Exxon halts giant hydrogen production project as demand remains weak

Many countries around the world, particularly EU member states, have ambitious plans to develop a hydrogen economy. However, the sector is not developing as smoothly as some had expected in the past. In recent months, a large number of hydrogen projects have been cancelled, particularly planned electrolyzers for producing green hydrogen and other technologies for producing low-carbon hydrogen. One example is a major project by Exxon Mobil, which has decided to halt its development. The reason is weak demand from potential buyers.

Hydrogen technologies are expected to help decarbonize the energy sector, industry and transport in the future—not only in Europe. However, replacing fossil fuels will require significant volumes of renewable or low-emissions hydrogen. While electrolyzer projects attract the most attention, other options are available too.

One such project is Exxon Mobil’s plan to build one of the world’s largest hydrogen plants. However, it was not to produce hydrogen through water electrolysis, but by separating hydrogen from natural gas. This is currently the most widespread method of producing hydrogen, owing to its cost-effectiveness.

Exxon’s project, however, included capturing the carbon dioxide released and storing it underground. Hydrogen produced using this method is commonly known as blue hydrogen. This production method entails additional costs that customers are unwilling to bear, according to the company’s chief executive, Darren Woods.

"It’s still a significant challenge to secure committed customers willing to enter into offtake agreements," Woods said.

According to Reuters, the company and its partners have already invested around $500 million in the project. Woods said the total cost would run into the billions, but declined to give an exact figure. Exxon could restart the project in the future, he said, although it is entirely unclear when that might happen.

Developers are halting other hydrogen projects too

Projects involving the production or use of green or other types of hydrogen are being halted in regions beyond the United States, where Donald Trump’s election brought a major shift in climate policy. Hydrogen projects are also facing difficulties in the EU, where almost half of the successful projects from the EU’s second hydrogen auction were withdrawn.

The situation is similar in South Korea, which this year cancelled an auction to support electricity generation from clean hydrogen and ammonia. India’s ambitions for green hydrogen are also running up against insufficient demand.