It was a first half to forget for blue hydrogen, with the Middle East war also serving as a stark warning over fossil fuel reliance, writes Stefan Krumpelmann
US industrial gas firm Air Products announced at the end of June that it had scrapped one of the world's largest projects for natural gas-based hydrogen production with carbon capture and storage (CCS). It was a fitting end to the first half of 2026 for blue hydrogen, capping off six months of setbacks.
For renewable hydrogen, the first half of the year was a little more upbeat. While rattled by more project cancellations and bankruptcies, the sector could at least draw encouragement from final investment decisions (FIDs) and binding offtake agreements. Meanwhile, the US-Iran war was widely regarded as a potential tailwind, bringing a renewed focus on energy security and resilience.
For blue hydrogen, however, it was almost exclusively bad news.
No impetus from the war can be expected for gas-based hydrogen with CCS, as its adoption would do nothing to reduce exposure to fossil fuel supply disruptions or price shocks. In fact, the conflict has only served to raise more questions over the future of CCS-enabled hydrogen and ammonia facilities in the Middle East, some of which are among the largest planned globally. Most industry participants expect the war to drive up development costs because of higher borrowing costs and more expensive insurance.
Prospects for CCS-based hydrogen and ammonia were also dimmed by policy decisions in key offtake regions, most notably South Korea's U-turn on power generation plans. For years, co-firing of imported CCS-based ammonia with coal was a key part of Seoul's strategy to trim power sector emissions. But plans for an accelerated coal phase-out have made this a dead end. A relaunched second round of the country's clean hydrogen power generation bidding market will now focus on domestically produced renewable hydrogen.
In Europe, the focus has been on renewable hydrogen and support for CCS-based hydrogen has, if anything, weakened. The Netherlands said in May that it no longer sees a role for new CCS-based hydrogen plants in its energy transition plans and will not provide financial support for them.
Countries like China and India have managed to substantially trim renewable hydrogen and ammonia production costs, eroding much of the competitive advantage for CCS-based supply. Tellingly, South Korea's Samsung C&T opted for Indian renewable ammonia as a potential replacement for CCS-based supply from a delayed plant in Saudi Arabia for deliveries under the first clean hydrogen power generation bidding market round.
No major CCS-based hydrogen projects reached FID in the first half of 2026 and no new firm offtake deals were signed.
Air Products axed the 600,000 t/yr Louisiana Clean Energy Complex because the firm no longer expects it to deliver the necessary financial returns. Other plants met the same fate earlier in the year, for example Norwegian state-controlled Equinor's Dutch H2M Eemshaven project. This followed major cancellations in late 2025, such as ExxonMobil's Baytown project and BP's H2Teesside in the UK.
The cancellations have significantly shrunk the global project pipeline. The IEA said in mid-June that 7mn t/yr of CCS-based hydrogen production capacity was due on line by 2030, based on company announcements. This was already the lowest since the watchdog started publishing its annual hydrogen sector reviews in 2021 — even before Air Products dealt the latest blow to the project pipeline.
