By: Rahul Koul
Last updated : July 01, 2021 10:50 am
Our joint venture in India is doing very well but unfortunately because of COVID situation.
We are proud of our mega hydrogen project in Canada that is a unique display of our efforts in the energy transition, said Seifi Ghasemi, Chairman, President & CEO, Air Products and Chemicals while sharing insights into the company’s US $1.30 billion net zero hydrogen project in Alberta, Canada.
“The multi-billion project is very innovative as we have made it possible to use hydrocarbons to make a hydrogen which is as good as almost any green hydrogen. The unit has a 400 tonnes of hydrogen per day capacity. And then we have laid out a property plan to duplicate the unit many times. The liquid hydrogen that we are adding in the region will be the first ever with a capacity of 31 tonnes per day. There is significant value in the products we make. We have a hydrogen liquifier for mobility as there is going to be demand by 2024 and the rest of the hydrogen will be used by consumers in that part of the world which is looking to go to net zero and those who have demand for clean hydrogen. The whole combination is very exciting as we replicate this in the other parts of the world but there is no better place to start than Canada where we have an existing infrastructure also,” mentioned Ghasemi, while speaking at the recent Deutsche Bank’s Global Basic Materials Conference.
Talking about the expected returns from the project, the Air Products Chairman said, “Through this project, we are producing net zero hydrogen and we have customers that we won’t reveal. We expect 10 cents of operating income on every dollar spent on the project. Depending on the final price at which the green hydrogen or the blue hydrogen we sell, will determine the return. But I feel very good about the project and returns are excellent. We are producing a product that nobody has and it obviously will have a premium value.”
In conversation with David Begleiter, Research Analyst, Deutsche Bank, Ghasemi said, “Hydrogen is going to be a big growth area for us. As we go forward in time, we are beginning to see more and more interest in blue and green hydrogen. We are the largest user of grey hydrogen in the country and we are determined to produce the largest stocks of green hydrogen and blue hydrogen in the world. Between green hydrogen and blue hydrogen, we have the potential of doubling and tripling our air products by 2030 and 2035 respectively. In order to make blue hydrogen, we need to make significant investment into CO2 capture. We have made a commitment that in the next few months we will give our investors insights into spending. Therefore, a significant part of our investments are going to go into this area. As conveyed to investors earlier, we will spend US $15-18 billion 2020-23 and we are almost in the middle. Now we will give them a clear outlook on our spending until 2028.”
Bright Outlook
Sharing the region wise business trends, Ghasemi said, “Our business in China is doing well. The country’s economy is holding up. Not only China but Korea, Taiwan and the whole of Asia is okay. Our joint venture in India is doing very well but unfortunately because of COVID situation. We are the largest producers of oxygen, so we get benefitted there. Since that is a small business, it doesn’t reflect in our results.”
“In Europe, our business is doing okay. Credit goes to our people who have been running the plants efficiently with considerable cost cutting. But at the same time, the economy hasn’t gone down and the operations are going on well but not at par with China which has picked up fast,” said Ghasemi.
“In US, we are yet to see the growth everybody is talking about. The much talked about GDP growth is because people are travelling and all of that. People are flying but planes don’t have any demand for industrial gases. The fact is that for our results in the US, we don’t have a package of gas in the US and we don’t have a medical business. If you had a medical business in the US, you would have done better. . We are not seeing much industrial activity in the US. Our Latin American business has picked up not because of the economy but the changes in productivity and demand for Oxygen. We have fortunately or unfortunately benefitted from Covid. The demand for oxygen in Brazil, Columbia, Chile is significant. Overall the sky is not falling and we are doing fine,” added Ghasemi.
Sharing his outlook for Helium business, Ghasemi mentioned, “Helium business is interesting as there are only a few sources of supply. So the supply is obviously limited. Right now there will be a shortage of helium for some time but the big elephant in the room as they say is that Russia has announced a gigantic project in Eastern Europe where they plan to produce 2 billion cubic feet of helium. If they do it, it will significantly address the global demand which is 2 billion cubic feet. It will have a significant impact on prices.”
Despite setbacks, Ghasemi is optimistic about the L&G business. “Right now we are feeling optimistic about L&G business. We had a peak in 2015 and then it started going down. We didn’t make any money on that business from 2018 to 2020. Of late it has begun to come back and we are currently in the off cycle mode and hopefully we last for a few years. We liked that business much and we were the technology leaders in this space. So we will live through the cycles and will not divest this business.”
Sharing a few elusive details on the company’s Neon project, Ghasemi said, “Neon project is moving forward and our partners are committed to its completion by 2025. We have started ordering engineering equipment as they have a long delivery time. It is a proprietary product we are aiming to make and we will sell it above market prices. This is very unique as nobody will have this green energy produced from solar and wind at a massive scale. And in terms of who the customers are, we won’t reveal it now. Despite challenges, we will be moving forward and we are excited about it.”
Talking about economics of carbon capture projects, he says, “We are not going to make green hydrogen and blue hydrogen if the customers are not ready to pay for that and if we don’t get a return. But I think the demand is there and some of the customers whether they like it or not will face a carbon tax, making it economical for them to pay us in order to capture the carbon and have a green product. On the technology part, gasification is carbon capture ready. So in many parts of the world we can do gasification to capture the carbon and if we end up with blue hydrogen, that would be the ultimate thing.
On the question of whether the company is doing enough on the environment, Ghasemi said, “We are doing everything related to the environment. Be it carbon capture, production of hydrogen, we are into base business. We are way ahead of our peers. We are good corporate citizens and well known in communities for our work. We have demonstrated that in COVID by not cutting salaries and helping people through different means.”