- Shell cancelled its blue hydrogen project in Norway due to high costs and a lack of demand, following Equinor’s similar move.
- The future of hydrogen faces challenges* as high infrastructure costs and weak market demand hinder the development of blue hydrogen projects in Europe.
Shell will no longer pursue its blue hydrogen project in Aukra, Norway, citing high costs and insufficient demand. The company planned to produce 1,200 tonnes of blue hydrogen daily by 2030, using natural gas and carbon capture and storage (CCS) to cut CO2 emissions. Despite its potential, Shell deemed the project economically unviable.
Blue hydrogen is considered a bridge toward cleaner energy, using natural gas and CCS technology to reduce emissions. However, the high cost of CCS infrastructure and operation makes it less competitive than traditional or green hydrogen, which comes from renewable sources. Shell worked with Aker Horizons and CapeOmega on the Aukra project but decided not to renew this partnership.
The project formed part of Shell’s strategy to decarbonise heavy industries in Norway and Germany. However, despite plans for hydrogen adoption across Europe, the demand for blue hydrogen remains too low to justify further investment.
Shell’s decision follows Equinor’s recent move to cancel its blue hydrogen project, driven by the same challenges. These consecutive withdrawals cast doubt on the future of blue hydrogen and its role in Europe’s energy transition.
The European Union aims to reduce greenhouse gas emissions by 2050, with hydrogen playing a pivotal role. However, producing clean hydrogen, whether blue or green, still involves high costs. Blue hydrogen projects require expensive CCS infrastructure, making them less competitive with other energy sources. Although CCS technology works, its high costs and complex infrastructure requirements hinder the scalability of these projects.
The limited development of a hydrogen market complicates the economics of these projects. Cross-border hydrogen supply chains remain underdeveloped, making it difficult for companies like Shell and Equinor to justify significant investments. Despite hydrogen’s potential to decarbonise industries like steel, chemicals, and heavy transport, the necessary infrastructure and demand have yet to materialise.
In Norway, where the government has supported various hydrogen initiatives, Shell and Equinor’s withdrawal represents a significant setback. The moves raise concerns about the country’s ambition to lead in hydrogen technology. Europe’s future hydrogen development depends on whether governments and industries can create a favourable regulatory and economic environment.
Public incentives such as subsidies or carbon credits could reduce financial obstacles for hydrogen projects. However, without strong demand, companies may withdraw from these costly, high-risk ventures. Despite its promise, the hydrogen industry faces significant challenges in scaling up from experimental projects to widespread use.
Shell and Equinor’s withdrawals underline the difficulties within the hydrogen sector. While hydrogen holds the potential to help Europe meet its climate goals, financial and logistical barriers remain significant.