Norwegian unit of the British energy giant, Shell plc SHEL has decided to cancel its blue hydrogen project, the Aukra Hydrogen Hub, due to a lack of demand. The company announced its decision days after Equinor ASA EQNR, a Norway-based state-owned energy company, cancelled a similar project.
Shell Cites Lack of Demand for Cancellation
Under the project, Shell along with its partners, Aker Horizons and CapeOmega, would have used natural gas from the company’s Nyhamna processing facility to produce about 1,200 tons of blue hydrogen per day by 2030. However, the decision to scrap the low-carbon hydrogen project was taken after analyzing the feasibility of the project.
Blue hydrogen, which can be produced from natural gas using carbon capture and storage technology, would prove to be a milestone in decarbonizing European industry. However, the high costs and low demand, when compared to the traditional methods of producing grey hydrogen, make it impractical.
Equinor also scrapped its plans to build a pipeline to carry up to 10 gigawatts per annum of hydrogen from Norway to Germany. Both companies stated the same reasons of low demand, high production costs and inadequate regulatory framework to drop their respective projects.
Road Ahead for Shell
Despite carrying a Zacks Rank #3 (Hold), Shell is not currently involved in any hydrogen projects in Norway. However, the company has several other active projects in various energy sectors. It recently entered into a ten year agreement with the Turkish oil and gas company, BOTAS to supply up to four billion cubic meters of LNG annually.
Key Picks
Investors interested in the energysector might look at some other stocks like PEDEVCOCorp. PED and Sasol SSL. While PEDEVCO currently sports a Zacks Rank #1 (Strong Buy), SSL carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here
PEDEVCO Corp. is an oil and gas company engaged in the acquisition and development of energy projects in the United States and Pacific Rim countries. Over the past 30 days, the Zacks Consensus Estimate for PED's 2024 earnings has improved by 33.3%.
SSL is engaged in the mining and processing of coal. It also produces chemicals, explores and refines crude oil and manufactures fertilizers and explosives. SSL’s expected earnings per share growth rate for three to five years is currently 16%, which compares favorably with the industry's growth rate of 15.6%.
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