Wintershall Dea’s recent decision to pull out of Russia left the German independent with a multibillion-euro hole in its balance sheet and the loss of half of its production.
Despite, or perhaps because of this, the company is pressing ahead with its carbon capture plans as the technology is badly needed to reduce Europe’s industrial emissions.
By doing so, the company is, to some extent, banking on the world putting its ambitions into practice when it comes to reducing emissions.
Carbon prices in Europe have strengthened, and Wintershall Dea chief technology officer Hugo Dijkgraaf expects the company’s carbon capture and storage (CCS) investments will pay off quickly when projects achieve scale.
These low-carbon projects, with major partners such as Norway’s Equinor and UK-based chemicals manufacturer Ineos, will diversify Wintershall Dea’s business by using knowledge gained through its core exploration and production business, Dijkgraaf tells Upstream.
“These are world-scale projects,” he says. “We cannot start with small projects in this business.”
The company’s timing appears fortuitous: the European Union Emissions Trading System (ETS) price has hovered above €90 ($97) per tonne of carbon dioxide since February and exceeded €100 for a time late that month, a record high.
“The ETS hitting €100-plus is an important factor,” Dijkgraaf says. “Once [our projects] are at scale, we’ll be in the money quite soon, with the ETS price where it is.”
Wintershall Dea aims to grow its low-carbon businesses while expanding its oil and gas exploration and production — a common tactic in the sector as fossil fuel production has been delivering record-high profitability.
But the task may be thornier for Wintershall Dea, as it is in dire need of new revenue streams after announcing the exit from its Russian operations, which means investment in developing low-carbon ventures will be closely scrutinised by investors.
The company intends to stay the course with its core oil and gas business and build on that to establish a compatible low-carbon offering, Dijkgraaf says, noting Wintershall Dea is diversifying its international operations.
“There is no doubt in our future in E&P. We stay true to what we are good at,” he says.
CCS is “close to our core”, he insists, given the engineering and subsurface synergies with E&P and the availability of depleted oil and gas field assets the company can repurpose as CO2 storage sites.
CCS “is not a step out. It’s a logical conversion. It helps us use existing infrastructure for longer [with] clear benefits to us directly”, Dijkgraaf says.
Wintershall Dea and Ineos are the main developers behind Project Greensand, which began a trial CO2 injection earlier this month.
A first load of CO2, captured and liquefied at an Ineos Oxide plant in Antwerp, Belgium, was shipped to Danish waters and injected into Ineos Energy’s depleted Nini West oilfield in the Danish North Sea.
The project is the first in Europe to trial all stages of the CCS value chain, and a milestone for Wintershall Dea.
“It’s important to show that it’s possible to transport CO2 across borders, to inject it safely,” Dijkgraaf says.
“The industry needs some proof points. Greensand is one.”
Pending the final investment decision in 2024, Greensand aims to store up to 1.5 million tonnes per annum of CO2 by 2025 and scale to 8 million tpa by 2030.
Wintershall Dea is partnered with Equinor and others in the Snohvit CCS facility offshore Norway, where 7 million tonnes of CO2 have been captured and stored since 2008, and is pursuing other large-scale projects.
Last October, Wintershall Dea obtained a licence to explore carbon storage potential in the Luna acreage some 120 kilometres offshore Bergen in the Norwegian North Sea. Luna has estimated injection capacity of up to 5 million tpa of CO2.
In August, the company and Equinor announced an agreement to develop Nor-Ge, a 900-kilometre pipeline to connect CO2 collection sites in northern Germany to storage sites offshore Norway. It expects to complete the pipeline by 2032.
CO2 transport and storage “will become a business in its own right, when [rules] around capturing carbon in Europe will be harmonised”, Dijkgraaf says.
In Wilhelmshaven, on Germany’s North Sea coast, Wintershall Dea hopes to build a plant producing 5.6 terawatt hours per year of blue hydrogen for industrial use, as well as a hub for collecting and transporting CO2 from local industrial emitters.
The location has a deep-water port and access to two pipeline entry points for Norwegian natural gas reaching Germany.
“We’re building a business model — from emitter to storage, from H2 molecule to the client,” Dijkgraaf says, adding that the focus in the coming months will be on maturing the blue hydrogen plant project.
“This is the year of feasibility.”
Wintershall Dea posted a 130% increase in adjusted net income for its non-Russian business in 2022, to €928 million, as energy prices soared, but also suffered from €7 billion in one-off losses related to the exit of its Russian upstream and associated midstream business.
Its Russian asset base included a 15.5% stake in the operator of the Nord Stream 1 subsea pipeline and major investments in the never-used Nord Stream 2, as well as upstream investments in the Yuzhno Russkoye and Achimov gas developments in Siberia.
The decision effectively halves the company’s production, with Russia accounting for 320,000 barrels of oil equivalent per day out of a total 635,000 boepd produced in the first nine months of 2022.
Wintershall Dea is working to increase its production in Norway, with the Nova and Njord fields now on stream and eight development plans submitted, including the Maria phase two and Dvalin North projects.
Healthy oil prices and energy security concerns are providing oil and gas producers a tailwind for such investments — and given the modest-at-best returns for oil companies’ renewable energy businesses, it is unclear if they can count on continued investor support for their net-zero ambitions.
Dijkgraaf, undeterred, insists the goals are not mutually exclusive.
“There is no future for companies without a transition objective,” he says.
“We all have to play our role.”
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