Norwegian fertilizer maker Yara and Canadian pipeline company Enbridge plan to invest up to $2.9 billion to build a low-carbon blue ammonia production plant in Texas, they said on Friday.

Blue ammonia, rather than green ammonia derived from renewable energy, refers to ammonia produced from natural gas, with the carbon dioxide (CO2) byproduct captured and stored.

The plant, which would be Yara's biggest, would be built at an Enbridge oil storage and export facility near Corpus Christi, with production to start around 2027-28.

The companies have not yet made final investment decisions.

Yara is the latest European company to announce a major investment in the United States. More than 200 low-carbon ammonia facilities are being planned globally and the U.S. Gulf Coast is becoming a major hub due to existing infrastructure, cheap natural gas and high government subsidies, said Alexander Derricott, senior analyst at consultancy CRU.

The number of projects that actually proceed depends largely on how much of a premium buyers of low-emission ammonia are willing to pay for the costlier production, Derricott said.

While the project was planned long before last year's U.S. Inflation Reduction Act (IRA), the increase in carbon storage tax credits in that law made it more attractive, Yara said.

"We've focused on the United States for two reasons and the first is low energy prices, naturally, and the other is that carbon capture is accessible at an attractive cost," Magnus Krogh Ankarstrand, president of the Yara Clean Ammonia subsidiary, told Reuters.

Yara intends to buy all of the plant's output for feedstock in its global production system, including Europe, as well as for new clean ammonia markets such as shipping fuel.

The plant will supply 1.2 million to 1.4 million tonnes of low-carbon ammonia per year.

About 95% of the CO2 generated from production would be captured and transported for nearby permanent storage.

The Oslo-listed firm last year cut much of its European production, citing high energy costs, and currently imports about 1 million tonnes of ammonia to Europe per year.

High gas prices in Europe have made the case to build in the U.S. stronger, Ankarstrand said.

"But prices in the U.S. have been attractive for a long time, and in addition there is already a tax credit in place for carbon capture in the U.S.," he said.

The IRA offers companies a tax credit of as much as $85 per tonne of captured carbon stored underground.

Many similar facilities are in development and demand for low-carbon ammonia looks strong, said Vince Paradis, Enbridge's vice president of business development.

He said the project has the advantage of using Enbridge's existing export terminal and gas pipelines.