Many Russian low-carbon hydrogen projects canceled or on hold as costs mount

A majority of Russia's renewable hydrogen projects have been canceled or shelved amid geopolitical tensions, which have driven up costs, restricted access to technology, and curtailed export opportunities, multiple industry sources and analysts told Platts, part of S&P Global Energy.

Russia has 18 low-carbon and renewable hydrogen projects with a combined projected capacity of 1.2 million metric tons/year, of which 13, or 61%, stands canceled or is on hold, data from S&P Global Energy analytics showed.

"One of the key factors is the geopolitical environment, which has restricted potential hydrogen exports and complicated access to the technologies and equipment needed for hydrogen production and consumption," Dmitry Baranov, senior analyst with Finam, a Moscow-based financial advisory firm, said July 27.

Baranov explained that in recent years, the economics of hydrogen production in Russia has become less attractive, particularly for commercial projects targeting export markets. Weak and uncertain demand, especially overseas, is also behind the shift.

Obsky Gas Chemistry Complex, one of the largest low-carbon hydrogen projects with a planned output capacity of 355,555 mt/year, has been canceled/put on hold, the database indicates.

Obsky Gas Chemistry Complex did not respond to a questionnaire from Platts, part of S&P Global Energy, seeking more details about the project.

Quiet winding down

The trend of quietly winding down projects is clearly emerging, and it is understandable given the current circumstances, Vladimir Poklad, director of Moscow-based consultancy Delovoy Profile, said in an email July 23.

According to Poklad, during the Eastern Oil and Gas Forum in Vladivostok, some prominent members admitted projects in the Sakhalin region were on hold. Similar setbacks in hydrogen initiatives in Kamchatka, Khabarovsk, Zabaykalsky, Magadan and Amur have been spoken about.

The low-carbon/renewable hydrogen projects that are canceled or on hold represent about 700,000 mt/year of capacity and are mostly based on hydropower, natural gas or renewable energy.

However, according to Baranov, Russia's low-carbon/renewable hydrogen projects are being postponed rather than abandoned at this stage.

Advancing projects delayed

Rosatom VTGR project in the Republic of Tatarstan, an advancing 352,000-400,000 mt/year low-carbon hydrogen project to be built in four phases, was expected to start production in 2024, but the timeline has since shifted to the early 2030s, industry members said.

No site selection decision has been made, and the project has yet to move into any visible construction preparations, the industry members said.

Rosatom declined comments on questions from Platts seeking project details July 15.

The other project seen advancing is Sakhalin's 24,000 mt/year low-carbon hydrogen project, which is in its design phase, according to the database. This project is also being developed by Rosatom.

Rosatom is considering resuming Sakhalin by the end of 2026, following a delay, Rushan Gibadullin, director of Rosatom, said during an industry event July 30, as quoted by Sakhalin's government press office.

Sakhalin in offtake talks

"The current situation led to a temporary pause in the project's implementation," Gibadullin said, adding that Rosatom is in talks with the Sakhalin government on "organizational matters" related to the project.

He said Rosatom is also "engaging with potential partners" in Asia-Pacific on opportunities for cooperation and low-carbon hydrogen offtake.

Sakhalin, whose primary owner is Gazprom, is slated to capture 297,000 mt/year of carbon dioxide, the database shows. Its carbon intensity is 3 kg CO₂/kg H₂.

Rosatom is the developer for all the named advancing projects, the database showed.

Platts assessed the India Renewable Hydrogen Term Contract at $3.24/kg on July 30, down 2.99% month over month.

Temporary retreat seen

Despite the setbacks, analysts say the sector is evolving, and some existing projects can still be implemented.

"For Russian companies, hydrogen is increasingly seen not as an independent large-scale market, but as a technological option within existing industrial value chains," Baranov said.

"It makes economic sense where it can provide measurable benefits in areas such as feedstock efficiency, decarbonization or technological sovereignty, but it is losing appeal as a standalone export-oriented investment case," he added.

The economic appeal of hydrogen has narrowed to niche, localized applications, Poklad said, adding that large-scale export-oriented projects are unlikely to reach final investment decisions over the next five years.

"However, this does not mean that the industry is dying," Poklad added. "I would describe what is happening not as a collapse, but as a narrowing of the window of opportunity. The range of scenarios under which projects can achieve economic viability has become smaller, but it has not disappeared entirely."