Impacts on U.S. Natural Gas Demand from Blue Hydrogen Projects

In recent years, blue hydrogen has started gaining traction as a potential pathway to lowering emissions in various industries. Using natural gas as a feedstock, new blue hydrogen projects stand to increase natural gas demand in the coming decade. This Energy Market Insight explores incremental natural gas demand associated with greenfield blue hydrogen projects in the U.S., taking advantage of data from BTU Analytics’ recently published Hydrogen Projects report.

BTU Analytics is currently tracking 27 proposed greenfield blue hydrogen projects across the Lower 48, with most projects being located along the Louisiana and Texas Gulf Coasts. This region offers favorable conditions for blue hydrogen projects, including access to relatively cheap natural gas, existing hydrogen pipelines, carbon storage sites, potential industrial demand, and port infrastructure for export.

According to announced project ISDs, blue hydrogen facilities could start contributing to incremental natural gas demand as early as this year, followed by notable increases in 2027 and 2029. These demand increases are mainly driven by projects expected to come online in Louisiana and Texas. If we assume that all projects with announced ISDs come online on time, then the U.S. could see a 2.6-Bcf/d increase in natural gas demand through 2032. However, of the projects that BTU Analytics is tracking, nine have not provided complete project timelines or ISDs, meaning that up to 2 Bcf/d of additional incremental demand could come online at some point in the future. It is worth noting that half of this demand stems from a single project in Appalachia.

One important factor to consider when estimating the timing and degree of incremental natural gas demand due to blue hydrogen facilities coming online is project status. In the U.S., most projects are still in the preliminary stages of development. Specifically, early-stage projects represent 96%, or 4.4 Bcf/d, of the total projected incremental natural gas demand. Since these projects may still be subject to delays, project downsizing, or outright cancellation, it is likely that incremental natural gas demand estimates could decrease or be pushed further back in the future.

Despite most projects being in the initial phases of development, there are several projects that are nearing or have reached FID, including:

• Air Products’ Louisiana Clean Energy Complex (Ascension Parish, LA) – This blue hydrogen and ammonia project reached FID in 2023 and is targeting an ISD in 2028. Air Products cited increased demand, particularly from Europe and Japan, and the passage of the Inflation Reduction Act (IRA) in 2022 as reasons for reaching FID.
• CF Industries, JERA, & Mitsui’s Blue Point Complex (Ascension, LA) – This blue ammonia project is expected to start construction in 2026 and begin production in 2029. Together, JERA and Mitsui intend to offtake 60% of the project’s ammonia production for either internal use or marketing within Asia. The project partners also expect the project to qualify for the IRA’s 45Q carbon sequestration tax credits.
• ExxonMobil & ADNOC’s Baytown Project (Harris County, TX) – This blue hydrogen and ammonia project is expected to reach FID in the second half of 2025. According to Air Liquide, the project is closer to FID after gaining clarity on the IRA’s finalized 45V hydrogen production tax credit in January and is now awaiting decisions around Japanese subsidies.

Together, these projects suggest that first-mover blue hydrogen projects in the U.S. benefit from industry-leader backing, foreign demand, government support, and Gulf Coast infrastructure.

Still, the fate of blue hydrogen projects and their associated natural gas demand in the United States remains uncertain. Looking forward, project development and associated natural gas demand in the U.S. will likely be impacted by how the Trump administration handles federal funding for hydrogen, domestic and international appetite for low carbon products, and the pace of company- and government-level decarbonization goals.

Keep track of global project development in the hydrogen space with FactSet’s Energy Transition coverage.

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