Exxon Freezes Plans for Major Hydrogen Plant Amid Weak Customer Demand

By Sheila Dang

HOUSTON, Nov 21 (Reuters) – Exxon Mobil (XOM.N) has paused plans to build what would be one of the world’s largest hydrogen production facilities due to weak customer demand, CEO Darren Woods told Reuters in an interview on Friday.

The suspension of the project, which had already experienced delays, reflects a wider slowdown in efforts by traditional oil and gas firms to transition to cleaner energy sources as many of the initiatives struggle to turn a profit.

U.S. President Donald Trump had also yanked funding for green initiatives to focus on fossil fuels.

Oil major Exxon announced plans in 2022 to build the plant at its refining and chemical complex in Baytown, Texas, with a goal of producing 1 billion cubic feet per day of so-called blue hydrogen, a clean fuel that produces water when burned.

Potential customers have stayed on the sidelines due to the higher cost of using hydrogen, Woods said, adding that an industrial slowdown and economic uncertainty in Europe have further crimped demand.

“There’s been a continued challenge to establish committed customers who are willing to provide contracts for off-take,” Woods said.

Hydrogen can be produced from natural gas and Exxon planned to capture the carbon dioxide generated from the process and store it underground. That carries a higher cost than hydrogen produced without containing the carbon dioxide, and not enough customers are currently willing to pay the premium, Woods said.

Exxon and its partners on the facility, including Abu Dhabi National Oil Company, have invested about $500 million so far into the project that is estimated to cost several billion dollars, he said, declining to give a precise figure.

Exxon can restart the project when there is enough market demand, Woods added, though it is unclear when that could be.

“We remain convinced that one, it will be needed, and two, this will be an advantaged project to meet that need,” Woods said.

Reporting by Sheila Dang in Houston; Editing by Nathan Crooks and Nia Williams

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