meed-logo

line1 line2 line3
SIGN IN / REGISTER

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.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11232883/main.jpg
Wil Crisp

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Abu Dhabi entities form new infrastructure platform

    17 April 2025

    Register for MEED’s 14-day trial access 

    Abu Dhabi-based investment entities ADQ, International Holding Company (IHC) and Modon Holding have formed a joint venture to support private and public-private partnerships in delivering infrastructure developments.

    The new venture, called Gridora, will be operated by Modon Holding.

    According to an official statement, "Gridora will serve as a platform for collaboration with specialist partners and capital providers, enabling the delivery of large-scale, high-impact infrastructure projects."

    The statement added that the platform will leverage Modon Holding’s infrastructure and real estate development expertise to deliver major projects, both in the UAE and globally.

    "It will enhance capacity for deployment, streamlining the procurement and implementation of key infrastructure contracts," it added.

    Gridora will have two business lines: infrastructure projects and infrastructure investments.

    It aims to create value throughout the infrastructure life cycle, from early-stage planning to operations, unlocking new opportunities for both fee-based revenues and long-term investment yields.

    Abu Dhabi is investing heavily in the infrastructure sector. In February, ADQ completed the acquisition of a 49% stake in Australian infrastructure investor and developer Plenary Group.

    The Abu Dhabi-based critical infrastructure-focused sovereign investor announced the planned acquisition in April last year,  including all shares owned at the time by the Canadian pension fund Caisse de Depot et Placement du Quebec.

    MEED’s May 2025 report on the UAE includes:

    > GOVERNMENT & ECONOMY: UAE looks to economic longevity
    > BANKING: UAE banks dig in for new era
    > UPSTREAM: Adnoc in cruise control with oil and gas targets
    > DOWNSTREAM: Abu Dhabi chemicals sector sees relentless growth
    > POWER: AI accelerates UAE power generation projects sector
    > CONSTRUCTION: Dubai construction continues to lead region
    > TRANSPORT: UAE accelerates its $60bn transport push

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13711918/main2304.jpeg
    Yasir Iqbal
  • Iraq signs export pipeline contract

    17 April 2025

    Register for MEED’s 14-day trial access 

    Iraq has signed a contract for the construction of its third offshore pipeline as part of a push to boost the stability and flexibility of crude oil exports from its southern ports.

    The pipeline project will be executed by a consortium of Italy’s Micoperi and Turkiye’s Esta, and it will have the capacity to transport 2.4 million barrels a day (b/d) of oil.

    Oil Minister Hayan Abdul Ghani said that this project is a strategic initiative and aligns with the government's plan to ensure the stability and flexibility of crude oil export operations from southern Iraq's ports. The operational capacity of the pipeline will be approximately 2 million b/d.

    The project has been approved by Iraq’s cabinet and its scope includes a marine pipeline with a diameter of 48 inches.

    The offshore portion of the pipeline will be 61 kilometres (km) long and the onshore portion will be 9km long.

    The scope of the project includes the development of two marine platforms. One of these will be located in the Basrah oil port and the second will be located in the Amiya oil port.

    The project also includes an open-water floating platform, electrical systems, communication systems, as well as cathodic control and protection systems.

    While this project is likely to enhance Iraq’s ability to export from the southern ports, it is struggling to improve export routes in the north of the country.

    Efforts to restart oil flows via the Iraq-Turkiye Pipeline (ITP) have stalled in recent years.

    Oil flows through the ITP, from Kirkuk in Iraq to Ceyhan in Turkiye, stopped in March 2023 and have yet to resume, despite several announcements by Iraqi officials stating that progress towards restarting the pipeline has been made.

    The oil exports stopped after a Paris-based arbitration court ruled in favour of Baghdad against Ankara, saying the latter had breached a 1973 agreement by allowing Erbil to begin independent oil exports in 2014.

    Prior to the halt of exports through the ITP in March 2023, approximately 450,000 b/d of oil were sent from Iraq via Turkiye to international markets.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13711824/main1041.jpg
    Wil Crisp
  • Engie submits lowest bid for Madinat Zayed power plant

    16 April 2025

     

    French utility developer Engie has submitted the lowest bid for the contract to develop and operate the Madinat Zayed open-cycle gas turbine (OCGT) power generation plant project in Abu Dhabi.

    Engie offered a levelised cost of electricity of 103.9544 fils (2.8 $cents) a kilowatt-hour (kWh) for the contract.

    A consortium of Saudi Arabia's Aljomaih Energy & Water and a subsidiary of the local Etihad Water & Electricity submitted the second-lowest bid of 107.86846 fils/kWh.

    The third bidder, a consortium of Egypt's Orascom Construction and Belgium's Besix, submitted the highest bid of 126.980 fils/kWh.

    The three teams submitted their proposals for the contract on 28 March.

    The Madinat Zayed independent power project is expected to begin commercial operations in Q3 2027. It will provide up to 1,500MW of backup generation, which can be operational “at very short notice”. 

    “Gas-fired plants like Madinat Zayed are key to ensuring a reliable energy supply while the country transitions to a decarbonised water and electricity system,” state utility and offtaker Emirates Water & Electricity Company (Ewec) said when it issued the tender for the contract in July last year.

    “[This type of plant] will be particularly important for supporting the growth of solar power, providing crucial flexibility during peak power demand periods and acting as a bridge to a future powered exclusively by clean and renewable sources.”

    Major capacity buildout

    Abu Dhabi’s current electricity generation installed capacity is about 22GW, with gas-fired plants accounting for 68.7% of the total and renewable and nuclear power contributing 12% and 19%, respectively.

    Construction work is under way for the 1.5GW Al-Ajban solar photovoltaic (PV) power plant and a 2.5GW combined-cycle gas turbine (CCGT) plant in Fujairah.

    Six major generation projects in Abu Dhabi are expected to be awarded this year. These are the 2.5GW Taweelah C CCGT scheme, the Al-Khazna and Al-Zarraf solar PV schemes, the Al-Sila wind facility and Bess 1, in addition to the Madinat Zayed OCGT scheme.

    In January, Ewec and Abu Dhabi Future Energy Company (Masdar) signed a power-purchase agreement for a 5,200MW solar PV plant with a 19 gigawatt-hour battery energy storage system (bess), which is expected to provide round-the-clock solar power.

    The project is expected to reach financial close this year.

    MEED’s April 2025 report on Saudi Arabia includes:

    > GOVERNMENT: Riyadh takes the diplomatic initiative
    > ECONOMY: Saudi Arabia’s non-oil economy forges onward
    > BANKING:     Saudi banks work to keep pace with credit expansion
    > UPSTREAM: Saudi oil and gas spending to surpass 2024 level
    > DOWNSTREAM: Aramco’s recalibrated chemical goals reflect realism
    > POWER: Saudi power sector enters busiest year
    > WATER: Saudi water contracts set another annual record
    > CONSTRUCTION: Reprioritisation underpins Saudi construction
    > TRANSPORT: Riyadh pushes ahead with infrastructure development
    > DATABANK: Saudi Arabia’s growth trend heads up

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13706588/main3447.jpg
    Jennifer Aguinaldo
  • Al-Sadawi solar IPP to reach financial close

    16 April 2025

     

    The project company developing the 2GW Al-Sadawi solar independent power project (IPP) in Saudi Arabia is expected to reach financial close for the scheme next month.

    The expected timeline falls within the average six-month period in which IPPs generally reach financial close after the power-purchase agreement (PPA) is signed with the offtaker, in this case Saudi Power Procurement Company (SPPC).

    A developer team that includes Abu Dhabi Future Energy Company (Masdar), South Korea’s Korea Electric Power Corporation (Kepco) and China’s GD Power Development signed the project’s PPA with SPPC in November last year.

    The developer team subsequently picked China's Shanghai Electric to undertake the engineering, procurement and construction (EPC) work for the 2GW project. 

    The Masdar-led team offered a levelised cost of electricity of hals4.847 a kilowatt-hour ($c1.29/kWh) for the contract to develop the scheme, which is located in the Eastern Province.

    The second-lowest bidder was a team that includes China’s SPIC Huanghe Hydropower Development and France’s EDF Renewables, which offered to develop the project for $c1.31/kWh.

    US/India-based Synergy Consulting is providing financial advisory services to SPPC for the fifth-round tender of the National Renewable Energy Programme (NREP). Germany’s Fichtner Consulting is providing technical consultancy services.

    SPPC is procuring 30% of the kingdom’s target renewable energy by 2030. Saudi sovereign wealth vehicle the Public Investment Fund (PIF) is procuring the rest through the Price Discovery Scheme. The PIF has appointed Acwa Power, which it partly owns, as principal partner for these projects.

    The Saudi Energy Ministry last year said that the kingdom plans to procure 20GW of renewable energy capacity annually until 2030, subject to demand growth.

    Hear directly from the gigaproject owners at the biggest construction event—The Saudi Giga Projects 2025 Summit, happening in Riyadh from 12-14 May 2025. Click here to know more

    MEED’s April 2025 report on Saudi Arabia includes:

    > GOVERNMENT: Riyadh takes the diplomatic initiative
    > ECONOMY: Saudi Arabia’s non-oil economy forges onward
    > BANKING:     Saudi banks work to keep pace with credit expansion
    > UPSTREAM: Saudi oil and gas spending to surpass 2024 level
    > DOWNSTREAM: Aramco’s recalibrated chemical goals reflect realism
    > POWER: Saudi power sector enters busiest year
    > WATER: Saudi water contracts set another annual record
    > CONSTRUCTION: Reprioritisation underpins Saudi construction
    > TRANSPORT: Riyadh pushes ahead with infrastructure development
    > DATABANK: Saudi Arabia’s growth trend heads up

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13704322/main3512.jpg
    Jennifer Aguinaldo
  • UAE’s Ewec extends Taweelah C power plant tender

    16 April 2025

     

    State utility and offtaker Emirates Water & Electricity Company (Ewec) is understood to have extended the tender closing date for the contract to develop and operate the Taweelah C combined-cycle gas turbine (CCGT) independent power project (IPP) in Abu Dhabi.

    The extension was announced after Ewec received a single bid for the contract on 28 February, according to industry sources.

    The Taweelah C IPP will have a generation capacity of up to 2.5GW and is expected to reach commercial operations in the third quarter of 2028.

    MEED previously reported that UAE-based Etihad Water & Electricity (Etihad WE) submitted a lone bid for the contract.

    The bidder, which sources say is now working with a new consortium partner, intends to resubmit a proposal by the June deadline.

    At least one more prequalified utility developer is interested in bidding, according to one of the sources.

    MEED understands that Ewec has reserved gas turbine units from German original equipment manufacturer Siemens Energy, which could help to attract more bidders to participate in the tender.

    A team of UK-based Alderbrook Finance and US-based Sargent & Lundy is providing financial and technical advisory services to Ewec for the Taweelah C IPP.

    The project will involve the development, financing, construction, operation, maintenance and ownership of the plant, with the successful developer or developer consortium owning up to 40% of the entity.

    The Abu Dhabi government will indirectly hold the remaining equity. 

    The Taweelah C IPP project’s power-purchase agreement (PPA) is expected to expire by 2049, making it several years shorter than previous PPAs, and in line with the UAE’s plan to reach net-zero carbon emissions by 2050.

    Ewec prequalified nine firms that can bid for the Taweelah C IPP contract in July last year.

    In addition to Etihad WE, the following firms passed the contract's prequalification phase:

    • Acwa Power (Saudi Arabia)
    • International Power (Engie)
    • Jera (Japan)
    • Korea Electric Power Corporation (Kepco, South Korea)
    • Marubeni Corporation (Japan)
    • Sumitomo Corporation (Japan)
    • GE Vernova (US)
    • Orascom Construction (Egypt)
    • Sojitz (Japan) 

    The Taweelah C IPP is the first CCGT project to be procured by Abu Dhabi since 2020, when Ewec awarded Japan’s Marubeni Corporation the contract to develop the Fujairah 3 (F3) IPP.

    Capacity buildout

    Ewec is undertaking a significant capacity buildout to support the emirate’s net-zero, energy diversification and artificial intelligence (AI) strategies.

    The bid evaluation process is under way for the Madinat Zayed open-cycle gas turbine (OCGT) IPP. The power plant is expected to begin commercial operations in Q3 2027. It will provide up to 1.5GW of backup generation, which can be operational at very short notice. 

    Ewec and Abu Dhabi National Energy Company (Taqa) recently signed the PPA for Al-Dhafra OCGT, while the prequalification process is under way for a 3.3GW CCGT in Al-Nouf.

    The tendering proceedings are under way for three renewable energy IPPs: the Al-Khazna and Al-Zarraf solar photovoltaic (PV) and Al-Sila wind facilities, and Abu Dhabi’s first independent battery energy storage system (bess) plant, Bess 1.

    In addition, Ewec and Abu Dhabi Future Energy Company (Masdar) plan to build a round-the-clock solar PV plus bess project. The solar PV plant will have a capacity of 5.2GW, while the bess facility is expected to have a capacity of 19 gigawatt-hours.

    MEED’s May 2025 report on the UAE includes:

    > GOVERNMENT & ECONOMY: UAE looks to economic longevity
    > BANKING: UAE banks dig in for new era
    > UPSTREAM: Adnoc in cruise control with oil and gas targets
    > DOWNSTREAM: Abu Dhabi chemicals sector sees relentless growth
    > POWER: AI accelerates UAE power generation projects sector
    > CONSTRUCTION: Dubai construction continues to lead region
    > TRANSPORT: UAE accelerates its $60bn transport push

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13703548/main2132.gif
    Jennifer Aguinaldo