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Will Big Oil’s Huge Carbon Capture Bet Pay Off?

Will Big Oil’s Huge Carbon Capture Bet Pay Off?

By Tsvetana Paraskova – Apr 21, 2021, 1:00 PM CDT

“We’re sending carbon back where it came from,” Norway’s energy giant Equinor says, describing its efforts to make carbon capture and storage (CCS) commercially viable in a future decarbonized energy system. Equinor is a joint venture partner with two other oil majors, Shell and Total, in developing the Northern Lights project in Norway, which is planned to deliver carbon storage as a service to help third-party industries to reduce emissions.

Big Oil has been using CCS as a means to cut emissions from its own operations. Now the world’s largest international oil companies see carbon capture and storage as a potential new revenue stream in the energy transition.

The top oil firms are already involved in dozens of CCS or CCSU (U for utilization) projects from Norway to Australia, saying that the technology is recognized as critical to achieving the Paris Agreement goals.

Of course, Big Oil’s increased focus on CCS technologies, especially carbon storage as a service, has drawn criticism from environmentalists. According to them, the talk of CCS projects and technologies is nothing but “greenwashing”, while the aim to profit from a solution to the problem Big Oil has helped to create is nothing short of cynical.

Big Oil Boosts Bet On Carbon Capture And Storage

The biggest oil firms believe that CCS is one of the ways to help carbon-intensive industries to reduce their emissions, as a growing number of companies in various sectors are committing to net-zero operations within the next two to three decades.

Oil majors are already working on several large-scale CCS projects aimed at decarbonizing industrial clusters in parts of Europe.

BP, Shell, Total, Equinor, Eni, and National Grid formed last year the Northern Endurance Partnership to develop ‎offshore carbon dioxide infrastructure in the UK North Sea, with BP as operator. The infrastructure will serve the proposed Net Zero Teesside (NZT) and Zero Carbon Humber (ZCH) ‎projects that aim to establish decarbonized industrial clusters in northeast England.

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Further north, Equinor, Shell, and Total formally launched last month the Northern Lights joint venture for the Northern Lights project, which has the backing and a large part of the financing coming from the Norwegian government, with the state covering around two-thirds of the costs.

Carbon Storage As A Service “We deliver on this strategy by offering CO2 transportation and storage as a service. We will work with customers across Europe and across sectors to help the transition to net zero emissions. We are the first, and we will help others to follow”, said Northern Lights Managing Director, Børre Jacobsen.

“This is neither a pipe dream nor decades in development. Northern Lights is scheduled for operation in 2024,” said Maarten Wetselaar, Integrated Gas, Renewables, and Energy Solutions Director at Shell.

CCS “is becoming a business rather than just a solution,” Wetselaar recently told The Wall Street Journal. Shell looks to include carbon storage as “part of an integrated energy package” to energy customers, he noted.

In the United States, Exxon created earlier this year a new business, ExxonMobil Low Carbon Solutions, to commercialize its low-carbon technology portfolio, focusing first on CCS.

“We have the expertise that can help bring technologies to market and make a meaningful difference,” chairman and CEO Darren Woods said.

Exxon is currently evaluating new CCS projects and partnerships to collect CO2 from industrial sources in the Gulf Coast and in Wyoming in the United States, as well as at the ports of Rotterdam in the Netherlands and Antwerp in Belgium. Projects in Scotland, Singapore, and Qatar are also under planning or evaluation.

Will CCS Overcome Current Challenges?

Despite Big Oil’s increased focus on CCS, challenges in making technologies economically viable mainstream solutions to the world’s hard-to-decarbonize industries remain.

Those challenges include funding for scaling up various CCS technologies and making them commercially viable in a low-carbon future. The carbon capture drive also faces challenges in the public’s perception as climate activists criticize the industry for aiming to profit from the solution. Environmental think tank Carbon Tracker commented on Big Oil’s hope to make CCS a service with “Create the problem >> profit from the cure.”

Related: Why Natural Gas Won’t Be Replaced Anytime Soon

Still, if any industry has the skills and technology to build pipelines and stuff carbon back in the ground or below the seabed, it is the oil and gas industry.

Big Oil is confident they can scale up CCS to commercial solutions for energy-intensive industries and industry clusters. Yet, oil firms recognize the challenges in helping carbon capture and storage to reach maturity and become a material part of their business.

“Accelerating the pace of CCS deployment requires continued collaboration between governments, industry and investors, among others, to help unlock financing capacity, accelerate technology development and encourage public support. We recognise the scale of the challenge in developing CCS globally as quickly and as widely as needed,” Shell says in its Energy Transition Strategy.

Government support for CCS has accelerated in recent months, with programs and support in the UK, Australia, and the United States, where two bipartisan bills recently introduced in the Senate aim to support carbon capture and storage technologies.

Yet, CCS becoming a material part of Big Oil’s business is probably a decade away.

“In terms of hydrogen and CCS, in terms of material parts of the company, you are really looking at 2030 plus,” BP’s chief executive Bernard Looney said on the Q4 earnings call in February.

“We need much more of these opportunities being built around the world, so that we can get the scale that will lead to the cost reduction that will lead to the economics of these things working,” Looney added.

By Tsvetana Paraskova for Oilprice.com

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