Negotiations are underway for additional offtake at the NEOM green hydrogen megaproject in Saudi Arabia which would exceed the production of the facility, according to CEO Seifi Ghasemi.
Speaking on an earnings call following the release of Q4 and full year results (click here), Ghasemi said construction is about 60% complete, and it is on track to launch the facility at the end of 2026.
Target production is 600 tonnes of hydrogen daily and analysts heard how the company plans to ‘fully load’ from 2027.
Striking an upbeat tone, in contrast with much of the ongoing challenges surrounding hydrogen financing, supply and demand, the CEO said the clean hydrogen market is expected to be worth more than $600bn by 2030 – eventually exceeding $1trn by 2050 – and its currently approved clean hydrogen projects account for less than 1% of future market expectations.
NEOM has been financed by 23 banks, providing more than 70% of total capital needed. Around 18,000 workers are currently on site and 35% of the total amount of the production has been contracted on a ‘take-or-pay’ basis.
Air Products is investing about $800m, or less than 10% of the total project cost, significantly less than the $1.7bn originally projected, illustrating its ability to execute “highly successful project financing”, according to Ghasemi.
He said the reason it is now in a good position with NEOM is because it took ‘first mover’ advantage.
“We started on the project in Saudi Arabia and our green hydrogen projects in 2017, our project is going to come on stream in 2027, so it’s taken 10 years. It’s a long process.”
But the market has changed dramatically over the last decade and Air Products now operates a different model.
“We did what we did with NEOM – it has turned out to be a good experience. Now we are saying that in future we are not going to announce a project without having and telling you a clear view of who will take 50%, 60% of the product on a long-term basis.”
Global investment firm D.E. Shaw recently called on Air Products to address its ‘longstanding underperformance’ in its stock performance and ‘deficiencies’ in governance and capital allocation policies, and called on it to accelerate efforts to de-risk existing large project commitments by signing offtake agreements at reasonable return hurdles.
Read more: D.E. Shaw calls for leadership overhaul at Air Products citing ‘longstanding underperformance’
Ghasemi said NEOM’s physical development has been another attribute in attracting commercial interest. “Right now we are in a position to send people to go visit NEOM. And once they visit, they are a lot more enthusiastic in talking to us than they were before,” he added.
NEOM and Louisiana will be Air Products’ main focuses for green and blue hydrogen respectively.
“We think the lowest cost place to produce green is in Northern Saudi Arabia, and the lowest cost place to produce blue is in US Gulf Coast,” he said.
It has pulled the plug on a $4.5bn Texas green hydrogen project as it does not meet guidelines for new low-carbon project investments. “We have stopped our involvement in this project, and we have sold our development rights to our partners,” he said.
