Air Products is signing off 2025 on a positive note after announcing an imminent deal with ammonia and fertiliser giant Yara for its troubled Louisiana blue hydrogen project.
One key element is the 45Q carbon capture tax credits, which avoided the clean energy funding cull from the US government.
CEO Eduardo Menezes said the credit, which offers up to $85/tonne of carbon dioxide capture, stored or used in industry, would “skew” the plant for its first 12 years of operations, to deliver returns higher than a traditional grey hydrogen project.
Source: Air Products
“The EBITDA for the first 12 years should be higher than a normal EBITDA would be in an industrial gas project,” he explained. With an expected 5.5 million tonnes of CO2 per year expected to be captured, Air Products could bank over $460m annually from 45Q.
The company is still negotiating the carbon capture segment of the project. Air Products expects to announce a third-party carbon capture deal under a long-term agreement “later”. Currently, the sequestration scope is not included in the new capital expenditure forecasts of $8–$9bn – up from the original $4.5bn.
Under the deal with Yara, Air Products will offload the Louisiana project’s ammonia production, storage, and shipping elements – representing around 25% of that $8–$9bn.
Air Products plans to sell around 80% of its blue hydrogen to Yara under a 25-year offtake agreement, enabling the production of 2.8 million tonnes of ammonia per year. The remaining 20% would be fed into the industrial gas firm’s existing US Gulf Coast hydrogen pipeline system, where it moves over 1.5 bcfd of hydrogen, representing around 12% of total volume.
The Louisiana project, initially expected to be operational in 2026, is now due online in 2030 if final investment decision (FID) can be taken by mid-2026. News of the Yara partnership follows spending on the project pausing in May and last month’s earnings call in which the CEO confirmed “advanced negotiations” were underway.
He stressed that the transaction will only close once the project starts.
“We will have progress payments like we would have with any project, with the difference being that the final payment will be larger than what would be in a normal transaction of a sale of a project. This is something we are still finalising,” Menezes said.
Yara, the largest ammonia trader globally, has keen interest in developing renewable ammonia, both blue and green.
“It’s a good deal for Yara but also a very good deal for Air Products as we won’t need to have a sales force and marketing structure and so forth … personally, I have been working with Yara for 20 years,” added Menezes. “Having a partner like Yara, with its infrastructure [of] ships and terminals, really eliminates this volume risk that we have today.”
Menezes sounded off on a note of caution, underlining that negotiations remain at a critical stage.
“If we cannot get to a capital expenditure number that we can both live with, we will not have an FID,” he said. “We are making this announcement as we believe that we have a path to get there, but until we have these agreements with construction companies done, and we have a final picture, we will still need to make a decision on the FID.”
