intensity up to a maximum of 4kg CO₂e/kg of hydrogen, according to the US Department of Energy.

But the credit may not be enough to bring production to scale, even despite positive sentiment around permitting and the regulatory environment. BlackRock CEO Laurence D. Fink noted that “all decarbonisation technology is highly inflationary”, during another panel talk. “We can have green and blue hydrogen, but is anyone willing to pay the cost?”

Cost of transport

In addition to production costs, there are also transport costs to consider. “When talking about hydrogen, you have to transport it across the world because of the discrepancy of where there is demand and where it is being produced,” Elena Scaltritti, COO of technology company Topsoe noted.

China is currently the largest consumer of hydrogen, with production largely coming from Asia, Europe and the US. Most recently, Saudi Aramco and Topsoe announced a joint development agreement during the fourth quarter of 2024 to produce low-carbon hydrogen using Topsoe’s eReact technology at the Shaybah NGL recovery plant in Saudi Arabia.

But while interest in hydrogen appears to be growing, upstream executives emphasised its use primarily as a decarbonising agent in oil and gas. Ashraf A. Al Ghazzawi, Aramco's executive vice-president of strategy and development, told CERAWeek that hydrocarbons are “dominating” in the renewables sector, “but more as a supplement to traditional fuels rather than a replacement”.

As a result of the shifting dynamics around demand, Trafigura is paying close attention to how gas-based hydrogen will be treated in Europe, and how imported hydrogen is going to be treated relative to developing industry requirements for decarbonisation, said Trafigura’s Moore.

---

Author: Binish Azhar