Revenue for Woodside surpasses Q2 expectations, company withdraws from hydrogen endeavor due to escalating expenses.
In a strategic move, Woodside Energy has announced its exit from the H2OK green hydrogen project in Oklahoma. This decision comes amidst economic and market challenges that have affected the viability of the hydrogen sector, particularly for low-carbon hydrogen production.
The H2OK project aimed to produce up to 60 tonnes per day of liquid hydrogen via electrolysis and liquefaction for heavy transport. However, persistent industry-wide issues such as high production costs, limited hydrogen infrastructure, regulatory uncertainty, and growing competition from alternative low-carbon technologies have pressured the hydrogen market globally.
Woodside's CEO, Meg O'Neill, described the exit as part of a "disciplined approach to portfolio management," recognising the need to focus on more viable projects. The U.S. market, even with supportive policies like the Inflation Reduction Act, still presents economic hurdles for large-scale hydrogen projects.
In a bid to overcome these challenges, Woodside has instead shifted focus and heavy investment to its U.S. liquefied natural gas (LNG) projects. This includes a $17.5 billion Louisiana LNG export terminal.
The company has already made significant strides in this area, having completed the sale of a 40% stake in its Louisiana LNG project to Stonepeak for $5.7 billion in June. Stonepeak agreed to fund 75% of the project's capital expenditures in 2025 and 2026.
Meanwhile, Woodside continues to attract interest from potential partners for further stakes in its Louisiana LNG project.
In a separate development, Woodside has agreed to sell offshore oil and gas assets in Trinidad and Tobago to London-based Perenco in late March.
However, Woodside is not immune to other challenges. The company expects to book $400-$500 million in pre-tax charges related to decommissioning work for its Minerva, Stybarrow, and Griffin offshore facilities. Technical challenges at closed sites are driving up expenses, adding to the company's financial burden.
As a result of the asset sale, Woodside marginally adjusted its 2025 production forecast to between 188 million and 195 million boe. Despite these challenges, Woodside's Q2 revenue exceeded estimates, offering a glimmer of hope for the company's financial future.
[1] Woodside Energy Annual Report 2021 [2] Hydrogen Council, Hydrogen Outlook 2021 [3] International Energy Agency, The Future of Hydrogen [4] McKinsey & Company, The Hydrogen Economy: A Bridge to a Low-Carbon World
- In its effort to mitigate high production costs and focus on more financially viable projects, Woodside Energy has redirected its significant investment from the H2OK green hydrogen project to U.S. liquefied natural gas (LNG) projects, such as the Louisiana LNG export terminal, after selling a 40% stake in its Louisiana LNG project to Stonepeak.
- Amidst growing competition from alternative low-carbon technologies, the energy industry faces challenges in the hydrogen sector, particularly in terms of financing, due to issues like limited hydrogen infrastructure, regulatory uncertainty, and high production costs, as evidenced by Woodside Energy's exit from the H2OK green hydrogen project.
