ExxonMobil pauses Texas blue hydrogen project

ExxonMobil (XOM) has paused its development of a blue hydrogen project at its refining and chemical complex in Baytown, Texas. On November 21, Reuters reported ExxonMobil’s CEO, Darren Woods, as attributing the pause to weak demand from potential customers.

The supermajor had initially unveiled its plans for the hydrogen facility in 2022. Under those plans, the project would yield up to 1bn cubic feet (28.3mn cubic metres) per day of hydrogen produced from natural gas. Over 98% of the associated carbon dioxide (CO2) resulting from the production process would be expected to be captured and stored underground.

ExxonMobil previously said that the facility would be the largest low-carbon hydrogen project in the world at its planned startup in 2027-28. Development of the project was planned in line with the company’s ambition to achieve net-zero greenhouse gas (GHG) emissions on a Scope 1 and 2 basis across its operated assets by 2050.

However, low-carbon hydrogen has struggled to take off globally, owing to a variety of challenges including high production costs in some cases and customer uncertainty. In the US, the policy environment has also been less favourable for clean hydrogen development since President Donald Trump’s return to office. Indeed, in May, the US Department of Energy (DoE) announced that it was terminating 24 awards worth a combined $3.7bn issued by the Office of Clean Energy Demonstrations (OCED). Among these was an award to ExxonMobil worth nearly $332mn for enabling the use of hydrogen instead of natural gas for the production of ethylene at Baytown.

The hydrogen production facility received a boost in September on news that Abi Dhabi National Oil Co. (ADNOC) would acquire a 35% equity stake in the project. However, at the same time, the targeted start-up date for the facility was pushed back a year to 2029.

Based on Woods’ latest comments, ExxonMobil has continued to struggle to find offtakers for the hydrogen.

"There's been a continued challenge to establish committed customers who are willing to provide contracts for offtake," Woods told Reuters in an interview. He added that storing CO2 came with a higher cost and that not enough customers were currently willing to pay that premium.

According to Woods, ExxonMobil and its partners had invested around $500mn in the project so far, with the total cost anticipated to be “several” billion dollars. H said, however, that ExxonMobil could restart the project when there is enough market demand.

"We remain convinced that one, it will be needed, and two, this will be an advantaged project to meet that need," Woods was quoted as saying.