Shell pulls plug on Norwegian blue hydrogen project citing lack of demand

Shell has put the Aukra low-carbon hydrogen project in Norway on hold due to what the company said was a lack of demand for blue hydrogen to support an associated pipeline to Germany.

The Aukra Hydrogen Hub, being developed with partners Aker Horizons and CapeOmega, was to have a capacity of 2.5 GW, producing 1,200 metric tons of hydrogen per day by 2030, avoiding 4 million metric t/y of CO2 emissions.

Shell said it did not see "enough market pull" for blue hydrogen "to sustain financial support to the Gassco-led study" for a hydrogen pipeline from Norway to Germany.

"We have also chosen to put the Aukra-project on hold for the same reasons," a spokesperson said.

According to media reports, Equinor has also cancelled plans to export blue hydrogen to Germany.

Pipeline feasibility

In 2022, the Norwegian government tasked Gassco with preparing a joint feasibility study exploring a hydrogen transport value chain from Norway to Germany.

Gassco submitted a report at the end of 2023, finding the hydrogen transport proposal was technically feasible, subject to certain conditions.

"We are aware that these conditions have been matured further among involved industry players, and we take note of the decision made last week," a Gassco spokesperson told S&P Global Commodity Insights by email.

The Shell spokesperson said the Aukra project partnership was not renewed when it expired in June.

Aker Horizons will also exit the project.

"When both Equinor and Shell shelve their plans for a new pipeline for blue hydrogen export from Norway, it means that Aker Horizons will also not continue the plan for blue hydrogen production at Aukra," Aker Horizons Asset Development Managing Director Knut Nyborg said in an email.

"Aker Horizons agrees with Equinor's assessment that the framework conditions are not in place for large investments" in a blue hydrogen export pipeline, Nyborg said. "We also share Shell's conclusions that major industrial players in Europe now seem to prefer green hydrogen over blue."

Equinor and CapeOmega did not respond to requests for comment.

In 2023, RWE and Equinor signed a memorandum of understanding to develop a hydrogen value chain between Norway and Germany, with a view to RWE using the hydrogen in its power generation fleet, although the pipeline project did not involve RWE.

"It remains to be seen which type of hydrogen (blue and green) from which countries will later be used to supply the hydrogen core network, which is also yet to be established throughout Germany," an RWE spokesperson told Commodity Insights. "The hydrogen-ready gas-fired power plants that RWE wants to build in Germany still require a political framework from the German government."

The plants could start operations in 2030 at the earliest, the spokesperson said, noting that RWE is preparing for possible participation in an auction for such plants.

Blue hydrogen doubts

The Aukra project on Norway's west coast was to use natural gas from the Ormen Lange gas field, where it is transported to the gas plant at Nyhamna.

The partners planned to produce hydrogen via steam methane reforming or autothermal reforming, capturing over 95% of associated CO2 emissions for permanent storage.

Shell said one option for the Gassco-led pipeline study, in which Equinor was also involved, was for it to connect to Nyhamna.

Blue hydrogen, while cheaper to produce than green hydrogen via renewables-powered electrolysis, has not received as much policy support in the EU, with its primary focus on renewable hydrogen to decarbonize hard to abate sectors.

EU rules and regulations governing green hydrogen are well developed, while the industry is still waiting for the bloc to finalize definitions and rules for low-carbon hydrogen production with CCS.

Platts, part of Commodity Insights, assessed the cost of producing hydrogen via alkaline electrolysis in Europe at Eur5.80/kg ($6.5/kg) on Sept. 23 (Netherlands, including capex), based on month-ahead power prices.

Proton exchange membrane electrolysis production was assessed at Eur6.07/kg, while blue hydrogen production by steam methane reforming (including carbon, CCS and capex) was Eur2.68/kg.

Aker Horizons said it had prioritized scalable green hydrogen and ammonia projects such as the 600-MW Narvik plant it is developing in northern Norway, with plans to send the product to Europe by ship.