Oil and gas majors demand massive public support for carbon capture

The International Association of Oil & Gas Producers Europe (IOGP Europe) has called for the EU to set up a ‘European CCS Bank’ offering public support through its multi-billion-euro Innovation Fund, acknowledging that carbon capture technology is ‘economically unviable’ as things stand.

The scheme would be similar to a recently established ‘hydrogen bank’ that channels part of the €40-billion fund into schemes to produce the gas from renewable electricity – typically via contracts for difference (CfD), where public money is used to guarantee a profit during the scaling-up phase while production costs might outstrip the market price.

“If we do not incentivize CO2 capture for strategic industries, we won’t decarbonize, we will deindustrialize the EU,” said IOGP Europe director François-Régis Mouton. “Contracts for Difference have helped scale up renewables and are now used for hydrogen projects,” he said.

One problem with CCS is the high cost in terms of both energy and cash of capturing CO2, for example from factory chimneys, then purifying and compressing it before transporting it perhaps hundreds of kilometres to collection hubs, then transporting it further and injecting it at extremely high pressure into permanent storage, typically into aquifers in depleted oil or gas fields – sites that will then have to be carefully monitored for decades to come.

With the current carbon price of around €60 a tonne, it is far cheaper for the operator of a cement plant or steel factory to buy EU emissions allowances and pump their CO2 emissions into the sky that to pay for such a system, which in any case, apart from a heavily subsidised project in oil-rich Norway, is the subject of only a handful of pilot projects across the EU at present.

Build it…but what if they don’t come?

Oil and gas producers have a lot a stake, after decades of advocating CCS as a ready-to-go climate fix. The EU adopted in May a Net Zero Industry Act (NZIA) that requires them to deploy storage infrastructure – typically in depleted gas fields – capable of receiving 50 million tonnes of CO2 a year for safe and permanent storage by 2030.

Unless there is a willing line of factory owners ready to pay good money to have their CO2 emissions locked away forever, petroleum firms could be sinking their money into a white elephant.

To put that figure in perspective, the Northern Lights project in oil-rich Norway – not an EU member, so not counting towards the target – had been in development since at least 2017 when it opened in September, and is by far the largest project in Europe, yet is designed to support injection of just 1.5MT a year initially.

The European Commission is currently analysing EU petroleum production statistics and is in discussions with member states over how the storage deployment requirement will be divided up proportionately between oil and gas firms operating across the bloc.

Public money already flowing

The EU executive has, in fact, already begun funding CCS through the Innovation Fund, drawn from the sale of CO2 emissions allowances and worth some €40 billion in the decade to 2030. Support granted in October for projects such as CO2 capture at cement and steel plants that the Commission says will provide 13% of the CO2 needed to fill the new storage capacity.

But rather than relying on ad hoc applications for funding, the IOGP wants a dedicated facility similar to the Hydrogen Bank that channels EU cash into production of a clean fuel that can replace fossil fuels and decarbonise heavy industry, along with other ‘hard to abate’ sectors such as aviation, largely using renewable power from wind and solar.

However, as well as arguing that a new Carbon Contracts for Difference (CCfD) auctioning mechanism  should be put in place next year to help plant operators install carbon capture technology, the IOGP says such a CCS Bank could also involve ‘targeted funding’ for storage operators.

This would likely spark anger among environmentalists and political groups who believe there is a certain justice in making oil and gas firms pay for a technology the petroleum industry itself claims offers a solution to the global heating caused by burning fossil fuels.

Investment decisions

Last week saw a small step forward in deployment on the ground in the EU, with chemicals firm INEOS and partners announcing on Tuesday a final investment decision on their ‘Greensand’ carbon capture project in Denmark, designed to store an annual 0.4 million tonnes.

The project is heavily subsidised to the tune of €1.1 billion by the Danish government, as well as being earmarked for a share of €4.8 billion divvied up in the last round of funding under the Innovation Fund.

INEOS spokesperson Richard Longden told Euronews that the project allowed for a “gradual expansion of storage capacity towards 2030” which could potentially reach 8MT – although the depleted Nini West oil field to be used in the first phase is large enough only  to receive an average of 1.5MT over 20 years before it is full up.

“The site's full capacity, including future developments in the surrounding fields, could significantly extend capacity as additional resources are integrated into the storage plan,” Longden said. INEOS did not disclose how much it was investing in the project, only that it “paves the way for expected investments of more than $150m across the Greensand CCS value chain”.

UK bets big

The same week, the UK government announced that a planned “new carbon capture industry” would start next year after the signing of £4 billion (€4.8bn) worth of CCS contracts in what has been dubbed the North East Cluster in the coast region of Teesside.

The UK has even resurrected the idea of net-zero power generation from fossil fuels, with one of the beneficiaries of Tuesday’s round of contract signing being Net Zero Teesside Power (NZT Power), which aims to be “the first gas-fired power station with carbon capture and storage”.

NZT Power is a joint venture between UK petroleum firm BP and Norway’s state-controlled Equinor – part of the consortium of oil firms behind the Northern Lights project.

But despite the resurgence in political and financial support across Europe, critics are quick to point out a track record of failure, and they accuse fossil fuel companies of using CCS as an excuse to continue drilling – literally in the case of advanced oil recovery used in the majority of carbon storage projects worldwide, where the injected CO2 is used to force more crude out of the ground.

“Investing in outdated, high-carbon fossil-fueled industries like plastic production and betting on unreliable technologies like CCS locks us into a cycle of pollution and waste,” said Rachel Kennerley, a carbon capture specialist at the Center for International Environmental Law. “Real decarbonisation creates jobs in renewable energy, circular zero-waste economies rather than propping up business-as-usual for polluting industries.”

Despite having previously warned against over-reliance on CCS technology, climate commissioner Wopke Hoekstra said last week the EU’s net-zero goal would require “developing transport and CO2 storage infrastructures needed to decarbonise our industry”.

The new EU executive is due to present a flagship Clean Industrial Deal initiative in its first 100 days.  With ‘competitiveness’ replacing ‘green deal’ as the mantra of the second von der Leyen Commission, the scene is set in Brussels for some fierce lobbying over the coming weeks.