HOUSTON, Sept 4 (Reuters) - Abu Dhabi National Oil

Company (ADNOC) will acquire a 35% equity stake in Exxon Mobil

Corp's ( XOM ) proposed low-carbon hydrogen project in Texas,

with the companies announcing a one-year start-up delay until

2029.

ADNOC's investment shows a sign of confidence in a

multi-billion dollar project that Exxon has threatened to cancel

if the U.S. government restricts tax credits for it. A final

investment decision has been pushed into 2025, from 2024.

Exxon and ADNOC declined to disclose the value of the

transaction.

"This is a very significant investment and the partners it

is attracting give a sense for the momentum that's building

around this project," Exxon President of Low Carbon Solutions

Dan Ammann told Reuters.

TAX INCENTIVES

Exxon in 2022 disclosed plans to build the world's largest

low-carbon hydrogen facility at its refining site at Baytown,

Texas. Hydrogen is a fuel that produces water when burnt.

The project would be powered by natural gas, with associated

CO2 captured and buried underground. It was announced on the

back of clean energy tax incentives proposed by the

administration of U.S. President Joe Biden.

But the government limited incentives for natural gas-run

facilities. Exxon CEO Darren Woods earlier this year said the

project could be canceled without similar tax credits offered to

hydrogen facilities powered by renewable fuels.

AMMONIA BOOST

The project's estimated production has been revised since

its initial announcement. It was initially set to produce 1

million tons of hydrogen annually.

Now, the goal is to produce 900,000 tons of low-carbon

hydrogen and over 1 million tons of low-carbon ammonia, a

well-established industrial product commonly used as fertilizer.

Ammonia, which has three atoms of hydrogen in its

composition, is also used as a carrier for hydrogen, allowing it

to be exported by ship in a liquid form.

Exxon earlier this year signed an agreement with JERA,

Japan's top power generator, to explore selling about 500,000

tonnes annually of low-carbon ammonia.

"The timing (for the hydrogen project) depends on supply,

demand and supporting regulation coming together in sync," said

Ammann.