BP has officially withdrawn its plans to develop the H2 Teesside hydrogen and carbon capture project, marking a major pivot in the UK’s industrial strategy as the government pushes forward with an AI-focused redevelopment of the region.
The decision clears the way for what is expected to become Europe’s largest AI data centre, to be built on the former steelworks site in Teesside.
In a statement to the Financial Times, BP confirmed it has “taken the decision not to progress” the project and has withdrawn its development consent order (DCO) application.
While stepping back from hydrogen plans, BP stressed that it remains committed to Teesside through investments in Net Zero Teesside Power and the Northern Endurance Partnership, both cornerstones of the UK’s emerging CCS infrastructure.
A Strategic Shift Toward Digital Infrastructure
The move follows the government’s designation of the Teesside site as an AI growth zone, a new framework offering streamlined planning, tailored energy arrangements, and regulatory support to accelerate data-centric development.
Backed by the Department for Science, Innovation and Technology, the project envisions a facility of nearly 500,000 square meters (~124 acres), positioning the region as a key hub in Europe’s digital transformation.
However, this shift has sparked tensions within the government. Energy secretary Ed Miliband was widely seen as supportive of BP’s hydrogen proposal and had a Thursday deadline to finalize the DCO decision. Local stakeholders, including Teesworks Ltd and the South Tees Development Corporation, objected to the hydrogen project, arguing that it conflicted with the viability of the planned hyperscale data center.
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AI growth zones were first introduced under the government’s AI Opportunities Action Plan in January. While intended to supercharge the UK’s competitive position in AI, the model has raised concerns elsewhere. The first zone, in Culham, Oxfordshire, triggered discussions about water scarcity – a growing issue as large data centers require substantial water for cooling.
BP’s withdrawal marks a symbolic turning point: a major energy company yielding ground to the fast-expanding digital sector.
It also underscores a broader recalibration in the UK’s net-zero pathway as large-scale hydrogen and CCS developments increasingly intersect with new technological priorities.
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