All manner of industries are piling into the hydrogen rush

“WE ARE BUILDING the energy company of the future…like Tesla did,” declares Seifi Ghasemi, chairman of Air Products. Comparing yourself to the electric-car darling may seem Napoleonic for a purveyor of industrial gases. But Mr Ghasemi, who has thought about one gas in particular, hydrogen, for 30 years, insists the comparison is apt.

He is not alone. Hydrogen is expected to play a big role in greening hard-to-decarbonise sectors such as cement and steel, as well as in long-term energy storage. Today’s smallish and, because almost all the stuff is made from fossil fuels in a carbon-intensive way, dirtyish hydrogen business is forecast to grow into a much cleaner trillion-dollar industry in a few decades. Governments are spending tens of billions of dollars a year to kickstart a clean-hydrogen revolution. A posse of hydrogen-curious firms are keen for a piece of the action.

Maheep Mandloi of Credit Suisse, a bank, sees the natural-gas industry as a template for the development of hydrogen, which is already used in refining. The rise of liquefied natural gas took the sort of capital and expertise that only the integrated global energy giants had. Small wonder big oil is taking an interest. In September Chevron, an American oil titan, unveiled a $10bn strategy for “new energy” that bets big on low-carbon hydrogen.

The other supermajors—BP, ExxonMobil, Royal Dutch Shell and TotalEnergies—have also announced investments in hydrogen clusters and technologies. Ahmad al-Khowaiter, chief technology officer of Saudi Aramco, says that the state-controlled oil colossus intends to be the world leader in fossil-derived low-carbon hydrogen in the 2030s. The kingdom’s hope is also to maintain its energy superpowerdom as oil’s prospects fade by exporting hydrogen made using its world-class solar and wind resources.

Aaron Denman of Bain, a consultancy, calls such bets a quest for “growth engine number two” in case the firms’ core fossil-fuel business falters. The same rationale may underlie the hydrogen efforts of other sectors with a spotty environmental record. On October 11th Andrew Forrest, a mining tycoon and Australia’s richest man, who controls Fortescue Metals Group, unveiled plans to build the world’s biggest factory for electrolyser machines, needed to produce green hydrogen from water.

Not all H₂ prospectors come from grubby industries trying to burnish their image in an ever more climate-conscious world. Given the much wider range of potential applications for hydrogen, various other sectors could strike gaseous gold. Mr Ghasemi, for one, is confident that his company will beat the commodities giants, which he sees as complacent. “They think hydrocarbons are here for ever and don’t think anybody can disrupt them.”

Air Products is trying to prove them wrong. It is developing several hydrogen megaprojects around the world, including a $5bn initiative to produce renewable hydrogen in Saudi Arabia for export. James West of Evercore, an investment bank, reckons industrial-gas firms could become the first supermajors of the hydrogen era. Big oil won’t take that lying down. ■

For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.

This article appeared in the Business section of the print edition under the headline “The hydrogen rush”