ExxonMobil has dropped its strongest hint to date that its Baytown blue hydrogen project in Texas is unlikely to be granted FID in the near term.

The world’s largest project of its type is likely to be shelved for the time being, but not terminated, judging by comments by the US oil major’s CEO, Darren Woods, at the Energy Intelligence Forum 2025 in London in mid-October.

Woods’ rationale for pausing Baytown is straightforward: He does not see enough demand for the product at current prices.

“We have concerns about whether to go forward in the context of whether a market will really develop,” he told the forum. “Despite the rhetoric, there are very few companies out there willing to pay a premium for low-carbon products.”

Stick or twist

ExxonMobil’s approach to Baytown reflects the dilemma facing hydrogen project developers globally—invest now and lock in demand as it starts to trickle through, or wait until demand emerges at scale. Woods appears to take the latter view. “If we do not FID (Baytown), we will put it on the shelf and come back when the customers are there,” he said.

That could be seen as concerning for the hydrogen sector, given that ExxonMobil is one of the few players with the resources to absorb the lack of returns encountered by early movers in the sector.

The lack of demand for clean hydrogen and all the other green-premium products emerging from the transition is a deepening concern for the industry and for policymakers as the clock ticks on decarbonisation targets. “The pace of the transition is not just about supply, but also demand,” said Patrick Pouyanne, CEO of French energy company TotalEnergies. “I need to invest in these [transition] technologies at the pace of demand,” he told the forum.

Pragmatic transition

Much has been made of the impact on US projects of the Trump administration’s tinkering with the 45V clean hydrogen tax credit, a subsidy introduced under the previous administration’s Inflation Reduction Act. Woods said the changes, which include a shortening of the window in which projects can qualify for the credit, had not directly affected Baytown, although they had “undermined” the development of the wider clean hydrogen market.

The economics of Baytown rely on 45V and other subsidies, but Woods stressed that long-term government support is not the answer. “We agreed to pursue a very large project underpinned by government support, but only in the short term,” he said. “I do not believe that any sustainable market will be built on government subsidies.”

Pouyanne echoed this view: “I am not in favour of subsidising renewables; they should be merchant projects doing power purchase agreements with customers.”

The need for a more pragmatic approach to the transition was a recurring theme at the forum, perhaps best summed up by Blair Thomas, CEO of investment firm EIG. He said the appetite for a green premium at this point is “de minimis”. Hysteria around the transition probably peaked at COP26 in Glasgow, and enthusiasm is now probably close to a nadir, he said.

“Celebrating the death of the energy transition is premature,” he said. “Energy transition is not dead. It is not going away. It is unstoppable. Decarbonisation is going to happen,” he added. “But we are going to have retrench. We are going to have mature and get more efficient, and we have to deliver rates of return.”

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Author: Stuart Penson