Hydrogen Oman has confirmed BP’s withdrawal from the Duqm Green Hydrogen Project, marking the second project cancellation from the nation’s inaugural hydrogen auction round following the HyDuqm venture’s termination by mutual agreement. The exits occur as BP restructures its global hydrogen portfolio, withdrawing from projects in Australia and the United Kingdom alongside Oman, exposing tensions between government ambitions for hydrogen export economies and developer reassessments of project economics amid persistent offtake uncertainty and capital cost inflation.
Hydrom announced both project conclusions at the 2025 Green Hydrogen Summit in Oman, framing the decisions as portfolio adjustments rather than fundamental strategy failures. However, two cancellations from the initial auction round, which generated significant interest during 2023 bidding, raise questions about project structuring, tariff levels, and offtake commitments sufficient to support final investment decisions. Seven projects reportedly remain active and progressing according to development timelines, though the transition from awarded status to operational facilities requires navigating financing, engineering, and market development hurdles that have proven challenging across multiple Gulf hydrogen initiatives.
BP’s continued participation in the Hyport Duqm project, which Hydrom emphasizes as evidence of ongoing partnership, suggests differentiation between project-specific economics rather than wholesale retreat from Oman. Hyport Duqm targets domestic hydrogen supply for industrial applications, including potential integration with BP’s existing energy infrastructure investments in the Sultanate. This domestic-focused project likely demonstrates more robust economics than export-oriented ventures, where delivered costs must compete against established fuel alternatives in distant markets while absorbing international shipping, handling, and conversion expenses.
The HyDuqm project’s conclusion followed “in-depth assessment of global renewable hydrogen offtake dynamics and investment frameworks,” language indicating that anticipated demand commitments or pricing mechanisms failed to materialize at levels supporting project advancement. Global hydrogen offtake markets remain nascent, with announced purchase commitments consistently lagging behind production project proposals. European hydrogen import strategies, which Gulf producers target as primary markets, emphasize domestic production subsidies and regional supply chains before committing to long-distance imports, compressing export project economics.
Green hydrogen production costs in the Gulf region benefit from exceptional solar resources, enabling low-cost renewable electricity generation, theoretically providing a competitive advantage over higher-cost production regions. However, these production cost benefits must offset shipping expenses, conversion losses if transporting as ammonia or liquid hydrogen, and import market carbon intensity verification requirements. Oman’s projects targeting ammonia as the transport vector face competition from blue ammonia production using natural gas with carbon capture, particularly from facilities in the United States and the Middle East with established infrastructure and lower capital requirements.
ACME’s Duqm Project, entering Phase 1 construction with targets of 100,000 tonnes annual green ammonia and 17,000 tonnes green hydrogen output, provides a benchmark for current project viability. The facility’s scalable design toward 1.2 million tonnes per year suggests phased development contingent on market demand validation, a risk-mitigated approach contrasting with some proposals pursuing full-scale capacity from initial operation. ACME’s ability to reach financial close and commence construction indicates successful navigation of financing, equipment procurement, and offtake commitment thresholds that other developers have found insurmountable.
Oman’s hydrogen strategy relies heavily on export markets, given domestic demand constraints from a population under five million and limited industrial capacity beyond oil and gas operations. This export dependency creates vulnerability to market development timelines in target regions, particularly Europe, where hydrogen infrastructure, blending regulations, and end-use equipment remain under development. Japanese and South Korean hydrogen import ambitions provide alternative markets, though these countries simultaneously pursue diverse supply sources including Australia, Saudi Arabia, and the United Arab Emirates, intensifying competition for offtake commitments.
The Royal Decree establishing Hydrom as the national orchestrator and contracting authority centralizes project development, potentially streamlining permitting and land allocation but also concentrating decision-making around auction design and contract terms. Auction structures balancing tariff competitiveness against project bankability prove challenging, with overly aggressive pricing potentially attracting bids that later prove financially unviable once detailed engineering and financing proceed. Two project cancellations from seven initial awards suggest auction terms may have underestimated execution complexity or overestimated near-term market conditions.
BP’s global hydrogen portfolio restructuring extends beyond Oman, affecting Australian and UK projects in a pattern suggesting corporate strategy reassessment rather than location-specific concerns. The company announced in late 2024 its intention to focus renewable energy investments on higher-return opportunities, with hydrogen ventures frequently demonstrating extended timelines to positive cash flow and lower internal rates of return than competing capital allocation options. This corporate reorientation impacts not only existing project commitments but potentially reduces available capital for new hydrogen ventures as major oil companies reassess energy transition investment priorities.
Developer consolidation in Gulf hydrogen markets may emerge as smaller participants struggle with financing requirements while integrated energy companies leverage existing infrastructure and customer relationships. National oil companies, including Saudi Aramco, ADNOC, and potentially Oman’s OQ, possess balance sheet capacity, technical expertise, and offtake networks that independent developers lack, creating competitive advantages as project economics tighten. Hydrom’s ability to maintain developer diversity versus concentration among national champions affects competition dynamics and potentially innovation in project delivery approaches.
The mutual agreement framework for HyDuqm’s conclusion suggests negotiated exit provisions within project development agreements, allowing developers to withdraw without penalty under specified circumstances. This contractual flexibility serves government interests by avoiding protracted disputes, but creates uncertainty around project pipeline reliability when calculating national hydrogen production targets and related infrastructure investments. Oman has announced ambitions for substantial hydrogen production by 2030 and 2040, targets that require high project conversion rates from awarded to operational status.
Electrolyzer supply chain constraints potentially contribute to project delays and cancellations as manufacturers face order backlogs and capacity limitations. Major electrolyzer suppliers, including Nel, Plug Power, and ThyssenKrupp, have announced capacity expansions, but production scaling timelines may not align with developer construction schedules, creating procurement bottlenecks. Equipment cost inflation during 2022-2023 also affected project economics, with some early-stage bids predicated on equipment pricing that later proved unavailable at assumed levels.
Renewable energy integration for large-scale electrolysis requires substantial solar and wind capacity, placing demands on Oman’s transmission infrastructure and grid stability mechanisms. The nation’s electricity system primarily serves coastal population centers, with interior regions where solar resources prove optimal requiring transmission buildout to connect projects. These infrastructure investments compete for capital against direct project costs while introducing execution dependencies that extend timelines and create additional risk factors.
The seven remaining active projects face the same market uncertainties and cost pressures that prompted bp’s withdrawal, raising questions about their individual paths to financial close and construction. Project-by-project updates on financing progress, offtake contract status, and engineering advancement would provide greater clarity on national strategy momentum, though commercial sensitivities often limit public disclosure of such details until major milestones occur.
Oman’s geographic position between major production regions in Saudi Arabia and the UAE and target markets in Asia creates both opportunities and challenges. Proximity to Asian markets reduces shipping costs compared to Atlantic basin exporters, but also intensifies regional competition. The nation’s strategy emphasizes not only production but potential roles in hydrogen transportation and logistics, leveraging existing port infrastructure at Duqm and other locations. Whether these positioning advantages prove sufficient to overcome developer concerns reflected in recent exits remains the critical question for Hydrom’s strategy execution.
