TOKYO, March 25 (Reuters) - JERA, Japan's top power

generator, said on Monday it has agreed with Exxon Mobil ( XOM )

to jointly explore the development of a low-carbon hydrogen and

ammonia production project in the United States.

Exxon is developing what is expected to be the world's

largest low-carbon hydrogen production plant at its Baytown

Complex east of Houston in Texas, with an annual output capacity

of about 900,000 metric tons of hydrogen and more than 1 million

tons of ammonia. The project aims to start production in 2028.

Under the agreement, JERA may invest in the project and buy

about 500,000 tons annually of low-carbon ammonia from the

project for demand in Japan, it said in a statement.

Ammonia is seen as an effective future energy source. It

does not emit carbon dioxide when burned, though its production

releases emissions if it is made with fossil fuel.

"Cooperation among leading companies is essential to

establish supply chains for ammonia, hydrogen, and other

products that are key to zero-emission thermal power," said

Steven Winn, JERA's senior managing executive officer.

Dan Ammann, president of ExxonMobil Low Carbon Solutions,

said in the same statement: "Building world-scale projects for

new markets requires supply, demand and supporting regulation to

all come together in sync."

Japan, the world's fifth-biggest CO2 emitter, has been

promoting ammonia as an alternative fuel to help reduce CO2

emissions at coal-fired power plants and other factories.

It aims to grow its demand for ammonia as a fuel to 3

million tons by 2030 as it pushes to achieve its goal of

becoming carbon neutral by 2050.

JERA is set to start a trial this week of co-firing 20% of

ammonia with coal at its Hekinan thermal power station in

central Japan, in what it said will be the world's first trial

using a large amount of the gas at a major commercial plant.

Environmentalists have, however, criticized the move as a

way to extend the life of dirty coal-fired power generation.