Turn back the clock six years ago. Only one nation in the world had a hydrogen strategy: Japan.

Since then, more than 50 other countries have developed strategies targeting the low-carbon fuel with decarbonization potential, pledging investments of over $300 billion with more than 1,000 projects announced.

The bad news is that only 4% of these projects have made it past the final investment decision (FID) stage, according to Rafael Fejervary, global hydrogen director for SLB.

“Why? Because there is little offtake. Only 1% of these projects have a binding offtake agreement for the long term,” Fejervary said during CERAWeek by S&P Global. “The reason for that is really the cost.”

The discussion took place as many energy and world leaders look to reduce global greenhouse-gas emissions. Hydrogen has been championed as a promising way to decarbonize hard-to-abate sectors such as steel and cement, while also serving as a low-emissions alternative in other areas such as transportation and energy storage.

Hydrogen can be made from various techniques and feedstocks that include water electrolysis with electricity from renewables and fossil fuels such as coal, nuclear energy and natural gas. Each comes with varying levels of carbon intensity. An abundance of low-cost natural gas, considered a transition fuel, has put this fossil fuel in the spotlight for its potential role in building the hydrogen sector, but its cleanliness has raised concern.

Government policies that enable demand creation and technology to drive down costs are two ways to address costs concerns, according to Fejervary, noting SLB has been directly involved in first-of-a-kind hydrogen projects.

Projects that have reached FID are located in existing hydrogen markets, said Eve Hansen, senior vice president of research and innovation for investment firm Energy Impact Partners.

“Hydrogen is already a feedstock in ammonia, methanol, refining. We’re seeing some of those projects go particularly in regions that have a carbon tax or some other incentive that’s driving the demand,” Hansen said. “That’s already a large industry to tackle.”

In terms of new markets for hydrogen, she sees demand emerging first in areas in which hydrogen can be used for green ammonia and methanol such as for shipping fuels or upgraded into sustainable aviation fuel (SAF). The aviation industry has shown a willingness to pay a premium for SAF, she said.


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Getting others to do so is among the ongoing challenges.

In the short term, demand will likely come from existing users, Fejervary added. That includes seven hydrogen hubs with which the U.S. Department of Energy is in the process negotiating awards totaling $7 billion.

David Burns, vice president of global clean energy for Linde, sees liquid hydrogen playing a role in the short term.

Hydrogen can be liquefied when cooled to below negative 423 F, according to the U.S. Energy Information Administration. Liquefied hydrogen can be used as a fuel in marine, rail, truck and rocket engines. However, it is an energy intensive and expensive process, the EIA says.

“Blue hydrogen is available at scale today,” Burns said.

He addressed the importance of bringing in others as part of the hydrogen equation. The chemicals company has formed several partnerships to grow what the company has called one of its bread and butter businesses: hydrogen. “We can do the production, carbon capture, work with experts on the subsurface …”

Linde has collaborated with SLB on carbon capture and sequestration (CCS) projects, with a focus on designing business and operating models that maximize value.

On the Gulf Coast, Linde is investing $1.8 billion to supply clean hydrogen to Dutch fertilizer giant OCI NV. The fertilizer company developing what is being called the largest blue ammonia facility of its kind in Texas. As part of a long-term agreement, Linde will supply the hydrogen to OCI, which will upgrade it to produce blue ammonia at its 1.1 million tonnes per annum facility in Beaumont, Texas. OCI plans to begin operations in 2025.

“At the same time, I think we need to think of customers and offtakers as partners,” Burns said.

Linde and Exxon Mobil Corp. in 2023 signed a long-term agreement for the offtake of CO2 associated with Linde’s new clean hydrogen production facility being constructed in Beaumont.

While producing more hydrogen with natural gas as a feedstock with CCS could give the sector a boost, the CERAWeek panelists agreed that attention should be paid to upstream methane emission rates.

“If you want to have blue hydrogen have a strong decarbonization story, you have to manage the upstream methane emissions,” Hansen said.

For the hydrogen production tax credit, known as 45V, an upstream methane intensity of about 0.9% has been set as the baseline for methane leakage during the natural gas recovery process and subsequent gas processing and transmission.

However, the U.S. Environmental Protection Agency estimates leak rates across the natural gas supply chain at about 2%-3%.

Not all natural gas has the same methane emissions intensity, and companies can show what differentiates their production.

“To me that’s the mission critical challenge, [and] an opportunity for the entire industry,” Hansen said.