Inside the Deals Powering Hydrogen — The Truth About Offtake Agreements

In this episode of The Hydrogen Podcast, we dive into the real mechanics of the hydrogen economy — not the hype, but the contracts that make it all work. Drawing on the latest data from the August 2025 Oxford Institute for Energy Studies report, Paul Rodden breaks down how offtake agreements are defining the future of hydrogen finance, investment, and market credibility.

📄 What You’ll Learn:
💼 What are hydrogen offtake agreements (H2SPAs)?

• The backbone of every bankable hydrogen project.
• How these long-term contracts (10–15 years) guarantee sales, unlock capital, and stabilize project economics.

🌍 Who’s Signing the Big Deals?

• ExxonMobil & Marubeni: 250,000 tonnes per year of near-zero carbon ammonia.
• RWE & TotalEnergies: 15-year, 30,000-tonne annual green hydrogen contract.
• Fertiglobe (Egypt): €397M, 20-year term – a major global benchmark.
• ACME & Yara (India): World’s largest green ammonia supply agreement.

⚖️ How These Contracts Are Structured:

• Shorter tenors than LNG (10–15 years vs. 20+) to allow for cost improvements.
• Pricing models vary: fixed, cost-plus, or hybrid, often tied to electricity or natural gas indices.
• Volume guarantees with take-or-pay clauses (60–80% typical), providing bankability while allowing flexibility.

🧩 Risks, Rewards, and Regulation:

• Contracts hinge on policy support, tax credits, and certification.
• Deals must account for change in law, subsidy revisions, and force majeure events unique to hydrogen.
• Certification and guarantees of origin now determine premium pricing and eligibility for incentives.

🚢 Delivery & Logistics:

• Pipelines for local markets; ammonia and LH₂ shipping for international trade.
• Complex risk-sharing defined through Incoterms like DES and FOB.

📊 The Future of Offtake Markets:

• 2020s: Foundational contracts with heavy state support.
• 2030s: More flexible, diversified structures and shorter tenors.
• 2040s: Global liquidity, price benchmarks, and trading instruments akin to LNG.

💡 Why It Matters:
Every hydrogen contract signed today pushes the industry closer to commercial maturity. These agreements are the link between vision and value—transforming hydrogen from a political promise into a financial reality.

📈 Takeaway:
Hydrogen’s next chapter won’t be written in policy memos—it’ll be written in binding offtake agreements. Those who master this contract landscape will control the pace and profitability of the global hydrogen transition.

Transcript

Today, we’re taking a deep dive into the beating heart of the hydrogen economy: the world of offtake agreements. If you’re a developer, an investor, a policymaker, or just curious about how hydrogen is moving from promise to reality, settle in. This episode is packed with economic insight, practical examples, and a forward-looking, pro-hydrogen analysis—right from the latest August 2025 Oxford Institute for Energy Studies report.

Let’s go beyond the headlines and into the substance of what it takes to build a clean hydrogen market. It starts—and ends—with offtake. These contracts are the backbone of every credible hydrogen business model. Why? Because producing clean hydrogen, whether green from renewables or blue from natural gas with carbon capture, demands enormous upfront capital. And investors—public and private—aren’t cutting checks on hopes and dreams. They want robust, long-term commercial commitments. That’s what an offtake agreement delivers.

Over five million tonnes per year of capacity has already reached Final Investment Decision globally, with marquee deals signed in the U.S., Europe, the Middle East, and Asia. We’re seeing rapid progress, but also recognizing that translating early-stage memorandums of understanding into binding contracts remains a challenge. Why is that? The clean hydrogen trade is, at its core, so new that legacy gas, LNG, and power contracts aren’t enough. They offer shapes and reference points, but don’t capture the unique risk profile of hydrogen—think policy-linked business models, certification regimes, and markets moving toward cost parity with fossil incumbents.

First, let’s clarify what these contracts really do. A hydrogen offtake agreement, or H2SPA, secures sales of a defined volume of hydrogen or derivative products—think ammonia, methanol, or synthetic fuels—over long periods, usually 10 to 15 years. The parties? They’re industrial users, utilities blending hydrogen into the grid, mobility and fleet operators, and aggregators. Each one is seeking to decarbonize, and each one needs reliable, certified low-carbon molecules.

But the market DNA of hydrogen is radically different from mature commodities. Clean hydrogen is capital-intensive, with significant regulatory and policy uncertainty. Unlike gas, which developed over decades with minimal government involvement, hydrogen’s market existence currently depends on direct support—think production tax credits, investment grants, and contracts for difference. Most agreements are still conditional on these interventions; if subsidies fade, the economics wobble.

Consider recent case studies. ExxonMobil and Marubeni signed a contract for 250,000 tonnes per year of nearly carbon-free ammonia from Texas; RWE and TotalEnergies inked a 15-year deal for 30,000 tonnes of green hydrogen annually, kicking off in 2030. Fertiglobe’s deal in Egypt runs for 20 years with a €397 million value, and ACME’s Indian green ammonia supply for Yara marks the largest arms-length transaction yet. These are not just business moves—they are foundational, signaling market maturity and giving first-mover players real strategic advantage.

Let’s zero in on the main commercial drivers. Duration is crucial. Whereas gas and LNG contracts sometimes ran for twenty years, hydrogen agreements typically land at ten to fifteen. Why shorter? Buyers are cautious in an emerging space, fully aware that costs of production will decline as technology improves and market liquidity emerges. They’re poised to benefit from future efficiency, not locked into static deals.

Pricing is another battleground. Unlike natural gas, there’s no transparent market benchmark for hydrogen yet. That means contract prices are negotiated—sometimes cost-plus, sometimes netback, fixed, or hybrid. All come with pros and cons. For fixed-price contracts, especially in pilot projects or those linked to long-term power purchase agreements, price certainty is valuable, but can drift out of line as technologies mature and input costs fall. Partial fixed models—allowing periodic adjustments based on power prices, inflation, or indexed costs—are gaining favor.

A central challenge: up until now, hydrogen prices are often linked to the price of electricity (for green) or natural gas (for blue), and sometimes even ammonia. But these cross-commodity indexes expose hydrogen deals to external market volatility, which can undermine stability and create contract disputes. Sellers want predictable revenue; buyers crave flexibility. The solution isn’t straightforward, and until liquid hydrogen price benchmarks develop, each deal is essentially bespoke.

Government support adds both complexity and opportunity. Contracts must clearly stipulate how subsidies are applied and reported, who absorbs risk if they’re changed or revoked, and—critically—how price is adjusted in tandem with support mechanisms. It’s a brave new world, unfamiliar to oil and gas traders, but essential for project bankability in hydrogen.

On volume, take-or-pay remains the anchor. Buyers commit to paying for a set share of the annual contract quantity, even if not physically taken. But whereas early LNG contracts pushed take-or-pay up to 90 percent, hydrogen deals are more flexible, usually ranging 60 to 80 percent. As government subsidies and equity participation become more prevalent, bankability can be maintained even with lower volume guarantees.

No hydrogen contract survives on rigidity. The evolution toward greater volume flexibility—embodying DQT (downward quantity tolerance), make-up rights, and carry-forward provisions—mirrors lessons learned from LNG. This lets buyers reduce risk in the face of uncertain demand or variable supply. It’s all about adaptability, whether through long nomination windows, the option to defer or cancel cargos, or mechanisms to carry forward unused quantity.

Quality is the next frontier. Specification clauses in hydrogen contracts address both purity and carbon footprint. Certification is becoming non-negotiable, with buyers demanding third-party validation, lifecycle emissions accounting, and guarantees of origin. This is the price of premium market value—and, crucially, of eligibility for government support. Delivery of off-spec hydrogen can have serious consequences: rejected cargos, price penalties, and even contract termination in extreme cases.

Transportation further complicates matters. For regional trade, pipeline delivery is efficient but needs major investment and regulatory clarity. For international deals, shipping rules the day, with hydrogen typically converted to ammonia or shipped as LH2. Incoterms such as DES (delivered ex-ship) or FOB (free on board) define risk allocation. But the technical challenges of shipping hydrogen—material compatibility, cryogenic storage, safety protocols—require complicated contract frameworks.

Now, let’s talk risk management: price review and force majeure. Price review clauses—allowing renegotiation if market fundamentals shift, technology advances, or input costs dramatically change—are vital for both seller stability and buyer flexibility. These clauses are carefully constructed, with clear triggers, negotiation steps, and pathways to mediation or arbitration. Hydrogen projects must plan for disruptions well beyond the norm: electrolyzer or SMR failures, supply chain hiccups, even force majeure events specific to hydrogen blending or ammonia cracking. Each risk is unique to hydrogen and must be meticulously mapped in every agreement.

Let’s be direct: government support and policy are central to hydrogen economics. Unlike the gas sector, where state intervention was fleeting and indirect, hydrogen lives and dies by the stability of subsidies, certification, and regulatory mandates. If a contract’s tender is built on public incentives, regulation change or subsidy loss can trigger renegotiation, price adjustments, or—rarely—termination.

A well-drafted contract weighs these risks, spelling out what constitutes a change in law, how price or obligations will adjust, and what thresholds trigger good-faith negotiation or third-party resolution. Arbitration remains the formal backbone for cross-border disputes, but expert determination and mediation are becoming more common, especially for technical disagreements or price recalibration.

Risk allocation in hydrogen contracts also demands alignment across every link in the value chain. Contracts for production, transportation, and delivery must synchronize definitions and triggers for force majeure, change in law, and price review. This avoids costly gaps or conflicts, especially in complex multi-party, multi-jurisdiction environments.

Now, turning to market evolution—here’s where it gets exciting. The 2020s are the era of foundational contracts: long-term deals, often anchored by government support or first-mover offtakers. The 2030s will see diversification—shorter tenors, more adaptable structures, hybrid deals with embedded future-options for switching between natural gas and hydrogen. And by the 2040s, hydrogen contracting could mature into a global trading framework, marked by liquidity, risk management instruments, and standardization, echoing the LNG industry’s rise.

Pulling this all together, I want to emphasize: hydrogen offtake agreements are the bedrock for unlocking investment, underpinning risk, and deploying clean molecules at scale. The sector faces hurdles—uncertainty on price benchmarks, shifting policy, contract complexity, and technical risk. But every binding contract is a signal to the market: capital is flowing, volumes are moving, and the transition is on.

Given the challenges, why am I optimistic? Because the speed of contract innovation in hydrogen is outpacing the development curves seen in gas and LNG—for every project financed, for every supply deal signed, for every dispute navigated, industry practice is consolidating, benchmarks are inching closer, and liquidity is growing. Government intervention, while a crutch today, is laying market foundations, sharpening private sector engagement, and attracting the institutional money needed to deploy at continental scale.

My pro-hydrogen message for the boardroom, for the C-suite, and for national leaders listening today is simple: Realize that contracts are not just paperwork. They are engines of growth, instruments of security, and gateways to a lower-carbon, globally competitive future. Structure them wisely, adapt them quickly, and let them lead the market toward price discovery, reliability, and enduring commercial value.

Look ahead to a market where hydrogen is bankable not just for decarbonization, but because it’s profitable. Contractual resilience will drive cost reductions, supply expansion, and technical breakthroughs. As we move from bespoke, complex agreements to liquid trading, hydrogen’s journey will be mapped by these deals—and the nations and companies signing them will shape tomorrow’s energy economy.

Alright, that’s it for me, everyone.  If you have a second, I would really appreciate it if you could leave a good review on whatever platform you listen to. Apple podcasts, Spotify, Google, YouTube, etc. That would be a tremendous help to the show. And as always if you ever have any feedback, you are welcome to email me directly at info@thehydrogepodcast.com. So until next time, keep your eyes up and honor one another.