Hydrogen is produced in large quantities both as a principal product and as a by-product. Hydrogen producers may consume the product captively, sell it to end users, sell it to a company that specializes in marketing industrial gases, burn it for fuel or vent it to the atmosphere. Hydrogen consumers may buy hydrogen from an industrial gas company or a by-product producer, use internally generated by-product hydrogen or install a hydrogen plant on-site. In some cases, a company will generate crude by-product hydrogen that is purchased and purified by an industrial gas company and then sold back to the original generating company.
Growth in the hydrogen market is driven primarily by regulations pertaining to desulfurization of fuel used in transportation, growth in transportation fuels, and a decrease in crude quality, requiring more and more hydrogen for processing. Hydrogen generation from crude processing is also decreasing because of poor-quality crudes. This has caused refineries to look for hydrogen availability from merchant sources that are set up on-site or adjacent to the refining facilities. The Middle East is expected to process huge volumes of sour natural gas that require significantly higher quantities of hydrogen to adhere to environmental standards. There is also rising demand for distillate fuels that would require increased hydrogen consumption.The following pie chart shows world consumption of hydrogen:
Higher growth rates are expected in China as a result of high levels of urban pollution leading to efforts to reduce emissions by enforcing stricter fuel sulfur regulation. BRIC economies including India and Russia are also planning to export ultra-low-sulfur fuels, thereby increasing hydrogen consumption in those regions. Though Western Europe and Japan have stagnant markets, North America is expected to increase hydrogen consumption mostly because of the abundant petroleum feedstock supply and advanced technologies.
The use of hydrogen as an economically and ecologically meaningful energy carrier requires technical progress in many areas:
- Generation of hydrogen. At present, the vast majority of hydrogen is produced from fossil fuels. Ideally, from an ecological perspective, hydrogen should be generated through electrolysis of water, using energy from renewable resources, preferably solar or wind energy.
- Storage of hydrogen. Storage of hydrogen in pressurized vessels is costly and liquefaction is energy intensive. For this reason, some consumers prefer on-site generation with small-scale hydrogen generators.
- Generation of energy from hydrogen. Continuing research in fuel cell technology is required for the efficient transformation of hydrogen into energy. This research is ongoing and paths to commercialization have been devised. Realization of this goal could greatly reduce the generation of airborne pollutants in the future.
Technical solutions for these issues are not expected during the forecast period of this report; however, intensive research on the above topics is ongoing and being strongly funded in the United States, Japan, and Europe. Research programs are listed and discussed in more detail in the regional sections of this report.
Nearly 96% of all hydrogen is derived from fossil fuels, with natural gas being by far the most frequently used with an estimated 49%, followed by liquid hydrocarbons at 29%, 18% from coal, and about 4% from electrolysis and other by-product sources of hydrogen.
Steam reforming of coal and steam reforming of natural gas are two major methods for producing large volumes of hydrogen in China. Hydrogen produced by these two methods is used mainly in the production of ammonia and methanol there. Ammonia, petroleum refining, and methanol are the three largest individual markets for hydrogen in China, accounting for over 93% of China’s total hydrogen consumption in 2014.
In China, large-scale plants are being built to keep pace with consumption demand from the domestic market. For example, the largest single-line coal-based hydrogen plant, a 4.8 million normal-cubic-meters-per-day plant, was put into operation in January 2014 by Sinopec’s Maoming Company.
Opportunities in hydrogen globally look strong in the forecast period (2014-19). Production of ammonia has been on the rise, especially in the United States, with lower natural gas prices providing an advantage. The methanol market is also experiencing robust growth. Demand for distillate is steadily on the increase. Refineries are large-volume producers and consumers of hydrogen for distillate. In general, environmental regulations implemented in most industrialized countries result in increased hydrogen requirements at refineries for gasoline and diesel desulfurization because of increased demand for cleaner fuels and tighter engine manufacturer specifications.
In addition, ongoing oil sands processing, gas-to-liquids, and coal gasification projects all require enormous amounts of hydrogen and will boost the size of the market significantly in the next five years. Alberta, Canada has an enormous area containing oil sands that can be processed to produce oil. Even by conservative estimates, this area is estimated to be the second-largest oil reserve after Saudi Arabia. Desulfurization operations for these sands would consume vast quantities of hydrogen.
Hydrogen is also expected to see a surge in consumption in the manufacture of methanol. Substantial methanol consumption in direct-fuel use as motor gasoline is expected in countries such as China, Russia, South Africa, Venezuela, and several Middle Eastern countries.Overall global demand for hydrogen is expected to increase by around 5-6% during the next five years, primarily as a result of demand from petroleum refinery operations, and the production of ammonia and methanol. Asia will continue to lead demand growth in line with the region’s increasing growth of domestic economies.