Council on Energy, Environment and Water Integrated | International | Independent
Natural Gas Pyrolysis
A Bridge to a Green Hydrogen Economy
23 January, 2023
Aashwij Prabhu, Hemant Mallya and Sabarish Elango

Suggested Citation: Prabhu, Aashwij, Hemant Mallya, and Sabarish Elango. 2023. Natural Gas Pyrolysis: A Bridge to a Green Hydrogen Economy. New Delhi: Council on Energy, Environment and Water.


This issue brief presents the case for natural gas pyrolysis as an alternative method of hydrogen production. Incumbent ‘grey’ hydrogen production by steam methane reformation (SMR) inherently produces process CO₂ emissions, as the carbon in natural gas is converted to CO₂. Pyrolysis of natural gas produces ‘turquoise’ hydrogen and solid carbon particles, with CO₂ emissions arising only from the heat generation. Thus, the pyrolysis process produces similarly priced hydrogen with significantly lower emissions than SMR. Apart from prices and emission comparisons, the study explores potential use cases of the carbon by-product, which can offset imports of certain commodities used in other industries. The study makes recommendations on how to scale up pyrolysis in India as a short- to medium-term solution until green hydrogen becomes more affordable.

Key Highlights

  • Turquoise hydrogen has an 84 per cent lower CO₂ footprint than grey hydrogen. Even the combined emissions from pyrolysis and downstream combustion of the carbon by-product is lower than SMR on an energy basis.
  • Turquoise hydrogen, priced as low as 1.6 USD/kg, is much cheaper than green hydrogen (from water electrolysis) and comparable to grey hydrogen. Offsets from the sale of the carbon by-product allows turquoise hydrogen to be priced competitively.
  • Pyrolysis plants can be deployed at strategic locations near liquefied natural gas terminals and gas processing sites to seamlessly blend hydrogen with natural gas in the pipeline network.
  • The carbon by-product has potential uses in manufacturing products like steel, aluminium, tires and dyes. Significant quantities of carbon black and coking coal imports can be avoided if the pyrolysis carbon is used in these industries. Some pyrolysis processes are tuned to produce higher-value by products like graphite, which can be used in battery manufacturing.
  • Pyrolysis can be scaled-up in India to build demand for hydrogen in industries and other end-consumers. These consumers can then easily switch over to green hydrogen once it becomes cheaper and more accessible.


Hemant Mallya
“Natural gas pyrolysis should be evaluated as a strategic option to provide both cheap hydrogen and carbon morphologies with new age applications.”

Executive Summary

India currently consumes approximately six million tonnes (Mt) of hydrogen per year (Lee 2021). Hydrogen production presently relies on steam methane reformation (SMR) of natural gas, a process whose main by-product is CO2. With the National Green Hydrogen Mission (NGHM), India intends to shift away from this ‘grey’ hydrogen while reducing the economy’s dependency on fossil fuels by introducing green hydrogen. There is also the intent to incrementally blend green hydrogen with natural gas. These initiatives are expected to increase the demand for hydrogen (Ministry of Petroleum & Natural Gas [MoPNG] 2021a).

A. Green hydrogen is currently expensive

Green hydrogen is produced by splitting water into hydrogen and oxygen using renewable electricity. However, the development of the green hydrogen ecosystem is expected to take time, possibly over a decade, due to its high cost, the need for large-scale GW-level deployment of renewable power sources, and massive capital investments. While grey hydrogen currently costs approximately 1.6–1.7 USD/kg H2 (for a natural gas price of 8 USD/MMBtu), green hydrogen is estimated to cost 4–5 USD/kg H2 (Biswas, Yadav and Baskar 2020). However, the development of the hydrogen ecosystem need not rely only on green hydrogen. Hydrogen production through pyrolysis of natural gas can be considered a transition pathway to accelerate the transition to a green hydrogen–based economy. Currently, hydrogen produced through natural pyrolysis is significantly cheaper than green hydrogen and produces 85 per cent lower emissions from the production process than SMR

B. Turquoise hydrogen can play a bridge role

Natural gas pyrolysis entails the decomposition of the methane in the gas into hydrogen and solid carbon at high temperatures. The solid carbon by-product can be sequestered more easily than the gaseous CO2 from SMR. The solid carbon can potentially be used as a substitute for carbon-based inputs in other industrial processes. Further, newer technology modifications to the pyrolysis process generate new-age materials such as carbon nanotubes and graphite as by-products, which are essential for the green energy transition, due to their use in various applications such as batteries and fuel cells.

C. Turquoise hydrogen from pyrolysis can be produced at favourable prices

To understand the economics of natural gas pyrolysis in India, we estimated the cost of hydrogen produced through three natural gas pyrolysis pathways – thermal pyrolysis, thermo-catalytic pyrolysis, and plasma pyrolysis. As shown in Figure ES 1, the thermal pyrolysis process has the lowest levelised cost of hydrogen (LCOH) among the three, at 2.8 USD/kg H2, without any value attributed to the by-product. If the by-product carbon can be sold at 0.4 USD/kg, then the LCOH reduces to 1.6 USD/kg H2. The thermo-catalytic process has a slightly higher LCOH, but it affords better control of the morphology of the carbon by-product. While our cost comparison considers the price of carbon black, by-products with better morphologies (such as graphite) can be obtained through thermo-catalytic pyrolysis. Higher quality by-products can fetch a significantly higher price than carbon black, thus potentially resulting in a lower LCOH than that of thermal pyrolysis. The plasma pyrolysis process is the most expensive among the three technologies, but since it requires only electricity as an energy source (as opposed to using natural gas for heating as for the thermal and thermo-catalytic processes), the process emissions can be negated using renewable power.

Thermal pyrolysis provides the lowest LCOH among all the available technologies

Thermal pyrolysis for hydrogen

Source: Authors’ analysis
Note 1: The price range corresponds to carbon by-product selling price of 0.40 USD/kg to 0 USD/kg
Note 2: Natural gas price assumed to be 8 USD/MMBtu
Note 3: The LCOH from plasma pyrolysis assumed the use of a domestically sourced electron accelerator. If imported, the LCOH increases by 4–5 USD/kg

A comparison of the LCOH for the different processes is shown in Figure ES 2. Green hydrogen produced through electrolysis is expected to become cost-competitive with turquoise hydrogen only after 2030. Grey hydrogen from SMR has an LCOH of approximately 1.6–1.7 USD/kg H2 but produces much higher emissions. Further, turquoise hydrogen could be made even cheaper if higher-value carbon by-products are produced. Hydrogen produced using SMR with carbon capture and sequestration (CCS), i.e., blue hydrogen (which is more comparable from an emissions standpoint), would have an LCOH of almost 3 USD/kg H2 (interpolated from Biswas, Yadav, and Baskar 2020). However, there are currently no CCS facilities operational in India, and it will take several years for the infrastructure to be built.

Hydrogen from natural gas pyrolysis is cheaper than hydrogen from electrolysis and comparable with SMR with CCS

Hydrogen production from natural gas pyrolysis

Source: Authors’ analysis; Biswas, Yadav, and Baskar (2020)
Note 1: The range of green hydrogen costs depends on the choice of an alkaline (cheaper) or polymer electrolyte membrane (costlier) electrolyser.
Note 2: The SMR and pyrolysis LCOH are shown for a gas price of 8 USD/MMBtu. The upper and lower bounds for SMR depend on operational characteristics and capacity utilisation. The upper and lower bounds for pyrolysis depend on the selling price of the carbon by-product.

D. Pyrolysis has its own challenges

Utilising natural gas to produce hydrogen brings its own set of challenges in terms of price and natural gas and methane emissions from natural gas systems. However, these challenges can be mitigated to a large extent. Recently, LNG spot market prices hit a record high and have been hovering at over 30 USD/MMBtu, calling into question the economic feasibility of natural gas pyrolysis. Our analysis shows that even when the average crude oil price stood at 90 USD per barrel (Bbl) in the fourth quarter of 2021–22 (Trading Economics 2022), the landed price of LNG in India was approximately 14.2 USD/MMBtu (spot + long-term contract purchases) (Department of Commerce 2022), which will yield turquoise LCOH competitive with green hydrogen today. Besides, fossil fuel prices are cyclical – the average gas price for the last decade was only 8.3 USD/MMBtu (MoPNG 2022, MoPNG 2016). Hence, long-term LNG contracts should largely mitigate fluctuations in natural gas prices.

Natural gas systems release methane emissions that are over 29.8 times more potent than carbon dioxide (ERCE 2021). There is a concern that pyrolysis will lead to increased consumption of natural gas and thus lead to an increase in methane emissions. However, there are known technologies and practices that can be utilised to mitigate methane emissions. Initiatives such as the Oil and Gas Methane Partnership, country-level pledges such as the Global Methane Pledge, and natural gas supplier certifications for low-methane supplies should alleviate the issue of methane emissions. Further, there is a trade-off between the land and water impacts (and consequently, ecological impact) of producing green hydrogen (due to the water needed for electrolysis and land needed for RE) which needs to be weighed against the impact of methane emissions from natural gas systems

E. Recommendations to scale-up pyrolysis as a short-to-medium-term solution

Regardless of the challenges, natural gas pyrolysis is a promising solution due to its price and emissions advantages compared to green and grey hydrogen respectively. Hence, we make the following recommendations for its consideration as a short-to-medium-term bridging solution to develop the hydrogen economy (until green hydrogen is commercialised).

  1. Scale up the hydrogen economy by accommodating turquoise hydrogen in purchase obligations until affordable green hydrogen is available at scale. Limited pyrolysis capacity can still supplement green hydrogen supply after the latter is commercialised, especially during off-peak hours for renewable energy.
  2. Carry out a pilot study to estimate the feasibility of hydrogen production through natural gas pyrolysis at a suitable location with natural gas availability and potential offtakers of hydrogen and carbon. Thermal pyrolysis is the least expensive option in our analysis; thermo-catalytic and plasma pyrolysis could become more affordable as the technology matures and is deployed at scale. Further, higher value carbon by-products can be produced with thermo-catalytic pyrolysis. Therefore, all three technologies can be piloted to identify the best option for India.
  3. Blend turquoise hydrogen with natural gas to incrementally decarbonise the natural gas demand base. Deploying pyrolysis plants (of 95 ktpa H2 capacity each) near seven existing pipeline injection points (LNG terminals and gas processing sites) could offer the opportunity to seamlessly blend 15 per cent of hydrogen by volume. This would involve a total capital investment of USD 318 million for a plant at each of the 7 major aforementioned natural gas injection points.
  4. Convert existing pyrolysis plants to use natural gas. Pyrolysis technology is currently used to produce carbon black – a material used in the manufacture of rubber products (mainly tyres, dyes, pigments, etc.). However, existing pyrolysis plants primarily use low-value residual oils to produce carbon (Birla Carbon n.d., PCBL 2021). These plants could possibly switch to natural gas without significant investment.
  5. Leverage new and existing markets for carbon by-products to offset the price of hydrogen. Carbon from pyrolysis can be used to supplement the domestic supply of carbon black. It could potentially substitute coke in blast furnaces for producing steel. If all the carbon from the seven aforementioned pyrolysis plants were used for steelmaking, more than USD 500 million worth of coking coal imports could be avoided, as carbon from pyrolysis can be sold at a lower cost than blast furnace coke. The carbon can also be used to produce carbon electrodes for the manufacture of aluminium. Another potential pathway is the production of activated carbon from carbon black. Carbon black can be used in the manufacture of sodium-ion batteries, while graphite can be used in lithium-ion batteries.
Hemant Mallya

Sign up for the latest on our pioneering research

Explore Related Publications