Next year could bring a change of pace for the industry as billions of dollars in development spending will be on the table for companies involved in carbon capture and storage (CCS) projects, as large-scale European developments take off, new research suggests.
While CCS has been touted as a potential emissions-reduction solution for decades, the high cost of the technology has meant only a handful of small projects have so far been built.
However, a Rystad Energy analysis has claimed that, as large developments are starting to make financial sense, up to $35 billion in development spending over the next 15 years could be triggered.
North-western Europe a hot spot
The Norwegian consultancy said in a note that, across Europe, around 10 large projects that are planned “have a high chance of being operational by 2035”.
Most of the planned projects are located around the North Sea in Norway, the UK, Denmark and Netherlands, but there are also projects on the drawing board in Ireland and Italy.
“Although most of the projects are expected to be online from the middle of this decade, investments and contracts awarded to suppliers will already start to grow significantly from 2021 to 2023, as most projects have a development timeline of three to five years,” Rystad said.
“Total capital investment for these projects is expected to reach $30 billion, in addition to operational expenditure totaling $5 billion until 2035,” the research suggested.
Rystad’s analysis said about half of the capital expenditure will be consumed by the facilities at the source, with carbon dioxide-capture equipment and facility construction making up the largest part.
In addition, storage investments will make up 15% and will mainly comprise well-related services to store the CO2 safely in underground reservoirs, while transport and operations could take 35% and relate to trunk lines, shipping and infrastructure maintenance costs.
The first three projects that are due to become operational are Pale Blue Dot’s Acorn CCS project in north-east Scotland, the Equinor-led Northern Lights carbon capture, utilisation and storage (CCUS) venture in Norway and the Port of Rotterdam CO2 Transport Hub and Offshore Storage (Porthos) project in the Netherlands.
These “game-changing” projects could de-risk the overall CCS uncertainty, likely prompting “more than twice as many projects, in count and size, to follow”, Rystad said.
“With the projects so far planned in Europe, we expect that 3 million tonnes per annum of CO2 capture and storage capacity will be added each year from 2021 to 2025, then jumping to 7 million tpa in the next five-year period 2026 to 2030,” Rystad said.
“By 2035, we are looking at total installed capacity of around 75 million tpa, where almost 80% will come from UK projects,” according to the research.
Looking at the bigger picture, other CCS projects have also been discussed across Europe, in Italy, Germany and also Ireland.
Eni said it will also invest in CCS projects to sequester more than 10 million tpa of CO2 by 2050. A scheme at Ravenna, Italy would move to execution after 2025, chief executive Claudio Descalzi previously said.
In Germany, Wintershall Dea is researching the technology and has set up a specialist unit to support its goal, although the company has been scarce on details or any targeted timeline.
In the UK, supermajor BP is leading other large oil and gas companies, including Shell and Total, to accelerate the development of the Net Zero Teesside CCS scheme in north-east England, while offshore Ireland, semi-state owned utility Ervia is looking into a CCS feasibility study at the depleted Kinsale Head gas field.
Limited live projects
However, currently, there are only two complete full-scale CO2 projects operational in Europe, both located off Norway at the Sleipner and Snohvit fields.
The CO2 injection projects have a combined CO2 capture and storage capacity of around 1.5 million tpa.
“Several European policymakers and non-governmental organisations have previously indicated they are ready to rule out CCS as a climate mitigation tool, saying the technology is not proven and available and has unrealistic expectations,” Rystad Energy’s head of energy service research Audun Martinsen said.
“For CCS to have a significant future, it’s therefore important that Northern Lights and Acorn run through their pilot stages to show that this can be a proven technology.
“As standard renewable technologies that have some maturity in Europe such as solar installations and offshore wind farms are increasingly gaining market share, CCS projects will face competition and have to prove cost-worthy,” Martinsen added.
Opportunities for suppliers
As progress is made on proposed projects, contracts are expected to be awarded in the coming years, with some of the deals on the table potentially turning out to be new markets for companies looking to join the energy transition rush.
“Developing CCS projects is an opportunity for the linepipe and oil-country tubular goods (OCTG) industry, with a new market about to open up for suppliers looking to expand beyond oil and gas,” Rystad’s senior vice president of energy service research, James Ley, said.
According to Rystad estimates, the Northern Lights CO2 storage project in Norway will require around 12,000 tonnes of carbon seamless linepipes for the export line, and tenders for these tonnages could be expected soon.
“For subsea installation, Saipem, Technip FMC and Subsea 7 are all competing for this job and we believe that Saipem and Subsea 7 are leading the race,” Rystad said.
“From an OCTG perspective, the initial requirements for Northern Lights are likely to be low as the project just calls for one well to be drilled in the first phase, following a test well drilled in March 2020.
“This injection well is expected to require high-chromium grades of OCTG tubing.
“Northern Lights phase one is expected to cost $760 million, with 56% of the contracts going to Norwegian suppliers,” Rystad said.