Air Products and Chemicals, Inc. (APD) Earnings Call Transcript & Summary

Hi, everyone. My name is Steve Byrne. I cover U.S. chemicals for Bank of America, been a chemical guy most of my adult life, I think almost exactly the same amount of time that our guest speaker has been involved in chemicals. He also happens to look like my brother. But -- so I'm delighted to have Simon Moore from Air Products with us to discuss hydrogen, and he is extremely well suited for this topic. So Simon, after getting his engineering degree from Penn State, started at Air Products, and he's been there, I think, all of his career, but he's been in many, many businesses. He started out in the merchant business, that is the trucking of liquid gases around. He went into a hydrogen tonnage in the hydrogen onsite businesses also in his career at Air Products. You may recall that Air Products had a large electronics materials business that he was a director of out of Taiwan. So he's had his share of exposure within Air Products. He's been my contact in Investor Relations for quite some time. He also has communications and sustainability in his responsibility. So we have lots to talk about. If you're not aware, they have made 4 really large investments in projects that are associated with hydrogen, and we will drill into that. A couple of my colleagues are also on this with me. Chase Mulvehill is on here. Chase covers oilfield services and midstream. And Frank McGann is also on. Frank is head of our LatAm oil and gas and petchems. So they're going to be joining me on this. So welcome all of you. And for those of you that are participating and listening, as we go through this, if you have questions, you can certainly send an e-mail to any 1 of the 3 of us.[Operator Instructions]

But we have lots to talk about. And so Simon, first of all, thanks for giving us some of your time. Maybe for those that are less familiar with Air Products would benefit from maybe some high-level comments from you about Air Products' role in hydrogen. You've been a very large producer of gray hydrogen for a long time, but you're clearly moving into blue and green. So maybe some high-level comments of where do you see the opportunity in gray, blue and green hydrogen?

Well, great. Well, thanks, Steve. Let me just, first of all, say thank you to you and the rest of the BofA team who have given us an opportunity to come and join you today. Thanks to everybody who's dialed in to listen. And Steve, I think we've done this a few times, and it's exciting that we're doing this again, and we've got another brand-new world-scale project to talk about. So we're up to 4 or 5 key projects to talk about, so we appreciate the opportunity. As you said, let me just ground folks a little bit about Air Products, but focus on hydrogen. We are the world's leading producer of hydrogen today. Hydrogen makes up a little bit less than 25% of Air Products business. We've been doing this for decades, and every single day, Air Products makes hydrogen through a few different processes. We distribute hydrogen every single day via pipelines, via trucks as a liquid, via trucks as a gas, and we're providing that hydrogen to customers in the conventional refining industry to the number of other industries, including the transportation market today. So I know we're going to get into these projects. But I think if I even reflect on, I believe, the tale of this was hydrogen isn't real this time. Well, I got to tell you, since it's 25% of our business today, we sure think it's real. It has been real for decades, and we're excited about maintaining our leadership position in the decades to come in hydrogen.

And maybeit would also help to highlight a little bit of how you would differentiate Air Products from other entities that are involved in the hydrogen? Would you highlight kind of your infrastructure? You have pipelines and you have the skills to liquefy and transport a lot of product around in trucks, but you also can build SMRs, POX units, auto thermal reformers. You have that engineering capability, but perhaps, it's your willingness to invest. I mean, I would highlight that as a differentiator. How would you view Air Products as being different from others in the hydrogen space?

Well, Steve, this is the problem when you know us well. You answer my questions for me. You're going to have to leave me something to share here as we go through. But I think, seriously, I'm just going to build on what you said. I don't have to tell anybody on this call today that there is a lot of excitement about hydrogen in the world. And any time there's a lot of excitement about hydrogen, it can be a challenge for investors and really anybody to sort out kind of what's real and what's not real. And I think one of the things that we're most proud about Air Products, again, we're building off our decades of experience. In fact, as you know, Steve, Air Products really got the hydrogen business started for the industrial gas industry. If you go back 30 years ago, the refining companies produce their own hydrogen, and over time, they saw the value of outsourcing. And they were able to then focus on their core competency at the time refining oil and gave Air Products the opportunity to get started. This first-mover advantage that we created 30 years ago in the hydrogen business has helped us maintain that leadership position today and has allowed us to become the largest hydrogen producer in the world. So again, that experience that we have. You mentioned it. We have a portfolio of technologies. We don't have a single answer. We can bring together these experiences in these technologies into the right solution for the right situation at the right time. So for example, to produce hydrogen, we can have the traditional steam methane reformer technology. We have our new gasification technology that we've recently acquired. New to Air Products, not new to the world. We're going to talk about carbon capture today. Air Products has been capturing 1 million tons a year of CO2 from a pair of plants in Port Arthur for the last 8 years. That's our CO2 capture technology. And then again, we talked about the technology, the options to distribute the hydrogen. We have the pipeline networks. We operate liquid plants today. So you put all of that experience together, we combine that with our mega project proven execution track record. And just to give people an example of that, a few years ago, we announced the world's -- let's say, the industrial gas industry's largest ever project, a $2 billion ASU project in Jazan in Saudi Arabia. And if anybody has ever saw that site, there was nothing there. It was flat sand, and we were able to execute that project on time, on budget with an outstanding safety record. So while an ASU project in Saudi isn't exactly the same as a sustainable aviation fuel facility in California, those core skills and the expertise to successfully execute the projects are transportable. And that's one of the things we bring to the table. And of course, the last thing would be is, as we've positioned ourselves over the last 5 to 7 years to have the balance sheet that allows us to do these projects. We have significant capacity available on our balance sheet, and so we can invest in these projects. And finally, I think perhaps the most important thing is the confidence to move boldly, create these first-mover advantages, and again, we think that that's going to drive our success going forward. So those are the things that we think make Air Products well positioned for the energy transition.

I'd say, over the next 10 years, do you see a more significant shift between gray, blue and green in any particular direction? And if you do, do you -- would you attribute it to demand for those different buckets or the cost of producing those? The blue seems to be mostly contingent on can you sequester that CO2? The green a function of can you get the renewable power, the cost of that and then the efficiency of an electrolyzer. And then, of course, gray, as you know very well, the cost of the nat gas. Do you see any trajectories in the cost structure of those and/or demand that might drive the splits between those 3 down the road?

Yes. Great question. And maybe just before I dive into the hydrogen, I just want to make sure that we remember that, of course, we have a very, very robust strong non-hydrogen business. we'll talk about the mega projects, but Air Products base industrial gas business, our traditional industrial gas business, is a very, very strong business, generates significant cash, and we expect that business to continue to grow. I really want to make the point that we are going to invest in that business as well, but because of the balance sheet capacity that we have, we can do both these things, Steve. We can support and grow the base business. You just saw we announced a $900 million order to provide ASUs for semiconductor segment. So I just wanted to take a second and remind everybody that we're going to keep supporting that business. It will continue to grow. And then if we turn to the projects in the energy transition, well, I certainly think that green and blue are going to grow because today, they're really pretty small. There's very, very little green hydrogen produced today. We'll talk about our NEOM project, absolutely a game changer for the energy transition for green hydrogen. And as I said, we have blue hydrogen today in our -- on our Texas system in Port Arthur, but we do expect those to grow. Now we view this as an and not an or. And the reason for that is, again, it's about bringing the right solution to the right situation. It's not going to be the right solution every single time. And again, we'll talk about some of our projects. There's a reason why, in addition to hydrogen, we're going to produce ammonia in Louisiana. And there's a reason why in addition to hydrogen or gaseous hydrogen, we're going to produce liquid hydrogen, in our Canada project, because those are the right solutions for the circumstances of those projects. So again, we think that there's going to be markets which will value the lower carbon intensity of the green hydrogen, but we think there's markets that are going to value the carbon intensity of the blue hydrogen. And I just got to say, I'm guilty of it because I've just done it myself. We kind of get wrapped around the axle on these names of green versus blue versus gray, but what the world cares about is lower carbon intensity. And we think the most productive programs around the world, in which California's low carbon fuel standard is one of them, that program doesn't tell people how to make hydrogen. What it says is, the lower carbon footprint you have the better. So if you have a project that is so-called blue produced from hydrocarbons, but has a Net Zero footprint, that's a wonderful project and creates significant value in the California rules. So again, I think you're going to see projects in all of these areas for Air Products going forward, and that's because it's a very, very large and diverse market. It's got diversity of needs from an economic standpoint, diversity of carbon intensity needs, but you also pointed out, there's different geographies that lend themselves better to different types of solutions. So we think it will be an and, and we think there'll be growth in all 3 of those.

All right. Well, before we get into these big projects, let me see if my colleagues want to jump in here. Chase?

Yes. Yes. Thanks, Steve. So I've got a question, just kind of a follow-up here on -- you're talking about blue hydrogen and really kind of CCUS on the oilfield service and midstream and list here in Bank of America. And so we get a lot of talk about CCUS and carbon capture technology. I cover Baker Hughes and Chart Industries, and we've actually got a carbon capture technology panel here. I think it's tomorrow. So how important do you think CCUS or carbon capture technology, how important is it to your hydrogen strategy? And then what do you think would actually drive quicker and further adoption of carbon capture and make you more excited about blue hydrogen?

Yes. Great question. So I mean the short answer is, yes, we think absolutely carbon capture is part of the solution going forward. And again, I think you'll hear that theme a few times. There's not one answer here, there's a multitude of answers. And so again, Air Products about 8 years ago, retrofitted an existing hydrogen plant, really 2 plants in Port Arthur with our own carbon capture technology that CO2 is used for enhanced oil recovery. But the key point is, we were able to deploy our technology to capture that CO2 from existing hydrogen plants and then operate that while maintaining the very high reliability of the hydrogen plant. It's easy to kind of talk about retrofitting in existing plants, but the value that our customers place on our product is a very high reliability. So when we do a retrofit, we have to be able to maintain that high reliability. We can do that. So we see a role for retrofit carbon capture on existing plants. So existing steam methane reformer facilities that use natural gas to create the hydrogen, they produce CO2, most of that CO2 is emitted today. We think there's opportunities to retrofit those projects. And again, those opportunities are going to depend on really 2 things. Geology comes into play. As you know, Chase, and as I'm sure everybody else knows, you can't sequester the CO2 everywhere because we talk a lot about the carbon capture technology, well, that's great. Then you got a whole bunch of CO2 you captured, you got to do something with it. And there are certain places in the world that are very, very amenable. They have the natural geology that are conducive to carbon capture. And quite frankly, Louisiana onshore and offshore is one of the best places, which is why we are doing carbon capture in the new Louisiana project, and then Alberta in Canada has an infrastructure in place to support the sequestering of the CO2. So again, there's the capturing technology. And then with being in a location where not only do you have the geology, but you have, I'll call it, the business or government infrastructure to support that. If we're going to go out and make a multibillion-dollar commitment and, as part of that, we're going to capture the carbon, we need assurances that we'll have unfettered access to the right to do that for many years to come. And in the state of Louisiana, working with the government officials there, we were able to secure a contract that ensures that we indeed do have the rights to sequester that CO2 for many decades to come. So I guess, in summary, we do see this as part of the solution, both in terms of retrofitting existing facilities and also new facilities that will incorporate carbon capture from the beginning.

Awesome. Frank, I think you maybe had something to kind of follow up there. So I'll turn it over to you.

Yes, sure. Just a question we have coming in from the audience. What happens or what needs to happen in the industry to reduce hydrogen production costs to below $1 per kilogram? And is it realistic that this could occur by 2030?

Well, as they say, everybody's got a forecast and most of them will be wrong. So the short answer is, I don't know. What we do know is, if you think about the things that help drive cost down, and we talk about hydrogen today. Look, the existing technology, the steam methane reformer technology is a well-developed technology. We're always looking to improve it, but it's a very, very mature technology. Let's talk about green hydrogen for just a second. So just to ground everybody, this is hydrogen made from renewable electrical power through an electrolyzer. And to be blunt, every consultant has got a forecast of where the costs are going to go on that, but there's 2 key things that drive those costs. One is the cost of the renewable power. I mean that's a big part of the cost of green hydrogen. And so in that case, quite frankly, you're looking at wind. You're looking at solar. You could be looking at hydro in some parts of the world. I think it's less likely to be nuclear. So if you think about wind and solar, those are obviously products, if you will, that have come down the cost curve pretty significantly. So I think it's less around figuring out how to make a more efficient wind farm, it's more about putting that in the geographic location where you get the best utilization of the capital. In other words, where the wind blows a lot, to be blunt, and you put your solar farm where the sun shines a lot. And that way, you get the best capital utilization of those significant investments. The other thing that you've got to do to drive this down is scale because if you look at today's green hydrogen projects, the ones that are onstream today, quite frankly, they're tiny. They're tiny relative to what the market needs. If you take a look at the project we've announced in Saudi Arabia, the NEOM project, that is orders of magnitude bigger than anything anybody has ever done. So we are scaling up. That project is scaling up. Our electrolyzer technology provider, thyssenkrupp, is absolutely scaling up their production of the electrolyzers. So I'm not suggesting there are not continuous improvement opportunities. Of course, there are, but again, it's about putting these projects in the right place in the world, and then it's about driving the scale, which is, quite frankly, what we're already doing with NEOM. So whether that results in X dollars in Y period of time, some of this is going to depend on the energy markets, what we're focused on is making real projects to make this low carbon fuel available when people want it as soon as possible.

And just to follow up. In terms of connections, you mentioned earlier that actually -- and we see this in many products, in many countries, getting the renewable energy to market is sometimes hampered by lack of transmission capacity and the availability of the electricity. How quickly do you see that being resolved in the markets that you're in?

Well, Frank, that is an excellent question, and let's face it, a huge question. And it's not just about hydrogen, of course. How can we move the places where it's lower cost to produce renewable power to the places where it's needed? I think countries around the world are grappling a little bit with that and putting investments to support that infrastructure is sometimes pretty complicated. So I just want to acknowledge, that's a big challenge for the world. Now if I bring that a little bit more granularly, you look at our NEOM project, we're solving that by -- we're building the wind farm and the solar field as part of our project, and we are connecting it to our electrolyzer. So we're not dependent in that case on any existing infrastructure, we're doing it ourselves. We're doing it right there. And by the way, the reason that project is located in the northwest corner of Saudi Arabia -- and again, I know this is simplistic, but the sun shines and the wind blows. And so that's one of the reasons why we're doing that there. But you're absolutely right. People talk about, hey, I got renewable power in the desert somewhere, hey, this will be a great low cost. Well, first of all, what are you going to do 24 hours a day, 7 days a week? What are you going to do with the sun doesn't shine? And how are you going to get that power to kind of where you need it? In the case of our NEOM project, one of the ways to think about this is we're essentially taking that low-cost power, the low cost, if you will, sun and wind and we're turning it into hydrogen, and then we're using ammonia as a transport mechanism to move that hydrogen to where it's needed. So I guess, Frank, if you really wanted to think about this, you could suggest that our NEOM project is actually one way of taking that low-cost electric power and moving it in the form of hydrogen to where it's needed to power city buses and trucks around the world.

Okay. Great. Thanks. I'll turn it back now to Steve.

Simon, I'd like to dig into this most recent project that you announced, the sustainable aviation fuel plant that you're going to build with World Energy in the Los Angeles area. We've talked about the requirement for hydrogen to convert a fatty acid of some sort into a fuel, it requires a significant amount of hydrogen. So it's -- your role is pretty clear in this case, but what led to this? And can you maybe give the attendees on this conference a little bit of background on this project. What's the scale and why SAF? So a little bit of background on that, please.

Great. Well, thanks. Well, I won't go too far back, Steve. But I got to tell you, for me, personally, this is an incredibly exciting project. When I started at Air Products, as you pointed out, as a liquid bulk salesperson, Southern California was my sales territory, and I had the Paramount Refinery as one of my customers when I started as a young salesperson. And to be out there on Earth Day a couple of weeks ago and to be talking about a $2 billion investment at that site, it really was a -- for me, personally, a wonderful experience to see that site continue and convert and be part of the energy transition going forward. Well, let's talk about what we're doing. So Air Products is going to execute and invest $2 billion to build a hydrogen plant to connect this Paramount Refinery to our pipeline network. In fact, we've already done that, and then to build a sustainable aviation fuel project. And I know many people on the phone are very familiar with that, but let me just step back for a second and talk about sustainable aviation fuel. At the end of the day, one of the reasons why we're most excited about this project is, we see that as a tremendous market. And the reason is, for a lot of companies, their so-called Scope 3 emissions are significantly impacted by their business travel. If you're a company that's not in the manufacturing business, a lot of your CO2 footprint is tied to your business travel. Every single one of those companies like every company in the manufacturing business is looking to reduce their CO2 footprint. They're not going to stop traveling. In fact, I think a lot of us are looking forward to getting back and traveling a little bit more. What is the alternative for airline jet fuel? In our opinion, there is no practical alternative for many decades. Perhaps, in a few years, Steve, in a few decades, we'll be here talking about hydrogen for flight, and we think that's a good potential in the long term, but in the near term, there is no alternative. The beauty of sustainable aviation fuel is it's a drop-in replacement for jet fuel. So no change to the engines. No change from the airlines. It is a drop-in replacement for jet fuel, and it has potentially a zero or very low carbon footprint. So at the end of the day, you've got the airlines who have made commitments about reducing their own carbon footprint. You got the airlines customers who are committed to reducing their share of that footprint, and you really have no alternative for decades to do that. We talked about this project. It will be the world's largest sustainable aviation fuel project. From an overall capacity standpoint, it's about 350 million gallons a year. That might sound like a lot, but in 2019, the world's jet field demand was about 100 billion gallons. So I'll say those numbers again. 350 million gallons of overall capacity versus 100 billion gallons of jet fuel demand. So we see there's absolutely a market with no alternatives for sustainable aviation fuel. And then you take a look at World Energy. They're a private company, and we were able to share some information about them on our last earnings call. They're in this business today. They've been doing this for 20 years. They produce sustainable aviation fuel and renewable diesel at the Paramount site today, and we were able to share that the revenue they generate last year just from that site was in excess of $400 million. So again, they understand the supply chain. They understand how to source the raw materials. They understand how to sell the sustainable aviation fuel. Well, why that site? Why would you do this at that site? Well, again, if you haven't been out there, it's an incredible location for a refinery. It's been there for 100 years. It's really in Los Angeles, and it's built up around it, but it's got outstanding infrastructure. There are product pipelines into LAX or L.A. World Airport. And of course, LAX, one of the reasons why the CEO of L.A. World Airports was part of one of the featured speakers when we announced this is, they want to make sure they have access to sustainable aviation fuel for the airlines, their customers. So it's a great market. World Energy is a great partner. Why is Air Products doing this project? Well, as you said, we're very, very excited about the hydrogen. We're excited about connecting this project to our existing hydrogen pipeline network. And then I'll go back to the location. It's a great location, but it's a very tight, meaning there's not a lot of footprint available. So actually executing a project in California, ensuring that you've got the permits and can execute this project successfully is, quite frankly, a real challenge. Now we're proud of our team, and we know we're up for that challenge, but that's how we got together with World Energy and said, rather than you guys trying to build a plant and we'll build a plant in parallel, why don't we put these things together and we'll build the plant. And then from a business standpoint, this goes back to Air Products core on-site business model. So we'll spend the capital, we'll execute the project, World Energy will pay Air Products a fixed monthly fee. So we have no exposure to raw material cost or availability, and we have no exposure to the end market, the SAF price or volume of sales. Again, of course, before we invest $2 billion, we've got to get comfortable that the whole project makes sense, but for us, it's the classic on-site deal with a major investment. And so that's a little bit of the overview of why we're so excited about it.

And then maybe one follow-up on that one for you, Simon, and that is, the feedstock for that plant is some kind of vegetable oil. It could be animal fat. It could be used cooking oil. There's a lot of renewable diesel capacity under construction in the U.S. It's sucking in the available oilseed market in the oil. Do you have a concern about the availability of that feedstock? Or do you think that there are solutions to that dilemma?

Well, again, I mean, obviously, we've had quite a bit of conversations with World Energy about this, but at the end of the day, that is what they do. That is where they've built some expertise over the last 20 years. They today produce from a wide variety of renewable sources over 20 locations over 7 suppliers. So Steve, we're confident based on our conversations with them that they will be able to do that. And I guess I would also just point out, you said, there's a lot of renewable diesel under construction. I guess, I'd say, there's some renewable diesel under construction, and there's a lot being talked about as well. So I think that this project, our expertise and our ability to execute this project is going to bring this project to market sooner than some of the other projects out there. And I think, again, we've talked about the confidence to create that first-mover advantage, and you'll see that in the feedstock availability as well.

All right. Let's jump over into blue. You have 2 very large projects that tie into your existing pipeline infrastructures. One of them is in Alberta, one of them is on the U.S. Gulf Coast. In both cases, you're not just simply putting in carbon capture for existing steam methane reformers, which you could do and then convert some of that gray into blue. But in both cases, you are adding incremental hydrogen supply and not an SMR. It's a unit. It's a POX in one location and auto thermal and the other where you can capture almost all of that CO2 fairly readily. Can you comment on these 2 big projects, Canada, Louisiana in terms of why you chose the path you did in terms of building new incremental capacity for hydrogen? That happens to make it easy to also capture the CO2 and then convert it into blue as opposed to just retrofitting your older SMRs.

Yes. Great. And again, you said it well, Steve. I mean, at the end of the day, we believe there will be increased demand for hydrogen. So it's quite frankly that simple. We think that we will need additional hydrogen capacity on both our U.S. Gulf Coast. And again, that's the world's largest hydrogen pipeline network, about 1,000 kilometers stretching from Texas all the way into Louisiana. We believe that we'll need additional hydrogen capacity to support demand growth there and the same thing in Canada. We have an existing hydrogen pipeline network and we'll be tying into that, and we believe that there will be demand growth there. So it starts with fundamentally, yes, we could retrofit our existing plants and perhaps, we may do that in the future. But at the end of the day, we think we need more hydrogen. So once you need more hydrogen, then you take a look at the situation. Again, I mentioned this earlier, we have a portfolio of technologies and expertise and can think about what's the right answer for these right solutions. So as you said, this is a little bit different than the traditional methodology or technology for producing hydrogen. And you would use a gasifier, they're really both gasifiers because you can capture greater than 95% of the CO2. And so the reason we chose that is, we see not only will there be increased demand for hydrogen, the demand for lower carbon footprint hydrogen is really what's going to drive this going forward. So we're going to be able to produce net zero hydrogen in Canada and very low carbon intensity hydrogen in Louisiana. In both of the projects, we're going to provide some of that hydrogen through our pipeline networks. And Steve, we've talked and a lot of folks have asked us about who are the customer is going to be. And I guess, I would just tell folks on the phone that, look, we've been selling under our long-term onsite business model via pipelines for decades. A lot of the hydrogen from both those projects is going to be supplied to customers via pipeline, and it's true, as of right now, we have not announced any customers. But I think you could anticipate it is not a stretch to guess that, hey, if a customer on our pipeline network needs additional hydrogen, they're going to want to contract that under a long-term take-or-pay type agreement. So again, we haven't announced any of that yet, but I think it is reasonable for somebody to guess there may be some of that at some point in the future. But that's not all we're doing. So if we take a look at the Louisiana project, we're also going to take some of that hydrogen and convert it to ammonia. Because, again, as we said is, the way to move the hydrogen molecule is different depending on the situation. Yes, to get it to our pipeline customers, of course, you provide it as a gas. But what we want to move this greater distances, perhaps to other parts of the world, it is quite difficult to move hydrogen as a molecule. And again, we do this every single day. If you want to try to move gaseous hydrogen around the world, it's very expensive. It's a very light molecule, and therefore, you have to have it at high pressure, a lot of containers to contain that hydrogen. You can certainly turn it into a liquid and that makes it much, much denser, but of course, it takes a lot of energy to liquefy hydrogen. It's a very, very cold product. And if you don't need that cold, that's a lot of investment to move that liquid hydrogen around. And then quite frankly, because it's cold, depending on how long the trip is, some of that hydrogen is going to gasify back during that time. That's why in both the NEOM project in Saudi and the Louisiana project, we're going to take some of that hydrogen, we're going to turn it to new ammonia, but we're not getting in the ammonia business, Steve. Ammonia is really just a transport mechanism for the hydrogen molecule. And everybody knows there's a global infrastructure for ammonia distribution today. We'll take advantage of that, move that ammonia near to where the market needs it, we'll crack or dissociate that ammonia back to hydrogen, and that's how we're going to get those hydrogen molecules to the right place. So again, that's the Louisiana project. But when we look at Canada, we see a tremendous market opportunity that's much closer in and around that Alberta area. In addition to the pipeline network, we see a robust opportunity for heavy transportation for fueling vehicles, heavy trucks in that area, and quite frankly, because that's a little bit more localized in Alberta, we are going to liquefy the hydrogen there, and then we'll use that transportation mechanism. We don't see taking liquid hydrogen from Alberta and moving it to Europe. We see that being used in the market there. And by the way, we're also going to take some of the hydrogen innovative approach, put it in a turbine and make electric power out of it to really drive that net zero footprint of the project. So I know I rattled off a lot of things there, but I think, suffice it to say is, it's important to have a portfolio of these technologies and kind of deploy them in what makes sense in each project.

Chase, you want to jump in here?

Yes. Yes. Yes. So Simon, another kind of question here on blue hydrogen and relative to kind of CCUS -- and sorry, I keep coming back to this. This is just a focus of mine. But when you think about CCUS and the cost, like where do you think costs ultimately have to get to be cost competitive with green hydrogen over time? I realize probably, today, it is cost competitive, but the cost curve is going to continue to come down for green hydrogen. So you get your crystal ball out, you look kind of 10 years down the road, where -- how much the cost need to deplete on the CCUS side to ultimately be competitive to where you see green hydrogen going?

Yes. And Chase, if I could not -- I'm guessing you were talking really about cost of where gray hydrogen might be going, right? So...

Yes. Yes. Yes.

But no problem. Well, look, I mean, obviously, we're comfortable moving ahead. It's $4.5 billion in Louisiana and about USD 1 billion for the Canada project. So I think my strongest answer to your question is, we're comfortable moving ahead now. And it's a combination of -- again, if I stick to Louisiana in the U.S., of course, we have the existing 45Q tax credits. Whether those get increased at some point in the future or not, we'll see for those existing credits to create value. But it's the value for the lower carbon hydrogen. That's why we think these projects make sense and that's why we're comfortable moving ahead. So I guess, I'd have to say that we obviously believe that with the infrastructure in place in Louisiana, the Federal 45Q tax credits, our view of how customers will value that lower carbon hydrogen, we're comfortable moving ahead with those projects. So again, I go back to kind of where I started. I think you're going to have different answers in different cases. I don't think the world is going to be all gray or all blue or all green. So obviously, as we execute these projects, you can improve the costs. But a big part of a carbon capture and sequestration project is just, quite frankly, how close are you to the place you're going to sequester the carbon. If I think about the Canada project, as you know, there's the ACTL, the Alberta Carbon Trunk Line. That's essential infrastructure that's been invested in by the government up there to move the CO2 from where it is likely to be produced and to where it can be sequestered. So there's a type of support or investment that maybe is a little bit different than people think about, but obviously, that lowers the incremental cost of that CO2. I think the capture technology itself, of course, can always improve. But again, these are relatively -- they're not new technologies. We'll continue to optimize those, but I really think it's more about the specifics around the sequestration rather than necessarily a step change in capture technology.

Can I follow up real quick, and then I'm going to hand over to Frank because I think he's got another question. But when you think about these blue hydrogen facilities and you have to think about -- obviously, location is very important. And because if you're too far from the demand source, then you've got to transport obviously hydrogen. If you're too far from the CO2 sequestration site and you've got to transport CO2. So let me ask you this, which one is actually more costly to transport? Is it more costly to transport hydrogen? Or is it more costly to transport CO2?

Well, Chase, I know this is going to be a very satisfying answer, but of course, it depends.

It depends.

It depends on all of the -- but all of the situations, again, indeed, when we talk about transporting hydrogen, I mean the Louisiana project is very close to our hydrogen pipeline network. We've invested a lot of money in that 1,000 kilometer pipeline network. So today, the transferred cost for hydrogen from our plant in Louisiana, say, to a customer in Texas are pretty nominal. And again, a key point here is, I think everybody appreciates, you don't have to build a new blue hydrogen pipeline network. You can put blue hydrogen at one end, a customer can take a molecule out the back end, the molecule doesn't know what color it is and essentially, you can use that existing infrastructure. But again, if I want to move, let's say, from Saudi. I want to move hydrogen from Saudi to Europe, then the right answer is the ammonia situation. So again, in Canada, we're actually not right next to the sequestration but the Alberta Carbon Trunk Line is already in place, which essentially puts us right next door, if you understand. So sorry to be not as specific as you'd like, but it really does depend on the specifics.

Yes. Yes. Frank?

No, I just was wondering, this is a little bit of a bigger picture question, I guess. But we've been seeing cost reductions in terms of -- and expect to continue these cost reductions to make hydrogen more competitive. It seems like it's the long-term answer for a lot of things. Do you think there is the chance or are you expecting that we could be surprised in terms of how quickly costs actually do come down as we've seen in some other technologies like electric vehicle batteries and wind or solar?

Well, again, I think what we're -- what we've been surprised by is, even in the less than 2 years since we announced the NEOM project, the world is focused on lower carbon energy. And I know I don't need to tell anybody this, but you see how that manifests itself with specific commitments and programs around the world to absolutely use hydrogen. The transportation market gets a lot of attention these days, the heavy transportation market, buses, trucks, trains, maybe ships. And so what we see is the world moving in that direction and governments creating either obligation mandates or incentives for people to move in that direction. So what we see is significant growth in the demand, and quite frankly, we're very, very excited about the position Air Products finds ourselves in where we're going to have the supply of these low or no carbon hydrogen molecules in 2026 and beyond. And so I don't sense the world is sitting back saying, hey, I'm not going to move in the direction of hydrogen until the costs come down. We see the world moving right now today, putting in place the infrastructure, the rules and the regulations that are driving that move and we're proud to be playing our role with $12 billion of absolutely real projects that are post FID, that are being executed to make sure those low carbon hydrogen molecules are there for the market.

Great. I'll turn it back now to Steve.

I mean, as you very well know, the electricity pricing in Europe and natural gas pricing is so much higher in that region as it is in the U.S. Is that creating a -- maybe a potential longer-term benefit for NEOM where you're producing green in a region like Saudi and moving it to other parts of the world where locally produced green is not going to be cost competitive with what you can produce in Saudi. Is that the solution that you can see? Are those the regions that you think are likely to be targeted by NEOM? And can you comment on any specific end markets that you think are going to be higher in that ranking order than others for this green ammonia that you're going to be shipping out of Saudi?

Well, Steve, as usual, yes, you're right. You've got the answer to the question. All I'd say though is, that was true even before the recent runoff. I mean, obviously, we can't sit back and say, hey, we saw this runoff in prices in Europe coming and therefore, we're doing NEOM. At the end of the day, I've said this before, but let me just say it one more time, the cost of the renewable power, whether you're buying the power or you're making the power, the cost of that power has a huge impact on the cost of the green hydrogen. So we're doing this project in NEOM in Saudi to leverage the investment in the wind and solar to create a very, very attractive production cost. And we believe that, of course, it costs money to move that into Europe, but we have always believed that, that creates a much, much better solution than trying to do a solar farm, perhaps, in Northern Germany, where you don't have that utilization of the sun. All of that was true a few years ago when we decided to move ahead with the project, and I think all of that is, as you said, even more true now, right? The wind and the sun haven't gotten any more expensive in Saudi, but certainly, if you're buying renewable power in Germany, it has changed significantly here recently. So I do think that we were comfortable already, and I think that's moved things in this direction as well. You talked a little bit about markets. I think we could have a whole discussion on the market opportunities, and we could talk about the fundamental energy markets, and we could talk about the industrial markets for chemicals and steel. We can talk about the transportation markets. We can talk about trains and ships and buses and trucks. And really in the buses and trucks transportation, this is around the heavy transportation where the relative merits of hydrogen are significant over the heavy weight of the batteries that would have to be used by those heavy vehicles. And so specifically for the NEOM project, we really see a great opportunity in that heavy bus and truck transportation market. But if the question is more broadly about hydrogen, there's lots of other market opportunities out there.

Okay. We have another question that's coming in from the audience, and it's, can you speak to any safety concerns of using hydrogen within the context of different commercial uses?

Sure. Great question. Absolutely critical. We are totally comfortable that hydrogen is safe when it's used the right way with the right approach and with the right experience level. Again, Air Products has been successfully making and distributing, and in the case of vehicles, dispensing hydrogen for decades and done that with an outstanding safety record. Hydrogen needs to be respected. But when it's respected and you have the right safety protocols in place, we're very, very comfortable it could be safe.

Steve?

Great. Chase, you good?

I'm good.

Okay. All right. Listen, Simon, I think we've run out of time. Just wanted to say thank you for giving us this discussion. Our best to you in these various projects. And I heard you say at the beginning, 4 or 5. I only count 4. So I'm anticipating a fifth announcement here pretty soon. So we'll be looking for that one. But listen, thank you and best regards for you going forward. So thank you.

Well, thanks, Steve. And let me just clear that up, if you might have noticed, we're doing a green hydrogen project in Arizona. So it's not as big, but that was my fifth one. But I'm sure there'll be more to talk about in the future. Thanks to the team. We really appreciate it. Thanks, everybody, for joining us, and have a great day, everybody. Thank you.

Thanks, Simon.