Industrial gas firms get lift from hydrogen

By Caroline Jacobs

FRANKFURT (Reuters) - Industrial gases companies have singled out the smallest, yet most abundant, chemical element in the universe as their biggest growth driver.

It is seen as an alternative to greenhouse-gas-producing fuels, thanks to its clean-burning and powerful characteristics, it helps NASA space shuttles lift off, and could one day fuel the humble car.

For now, hydrogen demand mainly stems from oil refiners who use it to meet environmental laws reducing sulphur in fuel. Many outsource hydrogen production to industrial gases companies like Air Products (APD.N: Quote, Profile, Research, Stock Buzz), Praxair (PX.N: Quote, Profile, Research, Stock Buzz) and Air Liquide AIR.PA.

"Selling hydrogen into refineries is one of the best long-term secular growth stories in the chemical sector," Laurence Alexander, analyst at Jefferies & Company said.

The declining average quality of crude oil -- dirtier and heavier, with more sulphur contamination -- also means refiners need more hydrogen for processing to meet clean fuel standards.

The world's number one hydrogen supplier, Air Products has a 40-45 percent market share, while domestic U.S. peer Praxair and France's Air Liquide each have about 20 percent. The new combination of BOC BOC.L of Britain and Germany's Linde (LING.DE: Quote, Profile, Research, Stock Buzz) would have a 17 percent market share in hydrogen.

STRATEGIC BUSINESS

All have pointed to hydrogen as their chief source for growth, identifying the gas as strategic for their business.  Continued...