Energy / Sullom Voe operator concern at government’s carbon capture funding strategy
SULLOM Voe Terminal operator EnQuest has expressed disappoint at the UK Government’s strategy for providing investment in carbon capture and storage projects.
The company warned that the UK could “cede the opportunity” to lead development in the field, despite possessing around 25 per cent of Europe’s total carbon storage capacity.
In response, the UK Government said its funding will help firms to “lead the world in a ground-breaking clean energy technology”.
Carbon capture and storage is one element of the proposed transition towards net zero at Sullom Voe Terminal (SVT) in Shetland.
EnQuest, which operates the terminal, has two carbon storage licenses from the UK Government.
These are located in the Magnus and Thistle fields to the north east of Shetland, and are connected to SVT by pipeline.
EnQuest subsidiary Veri Energy, which is overseeing the transition at SVT, said CO2 captured by emitters elsewhere would be transported via ship to the terminal, from where it would be sent via the repurposed pipelines for permanent storage in depleted oil and gas reservoirs.
It is exploring storing up to ten million tonnes per year.
But there appears to be concern about the longer-term funding support from the UK Government.
EnQuest’s half-year results, published last week, said Veri’s model is designed to de-risk carbon capture and storage value chain, “reducing the burden on government and emitters alike”.
But the company said it is “disappointing, therefore, to note that the UK Government does not plan any further investment in carbon storage” beyond what was outlined in its most recent comprehensive spending review.
“As it stands, this limits support to Track 1 projects, with only modest business development funding for Track 2,” it added.
“This approach negatively impacts the value proposition for emitters and is likely to see the UK ceding the opportunity to lead, despite possessing c.25 per cent of Europe’s total carbon storage capacity.
“Veri Energy remains encouraged by the project’s potential to provide a low-cost merchant-market solution for CO2 emitters to permanently sequester carbon.
“However, it is clear that a delay in government support will impact all UK projects of this type.”
A spokesperson for the UK Government’s department for energy security and net zero: “We are delivering first of a kind carbon capture projects in the UK, backed by £9.4 billion over this parliament – and £21.7bn over 25 years.
“This funding will see our industries remain competitive in the global economy, kickstart growth and lead the world in a ground-breaking clean energy technology.”
The first two ‘clusters’ under the banner of Track 1 to receive government funding – the £21.7 billion – were HyNet, covering Merseyside and north Wales, and East Coast, which spans Teesside and Humberside.
The government said it is supporting the “Track 2” Acorn and Viking ‘clusters’ with funding to advance their development prior to a final investment decision, while its own funding is expected to result in in £8 billion of private sector investment over the next 25 years.
Acorn, for example, would see CO2 sent to St Fergus in the north east of Scotland before it is sent offshore using gas pipelines for storage.
The Viking cluster would see CO2 sent offshore in the Humber region of England.
The half-year results meanwhile reaffirm EnQuest and Veri’s commitment to producing e-fuels at SVT, which is focused on integrating green hydrogen and biogenic CO2.
The initial target is to produce e-diesel for Shetland’s marine and power sectors, with longer-term ambitions to scale into export markets – including sustainable aviation fuel.
“The combination of infrastructure, natural resources, and skilled labour makes SVT a compelling hub for low-carbon fuel production, and the Veri team continues to evaluate scenarios for end products, scale, partnerships and technology integration for the project,” the results report said.
This is separate to Statkraft’s ambitions to construct a hydrogen/ammonia plant in the Scatsta area.
EnQuest also said that plans to develop wind turbines at SVT are continuing, with a final investment decision expected later this year.
Previous planning documents suggested the company was looking at installing two wind turbines which are 150 metres tall.
Meanwhile Shetland Aerogenerators is continuing with its wind turbines and a battery storage system near to SVT, with a consultation event last week hearing that the number of proposed turbines have reduced from ten to eight.
The company has a memorandum of understanding with Veri which is focused on how energy generated at Neshion could be used to supply a new low carbon fuel plant at SVT.
Wind turbines at Neshion could supply SVT with electricity via a ‘private wire’ arrangement as early as 2030.
SVT’s own gas-fired power station is set to be decommissioned in the coming years as the site gets ready to take in power from the grid.
Shetland Aerogenerators said under this scenario the company would not need to wait for a connection to the electricity grid, adding that all energy generated by the wind turbines could be used for e-fuel production.
EnQuest said it is also making progress with the phased decommissioning of the existing oil stabilisation, processing and storage facilities at the terminal.
The half-year report added: “EnQuest remains focused on right-sizing SVT for future operations and is progressing strategic projects to connect the terminal to the UK’s electricity grid and to construct new stabilisation facilities.
“These projects have been undertaken to enable the group to meet the North Sea Transition Authority target of zero routine flaring obligations by 2030, and this is expected to result in a 90 per cent reduction in overall emissions from SVT.
“The delivery of these projects will also reduce the terminal’s operating costs and provide resilience for long-term operations through the replacement of obsolete equipment. The projects provide the opportunity to extend SVT operations, which support production at both East of Shetland and West of Shetland assets.”
EnQuest chief executive Amjad Bseisu also called on the UK Government to do more to support the UK North Sea oil and gas sector.
It said successive UK governments have made the UK North Sea “globally uncompetitive through fiscal policy”.
“The UK remains the only country worldwide levying a windfall tax on energy profits, in an environment where even the Office of Budget Responsibility acknowledges that prices are at, or below, historic norms and therefore no windfall exists,” Bseisu said.
“We implore the government to act now to avoid the accelerated decline of this industry and the resulting death of the UK’s energy transition ambitions.”
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