Saudi oil giant Aramco has announced that it is putting its plans for blue hydrogen on hold due to high costs and the lack of off-takers.

Blue hydrogen is produced through the process of steam methane reforming, which captures and stores the carbon emissions. The company has already shipped blue ammonia to Japan and South Korea. However, according to CEO Amin Nasser, the development of the blue hydrogen program has been “very expensive” and the company has not been able to secure long-term off-take agreements for the clean fuel.

“It’s a lot of capital and you need customers. So we will not sanction a project without securing an off-take agreement,” he explained.

Blue hydrogen is seen as a crucial component of the energy transition, as it has the potential to reduce carbon emissions. Aramco had plans to produce 11 million tonnes of blue ammonia by 2030, but now, the company is considering exporting liquefied natural gas (LNG) instead.

Aramco’s decision to put blue hydrogen plans on hold is significant, as it is the largest oil producer in the world. The company had planned to exploit its untapped Jafurah sour-gas field to meet rising domestic demand for gas and then convert the remaining gas into blue hydrogen for export. However, the lack of off-takers and the high costs involved have forced the company to reconsider its plans.

According to Nasser, blue hydrogen could cost three times more than the current Brent spot price. Bloomberg reported that Nasser said that blue hydrogen could cost the equivalent of around $250 a barrel of oil given the existing technology. Even the customers in Japan and South Korea are waiting for government incentives to pursue blue hydrogen, as it is costly for them without incentives.

Despite putting the blue hydrogen plans on hold, Aramco has stated that its goal of producing up to 11 million tonnes of blue ammonia by 2030 remains unchanged. The company is continuing to work with potential customers and other stakeholders around the world, making progress across the blue hydrogen value chain. This includes receiving the world’s first independent certification with SABIC for blue ammonia and blue hydrogen production, as well as delivering three shipments of blue ammonia to customers in Asia.

In conclusion, Aramco’s decision to put its blue hydrogen plans on hold is a significant setback for the development of this clean fuel technology. However, the company’s commitment to producing 11 million tonnes of blue ammonia by 2030 remains unchanged, and it is continuing to work on developing the blue hydrogen value chain. The challenges surrounding blue hydrogen are significant, including the high costs involved and the difficulty in finding off-takers. However, the potential impact of blue hydrogen on reducing carbon emissions makes it an essential component of the energy transition.