Carbon capture, usage and storage – what’s the impact for the North Sea

26 February 2024

In the last couple of years, the roll out of renewables projects has stalled in the UK, and we’ve seen a swing back to the production and exploration of oil and gas. With UK oil and gas licences recently granted, Rich Hall, head of sustainability, highlights the need for investment in carbon capture, usage and storage (CCUS) in the UK.

CCUS in the UK – what’s the latest picture?

CCUS will play a crucial role in meeting global climate targets. Nearly all leading think tanks, including the Intergovernmental Panel on Climate Change (IPCC) and International Renewable Energy Agency (IRENA), have produced long-term energy outlooks that rely on a ‘rapid’ expansion of CCUS to limit global temperature rise to 1.5°C. This is a target that many experts acknowledge we will now overshoot.

Within the UK, CCUS was expected to play an important part in the government’s Build Back Greener strategy. In other words, encouraging the transition to net zero by supporting the development of future CCUS technologies to decarbonise and revolutionise existing heavy industry, whilst also protecting and creating highly paid, skilled jobs.

If we lose heavy industry in the UK for the lack of CCUS or slow pace of its commercialisation (as can already be seen within our steel industry), we risk losing further existing jobs in heavy industry and the energy sector, along with new jobs in CCUS, as other nations will steal our advantage.

Ultimately, the UK will import even more carbon in our products from overseas with the associated loss of economic opportunity, whilst ultimately paying an economic cost through carbon tariffs.

For the additional North Sea oil and gas licences to be consistent with the UK’s legally binding net zero targets, there should have been associated requirements for CCUS. This, in turn, would have helped stimulate this important but nascent industry by forcing additional investment - not just monetary but resource, and research and development.

CCUS: where should the UK be?

The UK’s stated ambition was for 6 MtCO2 per year of industrial CCUS by 2030, and 9MtCO2 per year by 2035. Whilst we are seeing some investment, progress is slow and most active facilities - or indeed projects - are based in North America.

For those of us in the UK that have been around CCUS for some time, there is a sense of wariness as opposed to cautious optimism. This is due to the number of previous projects that have failed, delays in decisions regarding Track-2 cluster sequencing, and the government’s recent backtracking on several net zero policy commitments. This means others could follow, and the Climate Change Committee’s evaluations regarding confidence in meeting our targets also drive this. The labour party reversing its spending pledge on meeting net zero targets merely adds to the threat of potential lost opportunity.

Energy transition – how could CCUS impact the UK energy industry?

Dealing with carbon capture is fundamentally tied to oil and gas production in the UK. If we don’t invest in CCUS in the UK, we’re kicking the can down the road and forcing the problem into another area of the world. This goes against the fair and equitable principles of ESG.

The granting of oil and gas licences could kick-start the development of CCUS within the UK. There is now a real opportunity to build our UK capability in CCUS, which will benefit the entire UK energy industry, and indeed wider economy.

Grant Morrison, head of oil and gas comments:

‘Decarbonisation of the oil and gas sector is key to a measured and effective energy transition in the UK. Multiple levers are available to achieve this including tackling methane emissions, eliminating non-emergency flaring, electrifying upstream facilities and equipping oil and gas processes with CCUS.’

‘According to The International Energy Agency, “the oil and gas industry is involved in 90% of CO2 capture and storage capacity in operation around the world today. More than 40% of CCUS investment since 2010 has been in projects directly related to the oil and gas value chains.” However, the UK is not mentioned in the report as a source of major global CCUS investment.’

‘CCUS in the UK, therefore, represents a positive opportunity impacting the UK oil and gas industry and the wider energy sector. The roll out of CCUS projects, held in reserve for Track 1, is now part of Track 2, which is now behind schedule due to delayed decisions. We have seen recent announcements that the Acorn Project at the St Fergus gas terminal in Aberdeenshire will be given the go-ahead. This would be Scotland's first carbon capture and storage facility, piping greenhouse gas emissions under the North Sea.’

‘Should this go ahead, there will be significant benefits to the local economy and skills mix in and around Aberdeen. If we can engage supply chains and labour within the local Aberdeen market and the wider UK, we can create the next generation of skills. However, the very 'live' debate around the potential impact on investment in the UK oil and gas sector of a change in government brings the issue into even sharper focus.’

How RSM can help

We work with a wide variety of clients in the oil and gas sector across the UK and globally. We can support your business with the following key areas of expertise.

For further information and to discuss the impact for your oil and gas business, please contact Rich Hall or Grant Morrison.