Exxon Mobil has paused its plans to build one of the world’s largest hydrogen production facilities, with Chief Executive Darren Woods confirming that weak customer demand has stalled progress on the multibillion-dollar venture.
The company had been working toward developing a significant blue hydrogen plant at its Baytown, Texas, refining and chemical complex, but Woods said the market conditions are not yet strong enough to justify moving ahead.
He acknowledged that the project had already faced delays and that broader industry challenges are affecting the energy transition efforts of major oil and gas companies.
Slowing Momentum for Cleaner Energy Projects
Woods explained that traditional energy firms are struggling to turn profits from new low-carbon initiatives, and the hydrogen project is no exception.
He said deteriorating economic conditions in Europe, coupled with an industrial slowdown, have limited demand from potential customers.
“There’s been a continued challenge to establish committed customers who are willing to provide contracts for off-take,” Woods said.
The company had originally announced the project in 2022 with the expectation that it would produce 1 billion cubic feet per day of blue hydrogen, which emits water when burned and has lower carbon intensity than conventional fuels.
However, hydrogen produced with carbon capture is more expensive than hydrogen produced without the same environmental controls, and buyers have not been willing to absorb the additional cost.
Impact of Policy Shifts and Economic Uncertainty
Woods noted that hydrogen customers remain cautious.
The sector has also faced policy swings, including U.S. President Donald Trump withdrawing funding for green energy initiatives in favor of fossil fuel priorities.
That move added more uncertainty for companies investing in transition technologies, especially those that require significant upfront capital.
The delay in the hydrogen project reflects the broader hesitation among buyers and investors evaluating cleaner energy solutions during periods of global economic strain.
Investment to Date and Prospects for Restarting Work
Exxon and its partners, including Abu Dhabi National Oil Company, have already invested about $500 million in the effort.
Woods declined to give a precise total cost estimate but confirmed that the full project would require several billion dollars to complete.
Hydrogen for the facility was intended to be produced from natural gas, with carbon dioxide captured and stored underground.
For Exxon, that created a potential long-term model for combining traditional fuel sources with carbon-management solutions, but the current economics have not aligned with expectations.
Woods said the company is prepared to restart the project when market demand materially improves, although no timeline has been set.
“We remain convinced that one, it will be needed, and two, this will be an advantaged project to meet that need,” he said.
The pause suggests that while Exxon still sees hydrogen as a viable future energy source, the shift toward large-scale adoption will take longer than anticipated.
