Bright outlook for carbon capture investment

20 October 2023

 

Commenting publicly this week, officials from some of the world’s biggest publicly traded international oil companies (IOCs) and national oil companies (NOCs) have made it clear that one of their preferred sustainable technologies is carbon capture.

Ahead of the Cop28 climate change conference due to start in the UAE at the end of November, senior figures from several high-profile oil companies made the promotion of carbon capture and storage (CCS) technology a key part of their messaging.

The appeal of carbon capture technologies to oil and gas companies, which see this technology as a way to extend the life of their existing facilities, is likely to translate directly into investments in the technology.

Great solution

Speaking at an oil and gas conference in London, Ahmad al-Khowaiter, executive vice-president of technology and innovation at Saudi Aramco, said he thought carbon capture was a “great solution” for the oil and gas industry as it could be applied to the existing industry to ensure that facilities do not have to be shut down for environmental reasons.

He said the technology could potentially mean the “tremendous investment” already made in existing facilities would not have to go to waste.

Al-Khowaiter spoke about carbon capture a day after the chief executive of Aramco, Amin Nasser, talked about CCS and urged world leaders to shift their focus away from goals that limit oil production in favour of goals that focus purely on limiting emissions.

“The idea is we need to reduce emissions [and] build more carbon capture and storage,” he said, calling for leaders to give more incentives to the conventional energy sector to implement CCS technologies.

He added: “The focus should be on reducing emissions. Incentives should not only be for renewables; they should be for supporting conventional energy and supporting carbon capture.

“We cannot meet our net-zero 2050 [target] without carbon capture and storage, so some incentives should go to carbon capture and storage.”

Nasser also said: “We need to work in parallel … not to call for shutting down our conventional energy today, increasing the prices and costs for everybody around the world.”

CCUS investment

Similarly, Nawaf al-Sabah, deputy chairman and chief executive of state-owned Kuwait Petroleum Corporation (KPC), commented on the significant planned investments in carbon capture, utilisation and storage (CCUS).

KPC aims to cut its Scope 1 and Scope 2 emissions to zero by 2050 and plans to invest $110bn in decarbonisation as part of its long-term plan for the oil sector.

Referring to the planned cuts to Scope 1 and 2 emissions, Al-Sabah said: “A big portion of that will be through CCUS. I think that is one of the technologies that we all, as humanity, need to invest in because it removes carbon that would otherwise dissipate into the atmosphere.”

In the case of KPC, it plans to take carbon from its refineries and inject it into its oil and gas reservoirs to stimulate production.

Critical technology

The enthusiasm for carbon capture from the NOCs was equalled by senior executives from publicly traded IOCs, who also said they were looking to invest heavily in the technology.

Richard Jackson, president of US onshore resources and carbon management at Occidental, said CCS was “central” to his company’s strategy.

Shell’s CEO, Wael Sawan, described carbon capture technology as “critical for the future of the decarbonisation journey”.

Problematic issues

Despite the enthusiasm from oil companies, it remains to be seen whether carbon capture technologies are the best way to invest capital to achieve effective emissions reductions.

This is mainly due to challenges with effectively scaling the technology, as well as issues relating to the technology’s business model.

One of the problematic aspects of a carbon capture business model has been clearly illustrated by Saudi Arabia’s Jafurah blue hydrogen plant project.

Engineering is nearly completed for this project, which is estimated to be worth around $1bn and will use carbon capture technology to remove carbon emissions from a facility that will produce hydrogen by processing natural gas.

Despite the project nearly being ready for the final investment decision, Aramco has warned that it is struggling to find offtake agreements for the product produced by the plant due to high pricing.

Aramco has asked governments in South Korea and Japan to step in to subsidise the use of blue hydrogen to make the project viable, and says it will not approve the project for execution until offtake agreements have been signed.

Economically challenged

This comes as some critics say that investments in carbon capture compare poorly to other decarbonisation solutions that use technologies proven to work at scale with functioning business models.

In a report published earlier this year, the consultancy McKinsey said: “Many, if not most, CCUS projects are economically challenged today, with high costs of capture for dilute point sources and a limited number of revenue streams available.”

While it remains unclear whether or not carbon capture is the most effective way of spending money to reach a net-zero world, oil companies have made it clear that it is one of their preferred technologies.

The fact that it could potentially allow oil companies to continue broadly using their conventional business models and existing facilities should mean that this technology receives significant funding from the oil and gas sector over the coming years.

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Wil Crisp
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