Air Products’ recently installed CEO, Eduardo F. Menezes, has delivered a sobering assessment of the US industrial gases firm’s clean hydrogen portfolio, reflecting the new mood of caution sweeping through this once over-hyped sector.

Menezes is “cautiously optimistic” about the firm’s biggest two projects: Neom Green Hydrogen in Saudi Arabia and the Louisiana Blue project in the US. However, he rated the rest of the clean hydrogen portfolio as “underperforming” as he used his second-quarter earning’s report to double down on his mission to refocus the company on its core strengths: industrial gases production backed by log-term offtake deals. Air Products is the world’s largest producer of grey hydrogen.

He criticised his predecessor’s strategy of piling into “first-of-a-kind” clean hydrogen projects without the security of offtake deals, an approach that has seen the firm’s headcount and borrowing surge in recent years. Air Products is cutting around 800 jobs.

“We will delay investing in downstream facilities in Europe until specific regulatory frameworks are clear for each country and we have firm customer commitments” Menezes, Air Products

The underperforming projects represent capex of $5b, including $3.3b on the large-scale blue hydrogen project in Edmonton, Canada. The cost overruns and delays are serious—it was originally unveiled in 2021 as a C$1.3b ($940m) project, with a startup date of 2024. The latest startup estimate is late 2027 or early 2028, Menezes told investors.

Also underperforming are the $800m Rotterdam blue hydrogen project, due onstream in 2028, and the $360m Arizona green hydrogen project, which is expected to start up next year. Further investments in Europe look unlikely in the near term.

In March, Menezes exited three key projects at a cost of more than $3b, including the World Energy SAF and hydrogen project in California and the Massena green hydrogen project in New York. For the remaining projects, further investment and progress to commissioning will be possible only if long-term offtake deals are in place, he said.

Air Products is committed to Louisianna Blue—its largest investment in the US—but it is trying to scale back its investment in the project. The company has given itself until the end of this year to come up with a “de-risking” plan that would see it exit the CCS and ammonia production elements of the project, focusing only on hydrogen and nitrogen production. The aim would be to reduce its capex to $5–6b, from $8b, and to secure firm offtake agreements for the hydrogen and nitrogen.

“There will be no new spending commitments on this project while we pursue the de-risking strategy,” said Menezes. The change of strategy is unrelated to recent uncertainty over subsidies offered under the Inflation Reduction Act, a spokesperson for Air Products added.

Neom progressing

The $8.4b Neom green ammonia project in Saudi Arabia is “progressing well”, he said. Air Products will complete the project’s 4GW of solar and wind generation capacity by mid-2026. “We will start commissioning the electrolysers and the ammonia production after that. We expect product availability in 2027.” The project is a joint venture between Air Products, Saudi developer ACWA Power and the Neom region.  Air Products will be the sole offtaker. Menezes declined to comment on the offtake price for the ammonia, although analysts have put it at about $600/t.

Menezes reiterated that the near-term plan is to sell green ammonia on an FOB basis from Saudi Arabia. In the longer term, the ammonia would be shipped to Europe, where it could be converted back to hydrogen. However, that would require investment in infrastructure that Menezes is unwilling to approve at this stage.

“We will delay investing in downstream facilities in Europe until specific regulatory frameworks are clear for each country and we have firm customer commitments,” he said.

---

Author: Stuart Penson