ExxonMobil has suspended development of its blue hydrogen project in Baytown, Texas, due to a lack of sufficient contractual commitments from buyers. Designed to produce 1 billion cubic feet per day, the project was among the company’s most ambitious carbon capture and storage initiatives. The decision reflects a strategic shift in favour of conventional hydrocarbons and liquefied natural gas.
A project built on international partnerships
Baytown was part of ExxonMobil’s Low Carbon Solutions division, with planned internal use for refining and petrochemical operations in the Houston area and potential for ammonia exports. Abu Dhabi National Oil Company (ADNOC) held a planned 35% stake, marking its largest low-carbon hydrogen engagement outside the UAE. The project also relied on Australian engineering group Worley, which held the EPC contract subject to final investment decision.
Memoranda of understanding were signed with Air Liquide to structure regional demand along the Gulf Coast and with Japan’s JERA, interested in both volumes and equity participation. However, these alliances were not sufficient to secure long-term contracts required to make the multi-billion-dollar project bankable without strong public support.
High capital costs and regulatory uncertainty
The site’s development involved multi-billion-dollar investments, including $500mn already committed. The technology was designed to capture over 98% of CO₂ emissions, requiring complex compression, transport, and storage systems. The cost differential between captured blue hydrogen and conventional forms (grey hydrogen or natural gas) remains too high for industrial clients to commit without a clear public support framework.
Recent reductions to tax credits introduced under the Inflation Reduction Act have weakened the project’s economic case. The Trump administration’s partial rollback of this fiscal framework—particularly through the “One Big Beautiful Bill”—removed major support for hydrogen hubs and carbon capture projects.
Strategic shift for ExxonMobil and ADNOC repositioning
The decision strengthens ExxonMobil’s short-term free cash flows, but undermines the credibility of its low-carbon strategy among institutional investors. The project was intended as a flagship demonstrating the company’s capacity to develop infrastructure compatible with net-zero pathways.
ADNOC, meanwhile, loses a US-based low-carbon export platform to Europe and Asia. The group may reallocate focus toward domestic projects or jurisdictions offering more stable support frameworks, such as the UAE or Saudi Arabia.
Impact on supply chain and international standards
The project’s suspension directly affects engineering and technology firms involved, including Worley, and suppliers of carbon capture equipment. The delay creates uncertainty for justifying industrial investments needed to scale the sector.
Baytown’s pause also calls into question the United States’ ability to shape global standards for low-carbon hydrogen. Regulatory ambiguity around the definition of “clean hydrogen,” combined with fiscal uncertainty, is prompting potential buyers to look elsewhere, despite rising European and Asian demand.
