Equinor halts Groningen H2M blue‑hydrogen project

Headline decision: Equinor cancelled the Groningen H2M blue hydrogen initiative after it could not lock long‑term buyers, removing a major prospective customer for the Northern Lights CO2 disposal system. Market signal: the project failed on commercial grounds — not on technology — as offtake scarcity made a final investment decision impossible.

Scale and context: the planned plant was sized at about 210–220 kt H2/yr, roughly 18–27% of current Dutch hydrogen demand and only a few percent of EU demand. Supply chain complexity: feedstock gas from Norway, onshore reforming in Groningen, capture and conditioning, then shipping captured CO2 back to Norwegian storage illustrates multiple transport and commercial handoffs that raise counterparty and operational risk.

A broader pattern: this cancellation echoes recent evidence from other European hydrogen ventures — for example, a completed but unused pressurised hydrogen pipeline in Germany — where technical achievements exist without commercial customers. That contrast (projects built or proposed versus absent offtake) crystallises a common failure mode: infrastructure and production intent that cannot conjure long‑dated industrial contracts. The two examples together show the same market friction from different angles — demand reluctance on the buyer side and stranded or underutilised assets on the infrastructure side.

Competitiveness dynamics: under current and projected carbon pricing scenarios, the contest is moving away from grey vs blue and toward blue vs imported green. Model runs in this trade show blue ammonia narrow cost advantages only at low carbon prices; imported green ammonia becomes the cheaper low‑carbon option once carbon reaches policy‑relevant thresholds. Parallel cost signals — domestic green hydrogen often struggling toward roughly $4/kg delivered when transport and integration are included — mean import routes can outcompete domestic molecule projects on delivered cost and lifecycle emissions.

Industrial demand reality: major users — primarily fertilizer and chemical producers — are weighing lifetime carbon exposure, potential asset stranding, and regulatory tightening before signing multi‑decade offtake contracts. That buyer conservatism undermines anchor customer formation for CO2 transport and storage ventures and leaves built or planned network segments exposed to low utilisation.

System and policy implications: losing a high‑profile blue hydrogen anchor reduces near‑term throughput for third‑party CCS ventures and increases the risk that parts of the emerging hydrogen value chain become underutilized. Policymakers face a choice: preserve optionality through targeted, contract‑backed support and clear decision gates, or risk socialising the cost of underused infrastructure via consumer tariffs and broad subsidies. The German pipeline case underscores the political and affordability risks of treating speculative hydrogen infrastructure as inevitable.

Alternative pathways: large renewable export hubs and electrolytic ammonia plants (for example in North Africa) can deliver near‑zero operational emissions and compete on delivered cost when electrolyzer capital and low‑cost power scale. Those import routes preserve downstream manufacturing while externalizing renewable generation to higher‑resource regions. For domestic strategy this implies prioritising contract‑led network growth, narrowly defined industrial use cases, and accelerating electrification where it is more efficient.

Timing and trajectory: this is not a one‑off. It fits a repeating pattern where conditional projects stall once commodity buyers price long‑term regulatory tightening and import competition into their procurement decisions. Expect more blue projects to be shelved unless offtake structures, guarantees, or significantly lower lifecycle emissions appear. Conversely, visible import projects and falling electrolyzer costs may accelerate a reallocation of private and public capital toward green exports, electrolyzer manufacturing, and logistics.

Investor and policy consequence: capital allocation will likely tilt to projects that either deliver full lifecycle emissions reductions or anchor guaranteed offtake via integrated supply chains. CCS players lose negotiating leverage; green exporters and electrolyzer manufacturers gain it. To avoid forced demand subsidies and protect consumers, governments should favour time‑bound, contract‑based support, explicit decision gates for speculative infrastructure, and policies that prioritise electrification where it is economically superior.