Hydrogen demand is expected to continue to increase as IMO regulations, that limit the sulphur content in marine fuels, apply on January 1, 2020.

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Currently, petroleum refineries use hydrogen in downstream units to meet fuel specifications for producing distillate, jet fuel, and other petroleum products. Refineries typically meet incremental hydrogen demand by either producing it on-site through steam reforming of natural gas or by buying it from merchant suppliers, EIA informs.

As demand for hydrogen rises, US Gulf Coast refiners are consuming more hydrogen from merchant suppliers, rather from their own production. Between 2012 and 2017, consumption of hydrogen from merchant suppliers increased from about 1,750 million cubic feet per day to 2,200 MMcf/d, a 25% increase.

During the same period, on-site production of hydrogen from natural gas decreased from about 475 MMcf/d to 415 MMcf/d, a 13% reduction. Merchant suppliers accounted for over 85% of hydrogen consumed by refineries in 2017.

The increased use of purchased hydrogen by US Gulf Coast refineries is considered a response to limitations on the amount of hydrogen that can be produced on-site, in comparison to the supply of hydrogen provided by merchant suppliers. Now, a large portion of hydrogen used by US Gulf Coast refineries is supplied by a 600-mile, one billion cubic foot per day network of hydrogen pipelines stretching from Lake Charles, Louisiana, to Houston, Texas.

From 2012 until 2017, US Gulf Coast petroleum refineries grew hydrocracking capacity by 50%, with a similar increase in distillate production. In the meantime, steam methane reformer (SMR) units capacity reported a fall of 19%, making refiners buy more hydrogen from merchant suppliers.

As for refineries located in the Midwest US, they have increased hydrocracking capacity by 13% from 2012 to 2017. In contrast with US Gulf Coast refiners, Midwest refiners do not rely as much on merchant suppliers, due to a lack of dedicated hydrogen pipelines. In fact, some Midwestern refiners use more Canadian, sour crude oil, which requires more hydrogen to process.

Finally, the overall utilization of US Gulf Coast refinery SMR units has been between 41% and 48%, while in the Midwest it has grown from 60% in 2012 to 66% in 2017.