Saudi Aramco, the world's largest oil company, has dramatically revised its blue ammonia production targets, signaling a significant shift in its low-carbon strategy. The company now aims to produce 2.5 million metric tons per annum (mtpa) of blue ammonia by 2030 from 11 mtpa by 2027.

Amin Nasser, Aramco's CEO, revealed the revised target during an earnings call, emphasizing that the new objective remains contingent on securing commercially viable long-term offtake agreements. "We refined the target. The market is not evolving quickly enough considering the high cost," Nasser explained, highlighting the primary reasons behind the strategic recalibration.

Blue ammonia, produced from hydrogen derived from natural gas with carbon capture and storage, is touted as a crucial transitional fuel in the shift towards a low-carbon economy. However, the industry faces significant hurdles. The production costs remain high, with Nasser noting that blue hydrogen costs around $200 per barrel of oil equivalent (boe), while green hydrogen, produced from renewable energy, can exceed $400 per boe.

Aramco's decision reflects a broader trend of caution within the low-carbon hydrogen sector. While the company has engaged in discussions with potential buyers, including those in South Korea and Japan, it is prioritizing financial discipline and ensuring adequate returns on its investments. "Until this comes to fruition, our focus is discipline," Nasser stated.

The delay and reduction in production targets are not unique to Aramco. Other Gulf companies, such as ADNOC and QatarEnergy, have also announced ambitious blue ammonia plans, but the industry as a whole is grappling with the challenges of scaling up production and establishing robust supply chains.

Aramco's cautious approach highlights the need for a pragmatic and commercially viable pathway to decarbonization. While blue ammonia offers a promising transitional solution, its widespread adoption hinges on addressing the cost challenges and establishing clear market demand. The company's revised strategy signals a shift towards a more measured and market-driven approach to low-carbon energy development, emphasizing the importance of securing long-term offtake agreements before committing to large-scale production. Aramco's actions are closely watched by the energy sector, and this scaling back will have wide ranging implications for the global hydrogen economy.

Saudi Aramco, officially the Saudi Arabian Oil Company, stands as a global energy powerhouse. It's a majority state-owned petroleum and natural gas company, and the national oil company of Saudi Arabia. Headquartered in Dhahran, Aramco is renowned for its vast hydrocarbon reserves and significant production capacity. It plays a pivotal role in the global energy market, engaging in exploration, production, refining, and distribution. Beyond its core oil and gas operations, Aramco is increasingly involved in petrochemicals and exploring avenues in low-carbon energy.