OEEC: CCS will employ as many people as oil & gas at its peak

Carbon capture and storage (CCS) is seen as a bridge to help the world wean off carbon fuels. With that in mind, this developing technology is not going to be temporary and is definitely going to happen on a large scale. To reach that as quickly as possible, we need regulations, licensing, a supply chain, as well as trust from society, the CCS: Completing the climate change menu session at Offshore Energy Exhibition & Conference concluded, highlighting the need for more projects to enable better understanding of what is working and what not.

Berte Simons, Business Unit Director of CO2 Storage & Transport Systems at Energie Beheer Nederland (EBN), Alistair Macfarlane, Manager UK Carbon Transport & Storage at North Sea Transition Authority (NSTA), Martin van Onna, CEO at Dutch thermoplastic composite pipe (TCP) technology player Strohm, and Flaviu Barsan, Energy Transition Manager at Dutch exploration and production firm ONE-Dyas, participated in the session, moderated by Paul de Leeuw, Director Energy Transition Institute at Robert Gordon University (RGU).

According to Simons, the Netherlands aims to develop quite a large CCS infrastructure, seen as a very important part of the energy transition. At the moment, the country is in the concept select phase of scaling up the CCS infrastructure, which means that after 2030, with the Aramis infrastructure and many storage sites offshore, ten times of what is being done now can be done.

Due to being a developing and capital-intensive industry, certain key challenges require collaboration across the industry with operators, suppliers, and government to come up with the right policies and legislation.

“A lot of things are needed for standardization and we have quite some challenges to overcome on how we are going to share risk in scaling infrastructure where we have an emitter-base, an industrial base in Europe, which is under pressure, not only because of the energy transition, but because of many other legislations as well,” Simons said.

“At the same time, we are still producing gas. We need to basically manage that in an orderly manner so we can optimize the economic value that we currently have in still supplying energy and then in the future using these assets for other purposes.”

Simons notes that CCS is definitely going to happen on a large scale and that the Netherlands is incredibly well positioned, especially taking into consideration that Belgium and Germany have very limited storage sites: “The ones who are moving first with large-scale industry will be able to capture the markets and will be able to share risk and derisk each other’s projects. That will definitely happen.”

A lot of commercial and economic risks and challenges lie ahead to make this market work, but those who are able to build the CCS offering or capture and/or are decarbonizing their portfolio are the ones who are going to push the scaling of the market as they are already connected. They are the ones who are going to be the first movers, where the largest volume of trade contracts is happening first, and they will be the first to access subsidies because they put in risk.

CCS is not going to be temporary, which changed the views on reusing already existing infrastructure. Simons claims that as the technology will be staying, facilities need to be built to last not only 15 years but a lot longer.

Scaling up also requires to be “in the money”, Simons notes, claiming that otherwise it is not going to happen: “You need to have cash, knowledge of the subsurface and assets in order to make this transition. We need to keep the industry here. People need to be employed here. They need to want to live in the Netherlands and work in the Netherlands. That is very critical and it is actually at risk at the moment when you look at cash and how we look at the business case.”

Macfarlane shares the confidence that the scaling up is going to take place. However, he believes that the pace needs to pick up hugely as at this speed the targets that have been set will not be achieved, and having one North Sea target would bring a much better result than each country acting on its own.

More projects are needed as the more we have the better we know what is going on and what is going to work and what not, Simons further notes, adding that, besides that, working with neighboring countries, as well as private companies, is the way to go, sharing all research results to help investors quickly assess what they have to do.

Strohm’s Van Onna claims that proven, mature technology is needed for the energy transition: “We started looking at hydrogen and CO2 at the same time. Originally we put more of our resources into the hydrogen camp and the only thing that we saw was delay and delay. It is an interesting comparison because in the hydrogen area, we saw that the technology challenges were so large that it was very difficult to increase the technology readiness level quickly enough to come to scale, and if you make that comparison to CO2, technology-wise it is a big difference, the technology is there.”

This might not be the case commercially, but in terms of regulations, large steps have been taken, resulting in more concrete inquiries and more concrete projects, thus showing that CO2 in terms of business is overtaking hydrogen.

In the past people would only talk about what is the cost of infrastructure and installation, while now there are real concerns on corrosion, lifecycle cost, picking the infrastructure back up at the end of the lifetime, and maintenance, Van Onna says.

The UK has 78 gigatonnes of storage, up there with Norway in terms of capacity, and all the emissions that the UK has emitted since the Industrial Revolution could be captured in this storage, Macfarlane notes. This solely represents a lot of opportunity, but given the proximity and the amount of infrastructure that is there already from oil & gas production, there is an opportunity for repurposing as well.

The UK currently has two Track 1 projects, one of which is Northern Endurance Partnership (NEP), which is an aquifer, and the other is Liverpool Bay, which is a depleted gas field. Furthermore, there are two Track 2 projects, announced in July 2023.

EBN is in contact with the Norwegian Northern Lights, not only with the project but also with the shareholders, exchanging anything that has to do with technical and risk of operations sharing.

“We are exchanging a lot on what was planned, how are things playing out when in the execution phase, issues with dealing with different customer emitter specifications, etc., and lastly, we also exchange public perception research,” Simons said.

Barsan from ONE-Dyas, which is maturing a portfolio of CCS projects, notes that in the feasibility stage, the critical questions that should be asked are: is it technically feasible and is it commercially feasible. If the answers to both are yes, then the next stage includes making pretty firm decisions on how the project is going to be developed, who the customers will be, where the CO2 will come from, and how will it be disposed of safely and permanently.

Commitment is important, but as Barsan notes, in order to commit to something, one has to trust it. Therefore, there needs to be mutual trust along the value chain, from the emitter side that they will make a final investment decision (FID), from transporters that they will invest in infrastructure, and then the rest of the value chain needs to have trust in developers that they will be able to store it safely.

The second element in this puzzle is cost. Government support plays a huge role, whether it is direct or indirect, in some measure or another, it needs to be there. According to Simons, research carried out with Norway, Canada and Denmark showed that there are two very important trust indicators – trust in the government and trust in the industry: “Those two parameters are key in how people look at the industry. I think at the moment because we are doing a lot of things offshore, we do not see a lot of appeals. People are very curious. I think they understand the importance, but the ability for the Netherlands to do onshore CCS is really over.”

From the supplier point of view, Van Onna adds that if we are not careful in the permitting process, trusting governments and institutions will drop, thus, being transparent and engaging people earlier decreases the odds of having appeals, rather than trying to be as quick as possible with the developments.

Similarly, Macfarlane says that the public’s trust can be obtained by showing that it can be done, as well as by setting up a robust process that shows that operators have been challenged and that the government is making sure money is not being provided for temporary solutions only that will start leaking back to the surface: “I think a lot of people are oblivious in the wider UK society. You need to show its value for money, and then the operators need to operate well. We have monitoring plans that the operators are committed to which we also steward. So all that will help to layer on layers of trust. And I am pretty certain in 10-15 years’ time, nobody will really care.”

The most important considerations going forward are said to be making the permit decisions, then building a mandate with the public for all the money that is going to be spent, and finally increasing the pace.

“I think we need a certain amount of CO2 as we have a dependency on hydrocarbons. So you need to have something to build the bridge and carbon capture and storage is that bridge,” Macfarlane said. “You have to build on those projects that we have now and go after scale because the unit-per-unit cost is going to increase hugely if you can do that. It is when you get that ramp-up that you will start seeing the per-unit cost going down. You also have to consider the cost of not doing it, the societal cost of this carbon.”

Giving a strike price per kilo CO2 is a tough question to answer. Barsan notes that the range would be very wide and perhaps not meaningful: “Everyone looks at carbon pricing and uses that as a bit of a barometer to gauge whether a technology like CCS becomes attractive or competitive. In some cases, the governments take more risk, in others the market and so on. What I think is even more important is recognizing that whatever price or cost we are looking at now will be very different in five years when we go into the execution of that project and we start procuring steel and putting things in the ground. The true-up mechanism between the now and then is not there yet and that hurts confidence.”

Barsan further highlights that contracts need to be there, but it is very challenging to get commitment at this stage of the market, and signing for something that will take 15 years to do brings a lot of uncertainty.

“We see very clearly that CCS projects will not compete on a return basis with conventional oil & gas developments. The margins are thin, the risks are relatively high, uncertainties are there. In the UK margins are guaranteed pretty much. In the Netherlands not yet and are much more subject to market, but a positive business case can be made,” Barsan said.

In the UK, injection from the Track 1 projects is expected in about three years, while contracts are expected early in 2025.

“We have 21 licenses that were awarded a year ago. There will be work coming from that, including seismic shoots and test drilling activity. So you can start seeing the wave coming now for it to be at its peak,” Macfarlane said, noting that for the foreseeable future, CCS will definitely be only offshore in the UK, especially since the geology to do it onshore does not exist.

As for long-term plans, Macfarlane believes that CCS will employ as many people as oil & gas did at its peak. This will include a lot of the same activities and same skillsets: “So it is a good thing when I said it was a bridge to helping us wean ourselves off of carbon fuels, but it is also a bridge to help us move people into other technologies and another sector. I think we are at a nice dawn just now.”

Everyone is in some way working towards the 2030 target, at the EU level at least, which consequently means things have to happen fast and the supply chain needs to be taken along.

Barsan believes the industry will have to be out there with contracts in the next few years to make this happen: “We have to be, we will at least be at a point where we know exactly what materials and long leads we need to order. We may not have the luxury of waiting until FID to order everything because there will be bottlenecks. There will be specialized and certain types of materials that everyone will be looking to source and procure, and there may not be enough. Having as many interactions already from this stage with supply chain participants and technology and materials vendors can only be good because then the end product also improves with time. They know what we need and we know what they can provide.”

When asked whether CCS is a band-aid solution and money is better spent on renewables, Barsan said: “There is an analogy I like to use. Take any team sport, you may not necessarily like all the players on the field, but take one off the field and you are probably going to lose the game. If you take CCS, for instance, that is kind of defense, right? Offense is doing everything else it can to avoid carbon in the first place. CCS is defense, it picks up the rest.”

Van Onna shares the vision, stating that absolutely everything needs to be done to do more renewables, more storage, more hydrogen, but that cannot replace CCS.