German power utility RWE said on Monday that it had withdrawn from Namibia's $10-billion Hyphen green ammonia project, a blow to the southern African nation's ambitions to become a major hydrogen hub.

The pullback is the latest example of companies reconsidering investments in a nascent technology that is expensive to develop.

RWE signed a preliminary non-binding memorandum of understanding with Hyphen in 2022 to take around 300 000 tonnes a year of ammonia - a compound used mostly to make fertiliser - from 2027.

Ammonia is usually produced using natural gas, and decarbonising that process requires replacing gas with hydrogen extracted from water using renewable energy sources.

"We can confirm that RWE is currently not pursuing any further projects in Namibia," the company said in a statement, as demand for hydrogen and hydrogen derivatives such as ammonia develops slower than expected in Europe.

"Against this backdrop, we have reviewed the relevant projects at RWE. This included the project with Hyphen in Namibia."

Hyphen spokesperson Ricardo Goagoseb said RWE had only signed "a memorandum of understanding to explore potential off-take," not made any final purchasing agreement.

Indigenous rights groups wrote to the German group in April, complaining that its concession was inside a national park and encroached on their ancestral Nama land.

Andrea Pietrafesa, legal advisor at the European Centre for Constitutional and Human Rights, in a joint statement with the Nama Traditional Leaders Association, applauded the decision not "to purchase goods produced on land where indigenous rights are violated."

RWE said there was no connection between its decision and these complaints.