Shell sees opportunity as carbon capture market evolves

Capturing greenhouse gas emissions and burying them underground is one way the world is hoping to slow global warming. It also could be a money-maker for the oil and gas firms developing the technology.

The industry has been using carbon sequestration for decades as a way to pump more hydrocarbons out of the ground. Today energy companies – with the help of government subsidies – are looking to scale up carbon capture and storage technology, not just to bury their own emissions, but also those produced by other industries such as steel and cement.

The industry is “very quickly” going to create the use of “CCS as a service,” Royal Dutch Shell’s head of Integrated Gas, Renewables and New Energy Solutions Maarten Wetselaar said in a recent interview.

The energy major is currently linked to a number of major CCS projects, from the Northern Lights in Norway to Porthos in The Netherlands. On Tuesday Shell said it was proposing to build a large-scale facility with a 300-million-ton storage capacity at its Scotford Complex in Alberta.

However, so far only two are operational, Quest in Canada and the Chevron Corp.-operated Gorgon project in Australia. These projects are “one-dimensional,” in that they are “very much focused on our emissions for our own assets,” says Shell head of CCS Syrie Crouch.

The question now has moved onto what CCS can offer beyond capturing Shell’s own emissions, says Crouch. Whether that’s aiding the blue hydrogen industry – which requires capturing emissions – or offering carbon services to heavy emitters in industrial hubs.

Many big emitters are likely to view CCS as beyond their core competency and so will look to outsource the process, HSBC Holdings plc analyst Tarek Soliman wrote in a research note on June 30. They might be able to “plug into” a carbon handling network as a way of capturing their emissions. “The wider use of CO2 in process industries as an input could also facilitate a market where capturing and delivering carbon dioxide becomes a profitable business,” Soliman says.

Unproven technology

While CCS is set to play a key role in the path to net-zero, critics say the technology feasibility at scale is so far unproven. Shell’s own scenario for keeping global warming to within 2 degrees C of pre-industrial levels by 2070, says that 10,000 large facilities have to be built over the next five decades, from fewer than 50 in operation last year.

Backed by Norway’s Equinor ASA, TotalEnergies SE and Shell, the Northern Lights project in the North Sea represents the next stage in developing CCS purely as a service industry. The venture will liquefy industrial CO2 emissions, transport them offshore and bury them. “We’re saying, here is a sink, here is a shipping solution and we will come pick up your CO2, we will take it back and we will store it for you at a tariff,” says Crouch.

The model could even become, “I’m going to sell you natural gas and I’ll take the CO2 back,” says Wetselaar. This adds extra layers of complexity: carbon prices, shipping costs, cross-border transportation. But as there are increasing numbers of countries with net-zero aims, these issues are being increasingly explored.

“There are a lot of things to put in place, but it is something that’s getting discussed,” says Crouch.

© 2021 Bloomberg L.P.

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