For institutional investors in Norway

Changing perceptions: natural resource companies are providing solutions to support net zero

Tim Gerrard

Tim Gerrard

Portfolio Manager

10 Nov 2021

Portfolio Manager Tim Gerrard explains how natural resources companies – specifically industrial gas suppliers – are supporting the transition to zero carbon by developing products and services that help consumers and other entities reduce their carbon emissions.

Key takeaways

  • While certain areas of the natural resource sector are far from being carbon neutral, they have a unique opportunity to enable carbon reduction.
  • Industrial gas companies are large emitters of carbon dioxide; however, their products and services can help other entities reduce their carbon emissions.
  • In this way, these companies can help the “old economy” function in a more sustainable fashion, while also shaping the transition to the new, low-carbon economy.

In recent years, we have seen governments, companies and consumers around the world commit to reducing their carbon footprints to help address climate change. While we automatically associate certain types of entities with the global decarbonisation effort, industrial gas companies rarely come to mind when thinking about clean energy. After all, by supplying the hydrogen required to clean up the gasoline and diesel fuels that are refined and sold for mobility, aren’t they part of the problem?

It is true that these companies are large emitters of carbon dioxide; however, many of them have begun to focus on developing products and technologies designed to help consumers and other entities minimise their own emissions. In this way, certain industrial gas companies are providing a useful – and in fact vital – service by helping the “old economy” function in a more sustainable fashion. More importantly, they are shaping the foundations of the new economy – the backbone of the which will be based on meeting the Paris Climate Accord commitments.

Established in 2015, these goals aim to reduce carbon emissions to net zero by 2050 in order to avoid a rise in global temperatures of two degrees Celsius. The near-term target has been accelerated to achieve a 50% reduction by 2030, with the goal of restricting warming to 1.5 degrees by 2050. Clean energy currently makes up 15% of total energy consumed, and forecasters say this figure needs to increase to more than 55% among signatory countries to the Paris Agreement to have a chance of managing greenhouse gas emissions to a level that achieves climate neutrality by mid-century.1

Transitioning to the new economy: a case study

So how does an industrial gas company get to participate in the transition to the new, low-carbon economy? Pennsylvania-based Air Products and Chemicals, Inc. (APD) offers a compelling example.

Global warning: the case for low carbon investing, today


In 2017, Air Products purchased gasification technology from Shell and General Electric that allowed it to produce synthesis gas – a.k.a., “syngas” – for clients, later refining the model to provide a broader range of gases and embed these businesses within the clients’ operations. Air Products could produce the gases safely and relatively cheap, and in return receive a regular monthly fee. In this way, Air Products re-engineered the base of its business, although nonetheless continued to focus on fossil fuel feedstocks.

While this transformation was underway, Air Products was working behind the scenes to build a hydrogen strategy, rolling out a global network and establishing strategic partners to position itself as one of the world’s largest producer of all types of hydrogen.

The many colours of hydrogen

The various colours assigned to different types of hydrogen refer to how it is produced. “Green” hydrogen is fairly well known as a clean energy source because it is produced in a climate-neutral manner. By contrast, “grey” hydrogen is generated from fossil fuels – a process that emits carbon dioxide.

However, another type of hydrogen has been percolating for the past five years that sits between grey and green: Like grey hydrogen, “blue hydrogen” is produced from a fossil fuel feedstock, but with the carbon captured and stored (a process called sequestration, which is one method of reducing carbon dioxide emissions). The concept of carbon capture, utilisation and storage (CCUS) is considered critical to achieving net zero by 2050, particularly as fossil fuels will continue to be required as energy for hard-to-abate industrial processes.

Green and blue hydrogen in action

Returning to our original example, two major projects undertaken by Air Products in recent years serve to illustrate how a natural resources company is helping to facilitate the transition to green and blue hydrogen, as well as incorporating CCUS to further minimise carbon emissions.

Five years ago, Air Products began working on one of the world’s largest green hydrogen projects, whereby the hydrogen used in Neom, a 10,000-square-mile business zone in Saudi Arabia, is produced by splitting hydrogen and oxygen from water using renewable energy. The process emits no carbon and produces approximately 240,000 tons per year of green hydrogen.

More recently, Air Products announced in October of this year that it is developing a $4.5 billion blue hydrogen clean energy complex in Louisiana that is expected to produce over 750 million cubic feet of blue hydrogen per day, which will be distributed to customers along the company’s dedicated pipeline and also used as feed for an ammonia plant.2 The ammonia produced will be transported globally before being converted back to hydrogen, most likely for use in heavy duty vehicles.

The use of gasifiers in the Louisiana project means that the CO2 is concentrated in particular parts of the process, which allows 95% of emissions to be recovered, compared to roughly 50% for traditional plants. The CO2 emissions will be permanently stored underground in highly porous, geologically-favourable conditions accessed onshore.

While certain areas of the natural resource sector – such as gas companies – are far from being carbon neutral, they have a unique opportunity to enable carbon reduction. Air Products is one company that has embraced this opportunity in particularly innovative ways. Through engagement with stakeholders and investors, many other resources companies are actively seeking to not only reduce their own carbon footprint, but also help other entities do the same.

As we’ve said before, the path toward net zero is exciting yet challenging. Resource companies in particular are facing increasing pressure in terms of their environmental, social and governance responsibilities as stakeholder demands rise. Those that adhere to sustainable practices are, in our view, more likely to be well positioned for the future and have greater potential to deliver attractive returns to investors.


1 UBS Equity Research, 25 March 2021, Q-Series: “Energy transition: how will $140tn of investment be allocated across the energy supply chain?”

2 “Air Products to Invest $4.5 Billion in Louisiana Blue Hydrogen Plant.” MarketWatch. October 14, 2021.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


Marketing Communication.