European majors and IOCs are refocusing their hydrogen strategies around projects that have already reached FID amid a wider pivot from low-carbon projects towards traditional fossil fuel production.

BP, Equinor, TotalEnergies and Shell are all reducing spending on low-carbon molecules in their capex plans for 2025, citing difficulties in finding customers for hydrogen. Those projects the firms are progressing tend be those focusing on decarbonising their own operations—most frequently refineries—rather than those requiring third-party offtake.

BP

BP announced on its Capital Markets Day in February that it is planning to cut investments in its transition business to $1.5–2b/yr from more than $7.5b/yr previously. As part of this recent strategy reset, BP will focus on a handful of hydrogen and CCS projects that either decarbonise its refinery operations or establish CCS and hydrogen hubs.

BP says it will now allocate $800m/yr through 2027 on 5–7 projects this decade—down from a global pool of 30 previously.

“We are now in delivery mode—not origination,” said William Lin, executive vice-president for gas and low-carbon energy at BP.

The firm has prioritised projects with a clear and supportive regulatory framework, agreed offtake and the ability to scale up in a capital-light manner through financing and partnerships. The bulk of this funding will be focused on the four projects that took FID in 2024:

• A 50/50 joint venture with Spanish utility Iberdrola to produce hydrogen from a 25MW electrolyser that will help decarbonise BP's refinery operations in Castellon, Spain from 2026.
• A project to produce hydrogen from a 100MW electrolyser to decarbonise BP’s Lingen refinery in Germany from 2027. This has funding support under the European Important Projects of Common European interest programme.
• A joint venture with Aberdeen City Council to establish a 300t/yr of green hydrogen production, storage and distribution facility in Scotland from 2026.
• The Net Zero Teesside Power (NZT Power) project in Teesside in the UK. NZT Power will be a gas-fired power station equipped with carbon capture. CO₂ will be transported and stored as part of the Northern Endurance Partnership (NEP) CCS network that BP is also a part of, and which has also taken FID.

The H2Teesside blue hydrogen project, which is part of the same cluster as NZT Power but has not yet taken FID, has also confirmed funding allocation from BP as part of the $800m/yr headline figure.

The Hyport Duqm green hydrogen project in Oman, in which BP acquired a 40% stake last year, is also a likely candidate for progression, although the company has not confirmed this. The project is in the pre-FEED phase.

Equinor

Equinor announced during its Q4 results presentation that it will now invest $5b in its renewables and low-carbon business between 2025 and 2027, down from the previously planned $10b. The firm did not say which projects in its hydrogen origination pipeline would be abandoned but did highlight its hydrogen division as a problem area.

“Particularly on hydrogen, we see that customers are coming later to the table to commit to long-term contracts,” said CEO Anders Opedal.

Equinor is a partner with BP in NZT Power and the Northern Endurance Partnership (NEP) CCS project, which has taken FID and is one of only two projects certain to absorb some of the $5b capital outlined. The other is the Northern Lights CO₂ transport and storage project, in which Equinor is a major investor alongside Shell and TotalEnergies, and which was officially opened late last year.

“We are now in delivery mode—not origination” Lin, BP

The firm has not yet taken FID on any hydrogen projects, having delayed a decision on its 600MW H2H Saltend blue hydrogen plant in the UK—its most advanced hydrogen project—until around 2027.

It has been developing three further hydrogen projects in Europe: H2M Eemshaven in the Netherlands, H2GE Rostock in Germany and H2BE Ghent in Belgium. It has not outlined specific FID dates for these projects beyond aiming for production startup “by 2030”.

In December, Equinor said it still plans to advance the production of low-carbon hydrogen in Northwest Europe and called on parties to express their interest in low-carbon hydrogen from H2M Eemshaven, although this was before it announced the budget cut.

The firm in 2023 left the Barents Blue project, which planned to make ammonia from gas, capturing CO₂ and storing it under the Barents Sea.

TotalEnergies

TotalEnergies will now invest $500m in its low-carbon molecules division in 2025, down from $900m in 2024.

Despite the budget cut, the firm maintains its ambition to decarbonise the hydrogen consumed in its European refineries by 2030, and in February signed agreement with industrial gas supplier Air Liquide to develop two projects in the Netherlands for the production and delivery of 45,000t/yr of green hydrogen.

The two firms will build and operate a 250MW electrolyser near the Zeeland refinery from 2029 and have agreed a tolling deal whereby TotalEnergies will offtake 15,000t/yr green hydrogen from Air Liquide’s 200MW electrolyser in Maasvlakte from 2027.

TotalEnergies has also recently outlined a further project with Air Liquide to produce green hydrogen at the La Mede biorefinery in southeastern France. The firm has an existing project with utility Engie to produce 2,000t/yr of green hydrogen at the site.

TotalEnergies in October 2024 announced plans to explore a green ammonia project in Morocco's Guelmim-Oued Noun region.

Unlike other majors, TotalEnergies has made sustainable aviation fuel (SAF) a core part of its transition strategy, setting itself a target of 1.5mt/yr of SAF production by 2030.

But CEO Patrick Pouyanne believes the firm can meet the target using SAF made from biofuels, rather than the more expensive e-SAF method, which uses hydrogen. E-SAF projects are not advancing fast enough because airlines still “want the cheapest option”, Pouyanne said on the firm’s Q4 results.

Shell

Shell’s Renewables and Energy Solutions business, which houses its hydrogen projects, recorded a loss of nearly $500m in 2024. While this is to be expected from a nascent division, Shell is on a drive to reduce costs in this part of its business, in particular looking to focus its capital more tightly on hydrogen projects with better prospects.

5–7 – Number of hydrogen and CCS projects BP will now focus on

“What we are doing is trying to high grade our portfolio… walking away early on from [some] hydrogen projects,” said Shell CFO Sinead Gorman on the firm’s Q4 results call.

In September last year, Shell cancelled its plans for a major blue hydrogen project in Norway—dubbed the Aukra Hydrogen Hub. It also cancelled plans for a 10MW green hydrogen pilot at the Port of Acu in Brazil. Both projects were still at a relatively early stage, with no binding contracts signed.

The firm will instead focus on the two projects on which it has taken FID. The Holland Hydrogen 1 project in the Port of Rotterdam will see a 200MW electrolyser produce green hydrogen to supply Shell’s nearby refinery operations. FID was taken in 2022. Meanwhile, the Refhyne II project will see a 100MW proton-exchange membrane electrolyser in Germany’s Rhineland produce green hydrogen to replace grey hydrogen used in refinery operations.

At Shell’s Capital Markets Day 2023, the company set an internal rate of return hurdle rate of 12–14% for its Renewables & Energy Solutions business.

The firm is likely to provide further information on its hydrogen strategy for the upcoming year at its capital markets day in March.

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Author: Tom Young