Exxon’s Baytown ammonia halt leaves Japan’s co-firing plans without a supply anchor
A flagship blue ammonia project’s suspension exposes the gap between Tokyo’s co-firing ambitions and viable project delivery.
The ICE TTF front-month settled at €60.52/MWh on Wednesday (2026-07-29), up 4.72% on the session, while JKM Asian LNG held flat at $21.32/MMBtu.4 The divergence captures a market waiting to see whether Asian buyers can replace a supply line that just went dark.
ExxonMobil suspended investment into its $7 billion Baytown blue ammonia project in Texas in November 2025, citing weak customer demand.4 Mitsubishi Corp was a partner on the project, which was designed to produce blue ammonia for export to Japan.4 For Japanese utilities that had pinned their co-firing strategies on that Gulf Coast supply, the indefinite pause creates a gap at the source.
Japan’s Ministry of Economy, Trade and Industry ruled in December that retrofitted coal-and-ammonia co-firing units are not eligible for the emissions-trading system’s carbon price freeze, meaning they must pay market rates for allowances starting fiscal 2028.4 That adds a cost headwind to an already challenged economic case.
On delivered-cost math, low-carbon ammonia remains expensive. Wood Mackenzie estimates the delivered price in Europe at $700 to $1,100 per tonne, meaning the lowest-cost green projects are now price-competitive with conventional supply.1 But that range assumes electrolysis power costs that Japanese utilities have not locked in, and it still sits well above pre-2025 grey ammonia benchmarks.
The Middle East conflict has shifted the hydrogen and ammonia debate from climate to supply security. Before the conflict, the Strait of Hormuz carried roughly 20% of global LNG, 25% of internationally traded ammonia and 37% of urea exports, according to shipping data.1 For Japan, which imports nearly all its fossil fuels, Gulf-sourced grey ammonia and LNG carry the same chokepoint risk as crude.
Tokyo has tried to fast-track domestic supply arrangements and bilateral agreements with producers in Australia, the Middle East and North America.4 The Baytown suspension blows a hole in the American leg of that strategy.
On the demand side, the government has signalled it will cushion households and businesses from any spike in fuel and LNG costs, a policy that effectively caps retail energy prices.2 That compresses the margins utilities can earn on co-firing investments, making the already expensive ammonia economics even tighter.
Traders are watching whether Tokyo broadens its environmental impact assessment rules for new power generation. Proposed changes would lower the mandatory EIA threshold from 40 MW to 20 MW, and the initial screening threshold from the current range of 30-40 MW.2 That would slow permitting for any new gas-fired or ammonia-ready capacity, potentially reinforcing the supply constraints.
The Gastech conference scheduled for September 14-17, 2026 in Bangkok will be an early test of whether Asian buyers can secure new ammonia offtake commitments from producers outside the Gulf.3
For now, the gap between policy intent and project delivery is widening. Asian LNG spot markets are flat, waiting for a project to actually break ground.4