Essar said its joint venture should eventually be able to meet 80pc of the government’s 5GW target.
Stein Ivar Bye, Essar's UK chief executive, said: "Hydrogen production is integral to Stanlow’s strategy and will set it on a journey to be the UK’s first net zero emission refinery with the ambition to avoid emissions of over 2m tonnes of carbon dioxide to the atmosphere per year -the equivalent of taking nearly a million cars off the road."
He added: “With the support from government to establish the appropriate business incentives, together with Progressive Energy, we are committed to undertaking the development and the financing of its construction."
Justin Madders, MP for Ellesmere Port and Neston, said: “Hydrogen is going to play an incredibly important part in the future of our economy and I hope that Ellesmere Port will play a central role in the green jobs revolution we need to meet the challenge of climate change.
"Essar has had a presence in the area for the last decade and the signing of this agreement with Progressive Energy means that it will be here for many decades to come.”