The United Kingdom’s vision

"The role that CCUS has to play in decarbonizing the United Kingdom (UK) by 2050 is significant: there are no credible net zero transition scenarios that do not foresee a role for CCUS,” says David Whitehouse, chief executive officer of Offshore Energies UK, the leading trade association for the UK offshore oil and gas industry. Many industries, such as cement, steel, and lime, will continue to produce process emissions, a natural by-product of the production of these materials. “These industries,” Whitehouse explains, “will be pivotal in ensuring that the UK can manufacture and install the critical infrastructure to increase the availability of renewable energy that will drive a low-carbon economy.”

 

CCUS has a role to play not only in decarbonizing domestic heavy industries but also in addressing the intermittency of renewables in power generation. “Roughly 30 percent of our electricity was generated by gas-fired power plants in 2023, providing a stable source of electricity to millions. Maintaining a consistent power source will be vital as we increase our reliance on renewable electricity,” Whitehouse stresses. CCUS offers a means to decarbonize the power generated by gas-fired power plants

 

 

 

 

 

What is the storage capacity of the United Kingdom?

The UK is responsible for roughly 78 Gt of carbon dioxide in the North Sea, and has storage capacity well beyond its needs; if it can harness this storage to inject captured CO2 into Europe (and even beyond), all parties will benefit. In the CCUS Vision published in December 2023, the government outlined ambitions to develop an international import market for CO2 in the UK to decarbonize Europe while strengthening its CCUS sector.

 

Which key sectors/stakeholders will benefit?

 

Heavy industries, such as cement, steel, and lime production, will benefit from reducing the environmental impact of process emissions. In turn, this reduces the aggregate costs associated with the UK ETS.

 

Then, oil and gas companies will be able to diversify and grow in new areas. A significant number of the current carbon storage license holders have a history of oil and gas production in the North Sea. Exploiting the capabilities of our world-class oil and gas sector will be vital in unlocking the storage potential of the UK Continental Shelf (UKCS).

 

In addition, there are vast opportunities for supply chains, whether by developing new technologies or the reapplication of existing oil and gas capabilities. Offshore Energies UK’s ‘Business and Supply Chain Outlook’ indicates that the oil and gas supply chain can deliver roughly 80 percent of the supply chain needs of the CCUS industry.

 

Finally, local economies will benefit from the £20 billion to be invested in the four government-supported clusters (Hynet, East Coast Cluster, Acorn CCS, and Viking CCS); these investments will enable growth in the industrial heartlands of the UK, providing jobs and attracting private investment.

 

What are the enabling policies and regulations addressing CCUS?

The UK government has made great strides in developing effective policies to support the emergence of a domestic CCUS industry. In 2023, the UK announced the allocation of £20 billion to support the start-up phase of four domestic CCUS clusters (HyNet, East Coast Cluster, Viking CCS and Acorn CCS), including a £1 billion infrastructure fund.

 

In December 2023, the CCUS Vision was announced, outlining the UK’s plan to transform the CCUS sector into a self-sufficient industry starting in 2035. The CCUS Vision foresees three key phases:

• market creation (2023 - 2030);

• market transition (2030 - 2035);

• self-sustaining market (2035 onwards).

 

 

 

 

 

What is a regulated asset-based mechanism?

 

A regulated asset-based (RAB) mechanism is a type of economic regulation typically used in the UK for monopoly infrastructure assets such as water, gas, and electricity networks. In the case of CCUS technology, the company developing the CCUS infrastructure will obtain a license from an economic regulator, which grants it the right to charge a regulated price to users in exchange for providing the infrastructure (T&S networks, storage sites, etc.). To prevent monopolistic disadvantages, the tariff is set by an independent regulator, which holds the company accountable for ensuring that any expenditure is in the best interest of users.

 

What are the enabling technologies? What will Eni’s role be?

 

For CCUS, these are mainly carbon capture technologies that enable the development of the industry. The United Kingdom holds a strong position in the development of these technologies, with companies operating all over the country, including Linde, Aker Carbon capture, Carbon8, and CarbonClean. Opportunities for Eni lie in the development of carbon stores and technologies associated with drilling, pipeline installation and MMV.

 

OEUK estimates that about 80 percent of the domestic UK CCUS market can be reached by the existing oil and gas supply chain. The largest segment is engineering and construction (30 percent of the market), driven by the construction of capture plants and pipeline infrastructure. This is followed by the equipment and materials segment, which accounts for 26 percent of the target market. Within the drilling, intervention, and P&A segment, roughly 45 percent is made up of offshore storage-related activities targetable by Eni through involvement in cluster projects in the UK.

 

What are the future challenges and opportunities in this area?

Among  the most significant challenges for UKCS and Eni is enabling cross-border CO2 transportation. Unlocking early imports of CO2 will enable the development of additional carbon stores and maximize the UK’s storage potential. However, at present, there are a number of barriers in the way of such imports, ranging from the lack of mutual recognition of UK and EU ETS systems to non-alignment of transportation, lack of infrastructure, liability for CO2 leaks and storage standards. OEUK are working together with industry to find solutions to these barriers and accelerate the development of cross-border transportation of CO2.

 

The declining price of UK ETS also remains a challenge for the development of self-sustaining CCUS projects in the UK. To date, the levelized cost of CO2 capture is between £40 and £100 pounds per ton, depending on the sector and the size of the capture plant. This is significantly more than the current UK ETS price, which remains below £40 per ton. That, however, does not include the additional costs of transportation and storage. Ensuring an effective and targeted approach to the free allocation of carbon credits and ensuring stable oil and gas prices will help keep ETS prices strong and favor the development of CCUS projects in the UK.