LIVE: Air Products CEO Seifi Ghasemi talks to Reuters

Good morning, good morning, good morning. Thank you for joining us.

Pleasure to be on your program. With respect to hydrogen, if I may just take a second, the energy transition: everybody wants to be carbon-free by 2050, 2060, 2075, whenever it is. At that time, the question is, how are we going to meet our energy requirements if we don't want to be using hydrocarbons? Then our only choices would be either sun, wind, hydro, or nuclear. But all of these sources of energy produce electricity. Electricity can be used directly to drive light transport like cars; electricity can be used for heating, air conditioning, cooking, or light industry. Fine. But then there are certain sectors of the economy that cannot be powered by electricity. You cannot electrify heavy transport, heavy trucks, heavy trains, ships, planes, chemicals, steelmaking. So those industries that cannot be electrified, right. So if that is the case, then the issue is how do we transition to that? We believe that right now, obviously as you said, Air Products is the largest producer of gray hydrogen. We make gray hydrogen using hydrocarbons, and that will continue for a long time until we get to 2050, 2060. But then the next stage is going to be what we call blue hydrogen. That is, you still use hydrocarbons, you produce the hydrogen through cracking the natural gas, but then you capture the CO2. So at Air Products, since we are the largest producer of hydrogen and we want to be the leader in the energy transition, we have decided to go step by step. We want to demonstrate to the world now that they can make gray hydrogen, we can make blue hydrogen, and they can make green hydrogen, because you have to start and prove these technologies. So they have announced a massive project, $4.5 billion in Louisiana, to produce blue hydrogen. We will still use natural gas, but we will capture the CO2 and sequester it. But then we decided that now is the time to demonstrate green hydrogen, and that is why we decided to do that at very large scale, to prove the viability. And that is the project in Saudi Arabia, the NEOM project. On that one, I just want to make one point clear: we are a partner in the production of hydrogen, but once that hydrogen is produced, Air Products is the sole offtaker of that green hydrogen for distribution in the world.

Sure. The NEOM project is moving forward. We have close to about 800 people doing the engineering of the project. We obviously have identified the place, the land. We have finalized and awarded the contract for all of the hydrogen compression equipment, and the other equipment are being designed and ordered. Expect that project to have commercially available hydrogen for consumption around the world by 2026. And in the meantime, Air Products is heavily engaged in building the infrastructure that is required to take the green hydrogen in the form of green ammonia from NEOM and then bring it to Europe, the United States, Asia, and all of the different parts of the world where the end users will be.

650 tons a day of hydrogen, which is a lot of hydrogen. But if you take into consideration that a heavy truck, if it gets converted to fuel cell, that truck will use something like 50 to 60 kilograms per day of hydrogen. So the whole production from NEOM, although it's a massive project and it sounds like a lot of hydrogen, you only need about 15,000 trucks around the world to be converted to fuel cell vehicles to supply from NEOM. Now, there is, and NEOM we are very much focused at least at this stage on mobility, specifically heavy trucks. What we see the opportunity, and it is very encouraging, is that Europe is far ahead of the other parts of the world in terms of the vision and the programs that they are adopting to promote the use of fuel cell vehicles. So we are very encouraged with that. And in other parts of the world, like in the United States, the state of California has adopted rules which are very friendly towards the conversion. Then Korea is very interested, and Japan is obviously interested in blue ammonia, not so much green right now. So we see significant interest and demand for the product, although it is, as you said, only four years away.

The end will come, climate change will come, and we all disappear. So what is the cost of that? When you are comparing green energy to fossil fuels, number one, fossil fuels are being subsidized. In total, governments around the world subsidize fossil fuels to the tune of more than $500 billion a year. That is a lot of money. If you take that subsidy away, the cost of fossil fuels is a lot higher. The second thing is, what is the premium for the damage that the fossil fuels do to our health and to the environment? What is the price for that? Then it is kind of a little bit the joke that everybody wants to go to heaven but nobody wants to die first. How does it work? If the board is so urgent, climate change is so urgent, that we need to get away from fossil fuels, and that is why all the governments are making all these promises of zero carbon by 2050, then in that case, take away all of the subsidies for hydrocarbons, put a carbon tax, and then it becomes very economical. So we are trying to demonstrate at a massive scale that it can be done.

Yeah, but there's something very neat. What we need is encouragement. It is not for the government to go give money to Air Products to make hydrogen; we don't need that. We are a commercial organization. What we need is the market. Which is exactly what the governments did with electric cars. I mean, the reason that you have Tesla is because there was a time when the governments were subsidizing if you were buying an electric car, that would give you $10,000 incentives. So that is where we need the government help, to encourage the conversion. But one other thing that is important here is that a truck company is not going to convert their trucks to fuel cell unless they know that somebody is making the hydrogen available.

What you were asking me before in terms of cost, some countries might decide that they don't want to go for the diamond, they settle for something less than that. For example, that is the direction that Japan is going. Japan is saying that you can use hydrocarbons; the most important element that is damaging the environment is the CO2, so capture the CO2 and then you can liberate that. And that is why we think actually that blue hydrogen in terms of quantity is going to be used significantly, because that can be used. It's just, as I always say, somebody walks into a jewelry store: you have the silver, which is gray hydrogen; you have the gold, which is blue hydrogen; and then you have the diamond, which is green hydrogen. Different people choose different bands depending on their budget and what they want to spend.

Well, obviously natural gas prices have gone up significantly in Europe. We haven't seen that significant hiking in the US. In Europe, the contracts are such that the main users of hydrogen are on site, they produce it and use it by pipeline. So it is making the price of gray hydrogen higher, making the price of gasoline higher, it is affecting everything. So to some extent, it helps with the energy transition that the hydrocarbons are not that cheap.

Well, let me make the comment in a different way. We all know the cost of production of oil in Saudi Arabia is $3.50 a barrel, but I don't see the Saudis running around selling it for $10 and saying they had a good margin. They sell it sometimes for $30, sometimes for $80, and sometimes for $200 a barrel. So in 2026, if Air Products is the only company that is making green hydrogen, and by that time a lot of people have converted for good reason and they need the green hydrogen, then the price is what the market price is going to be. They don't make things cost-plus here. We are a commercial company.

Well, the local production of hydrogen is something that obviously, if you have green electricity at a reasonable price locally, then you can do that. Right now, at our project in NEOM, I can disclose that the cost of electricity for us to produce there, because of the nature of the place and the wind and the sun, is about 2 cents per kilowatt hour. In Europe today, if the cost of power is 20 cents, I mean 10 times that, so it becomes very difficult to justify. At some point in time, are we going to see 2-cent power in Europe or in America? If that is the case, then you produce this stuff locally; there is nothing wrong with that, as long as you have a reasonable source of cost of power. And even when people talk about hydropower, which is another green source, hydropower around the world is difficult to find or get for anything less than 5, 6, 7, 10 cents per kilowatt hour, so it makes it challenging.

No, we don't see that as a threat. We are very supportive of renewable diesel. The issue with that is that when you look at the requirements in the world, there is only so much raw material that is available to make those kinds of products. But we have nothing to do with that, and we are very supportive of renewable diesel. I think those projects are a very good addition to all of the other possibilities for helping the energy transition. We are very supportive of that.