CEH Report

Table of Contents

Abstract

Opportunities in hydrogen look strong during the forecast period (2009–2014). Demand for distillate has been increasing steadily from refineries, which produce and consume large volumes. 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. At the same time, heavy sour crudes, which are hydrogen-deficient compared with lighter crudes, are making up an increasing proportion of refinery runs. Availability of by-product hydrogen at refineries will decline while hydrogen requirements increase. With increased demand, refineries must produce more hydrogen to meet their needs. Growing demand for diesel fuel, trends in outsourcing production that has been captive, and demand in emerging markets are drivers for the growth of hydrogen in refining. Technologies used in such cases include membranes, adsorption and cryogenic recovery.

The largest volumes of intentionally produced or merchant hydrogen are consumed at refineries, in ammonia production and in methanol production. Most of this hydrogen is produced by the consumer at the site where it will be used. Nearly 96% of all hydrogen is derived from fossil fuels, with natural gas being by far the most frequently used source, with an estimated 49%, followed by liquid hydrocarbons at 29%, coal at 18%, and electrolysis and other by-product sources of hydrogen at about 4%.

The global economic crisis that affected most countries bottomed out in mid-2009. Though a stabilization period followed, the world gross domestic product shrank by 2.2% in 2009. The severity of the collapse was reflected in global industrial production, which declined by over 9% in 2009. The fall in the prices of refinery products, polymers and intermediate chemicals led to reduced demand for hydrogen worldwide. Several planned undertakings, including some oil sands processing, gas-to-liquids and coal gasification projects, were delayed or shelved as a result of viability concerns. However, there was a revival by the end of 2009. Countermeasures adopted during the latter half of 2009 to alleviate the financial markets helped initiate a recovery; a slow, gradual improvement has been seen since then.

The following pie chart shows world consumption of hydrogen:

Increasing attention has been given to hydrogen production for use in fuel cells to provide energy for numerous applications, including transportation. Limited fossil resources, rising energy prices and concern for the environment are prompting increased attention on hydrogen as an alternative energy carrier.

The use of hydrogen as an economically and ecologically meaningful energy carrier requires technical progress in many areas. At present, the vast majority of hydrogen is produced from fossil fuels, and ideally, from an ecological perspective, hydrogen should be generated through electrolysis of water, using energy from renewable resources, preferably solar or wind energy.

Additionally, 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. Research in fuel cell technology is also required for the efficient transformation of hydrogen into energy. While this research is ongoing, and paths to commercialization have been derived, realization of this could greatly reduce 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, Europe and Japan. Research programs are listed and discussed in more detail in the regional sections of this report.

Since the early 1990s, consolidation has trimmed the number of global major 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. As of mid-2010, Air Products is attempting to acquire Airgas. While the initial bids have been rejected by Airgas, it remains to be seen what might happen.