TOKYO (Reuters) – Japanese trading house Mitsubishi said on Friday it has reached a preliminary agreement to buy a stake in and offtake low-carbon ammonia from ExxonMobil’s hydrogen facility in Texas.

Part of its decarbonisation drive, Japan is aiming to increase usage of hydrogen and its derivative, ammonia, for co-firing at power plants, usage in the steel and automobile industries and other areas.

Mitsubishi said that ExxonMobil’s facility was expected to produce up to 1 billion cubic feet (bcf) per day of hydrogen, which would have about 98% of CO2 removed, and more than 1 million tons of low-carbon ammonia per year.

The final decision was expected next year with startup of the facility in 2029, Mitsubishi said, without disclosing the size of the stake it was willing to buy or how much ammonia to offtake.

Mitsubishi planned to partner with Japanese oil refiner Idemitsu Kosan for joint equity and ammonia offtake which was expected to be used in Japan for power generation, process heating and other industrial activities, it added.

Earlier this year, Idemitsu Kosan, Mitsubishi Corp and Swiss firm Proman agreed to study a fuel ammonia production project in Louisiana.

Idemitsu aims to build an ammonia import terminal using the existing infrastructure at the Tokuyama plant in western Japan and supply more than 1 million tons of low-carbon ammonia by 2030 to industrial buyers, including in the chemicals and steel sectors.

Mitsubishi, in turn, is considering turning a part of its liquefied petroleum gas (LPG) terminal in Namikata in western Japan into an ammonia terminal and supply low-carbon ammonia for various industrial applications.

“We are excited to be closely collaborating with ExxonMobil to develop low-carbon hydrogen and ammonia supply chains that will bridge the United States and Japan,” Masaru Saito, environmental energy group chief executive with Mitsubishi, said in the statement.

(Reporting by Katya Golubkova; Editing by Stephen Coates)