APD Air Products and Chemicals Inc

Recently Praxair Inc. (PX) has been awarded a contract to supply 270 million standard cubic feet per day (scfd) of hydrogen to Valero Energy Corporation. Subsequent to the deal, Praxair decided to enhance its hydrogen capacity in Texas and Louisiana in order to meet the requirement. Besides, the company will also be expanding its Mississippi River corridor hydrogen pipeline system.

Praxair will install a new hydrogen plant in Louisiana with a production capacity of 135 million scfd. The plant will be located at Valero’s St. Charles refinery and is expected to come online in the fourth quarter of 2012.

Additionally, Praxair will be expanding its Louisiana pipeline by 50 miles and connect its new plant at St. Charles with its existing plant in Geismar. The extension is expected to consummate in the second quarter of 2012. These expansions will enable Praxair to satisfy Valero’s as well as other customers’ hydrogen needs.

In Texas, a new 135 million scfd hydrogen plant at Valero’s Port Arthur refinery will be installed. The plant is expected to begin production in the first quarter of 2013.

It is evident from the present scenario that the growth prospects of industrial gas producers are very bright going forward, with demand for gases expected to increase manifold due to their wide application areas. Hydrogen for refining; oxygen for healthcare; and nitrogen and carbon dioxide for oil and gas production are being increasingly used.

The demand environment for hydrogen is very strong, particularly in emerging economies of Brazil, China, Russia and India. Praxair is expected to launch a large hydrogen plant in India by 2011 or, latest by 2012. Project backlog for the company remains strong at 40 large projects with capital value of $2.5 billion.

Praxair is one of the leading companies engaged in the production and distribution of industrial gases, primarily catering to demands in North America, South America, Europe, and Asia. Prime competitors of the company include Air Products & Chemicals Inc. (APD) and L'Air Liquide SA.

We currently maintain a Neutral recommendation on the stock.

 
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