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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 decreasing crude quality requiring more and more hydrogen for processing. At the same time, hydrogen generation from crude processing is also decreasing as a result 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 following pie chart shows world consumption of hydrogen:
The merchant hydrogen business, representing volumes of hydrogen that are sold by industrial gas companies, is a small portion of the total hydrogen market and includes gaseous product delivered by single- or multiuser pipelines and liquid or gaseous hydrogen delivered in cylinders, tank trucks or railcars. Over the past few years, consumers, mostly one-time captive producers, have started to outsource hydrogen production to the big industrial gas companies. An important part of new hydrogen capacity is being constructed by large gas companies, either on-site, or to be delivered via pipeline networks.
Since the early 1990s, consolidation has trimmed the number of major global industrial gas companies from ten to four. Linde's acquisition of BOC in 2006 was the latest step in this consolidation process, which made Linde the largest gas producer worldwide, followed by Air Liquide, Air Products and Praxair.
In the past decade, increasing attention has been given to hydrogen production for use in fuel cells that would provide energy in numerous applications, including transportation. Limited fossil resources, rising energy prices and concern for the environment are focusing increased attention on hydrogen as an alternative energy carrier.
Technical solutions to the problems involved in using hydrogen as an economically and ecologically meaningful energy carrier are not expected during the forecast period of this report. However, intensive research on hydrogen generation and storage, as well as the generation of energy from hydrogen, 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 the 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%, coal at 18%, and electrolysis and other by-product sources of hydrogen with 4%.
In China, steam reforming of coal and steam reforming of natural gas are two major methods of producing large volumes of hydrogen. Hydrogen produced by these two methods is used mainly in the production of ammonia and methanol in China. At one time, the refineries used mainly naphtha as raw material. With the increasing prices of crude oil, many were converted to use coal or natural gas as feedstocks. Ammonia, petroleum refining and methanol are the three single largest hydrogen markets in China. These three areas account for over 90% of China's total hydrogen consumption.
Opportunities in hydrogen look strong in the forecast period (2013–2018), with an estimated consumption of about 868 billion normal cubic meters in 2018. 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. 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.
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 economic growth.
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 for the manufacture of methanol. Substantial methanol consumption in direct-fuel use as motor gasoline is expected in countries like China, Russia, South Africa, Venezuela and several Middle Eastern countries.