In January 2021, US annual hydrogen capacity was approximately 3.7 billion cubic feet per year (bcf/yr). Of this, 68% was used in petroleum processing, according to the US Department of Energy (DOE). Capacity was flat over the previous year, while in the rest of the world production declined by 0.3%. About 21% of the hydrogen produced was used in making fertilizer. Most of the hydrogen produced in the United States currently comes from steam methane reforming. There are 1,600 miles of hydrogen pipeline in the US and large hydrogen production facilities in almost every state. New innovations, applications and blue and green sourcing channels continue to emerge, and our view of hydrogen markets continues to evolve as a result.
Let’s remind ourselves of the recent history. The Covid-19 pandemic hit the refinery hydrogen business in 2020, with significantly reduced population mobility that reduced demand for petroleum products. In 2022, Russia’s invasion of Ukraine drove demand for energy to cover the lost Russian supply, causing skyrocketing Brent and WTI crude prices. In 2023, the average Brent crude price was $83/barrel (b) compared with $101/b in 2022 and $71/b in 2021. This decline in oil prices in 2023 reflects a darkening global economic backdrop and Covid-19 flare-ups in China, threatening demand growth and offsetting the impact of supply shortfalls caused by sanctions on Russia, which have the effect of pushing up prices.
Despite these fluctuating uncertainties, hydrogen is a long-term solid growth platform for the industrial gas industry. In large volumes, industrial gas companies continue to supply hydrogen through their on-site pipeline (OSP) businesses to oil and gas refineries, basic and specialty chemical manufacturers, and food processors. In smaller volumes, merchant liquid hydrogen is supplied via tube trailer and cylinder and used in a wide range of applications including metallurgy, electronics, aerospace, food hydrogenation, glass, electrical power generation, and fuel cells, which is experiencing the fastest growth. Hydrogen fuel cells are slowly gaining momentum as cost and performance have improved. In this report, we bring you up to date on the OSP business and the merchant hydrogen business, where liquid hydrogen for stationary and mobile fuel cell technology is growing.
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