EnQuest Critiques UK’s Carbon Capture Funding Strategy

EnQuest, the operator of the Sullom Voe Terminal in Shetland, has expressed disappointment with the UK Government’s approach to funding carbon capture and storage (CCS) projects. The company cautioned that the UK risks losing its opportunity to lead in carbon capture technology, despite holding approximately 25 percent of Europe’s total carbon storage capacity.

Funding Strategy Draws Criticism

EnQuest has highlighted concerns that the government’s current funding strategy may restrict the potential for growth in CCS. According to the company, its half-year results indicated that the business model of its subsidiary, Veri Energy, aims to mitigate risks in the carbon capture value chain, thereby alleviating financial pressures on both the government and emitters. Nevertheless, EnQuest described the lack of further investments from the UK Government beyond its recent comprehensive spending review as “disappointing.”

The government has allocated £9.4 billion over the current parliamentary term and £21.7 billion over the next 25 years for the development of CCS. However, EnQuest noted that this funding is limited to “Track 1” projects, which may stifle broader business development opportunities. The operator emphasized that the existing limitations could adversely affect the value proposition for emitters and hinder the UK’s ability to lead in this crucial sector.

“As it stands, this limits support to Track 1 projects, with only modest business development funding for Track 2,” EnQuest warned, suggesting that this approach could see the UK relinquish its leadership role in CCS despite its significant capacity.

Government’s Response and Future Prospects

A spokesperson from the UK Government’s Department for Energy Security and Net Zero defended the funding strategy, asserting it would enable the UK to maintain its competitiveness in the global economy and spearhead advancements in clean energy technologies. The initial clusters receiving government support include HyNet, which encompasses Merseyside and North Wales, and the East Coast, which covers Teesside and Humberside.

In addition to these clusters, the government has committed to advancing the development of the “Track 2” Acorn and Viking clusters, which aim to expedite their readiness for final investment decisions. The Acorn project will facilitate the transport of carbon dioxide (CO2) to St Fergus in northeast Scotland for offshore storage, while the Viking cluster will manage CO2 disposal in the Humber region.

EnQuest’s report also reaffirmed its commitment to producing e-fuels at Sullom Voe Terminal, focusing on integrating green hydrogen and biogenic CO2. The initial aim is to produce e-diesel for the marine and power sectors in Shetland, with aspirations to expand into export markets, including sustainable aviation fuel.

EnQuest CEO Amjad Bseisu urged the UK Government to enhance support for the North Sea oil and gas sector, arguing that fiscal policies have rendered the UK North Sea less competitive globally. He pointed out that the UK is the sole country imposing a windfall tax on energy profits, a move he claims could accelerate the decline of the sector and jeopardize the nation’s energy transition goals.

The company is also making strides in renewable energy initiatives, including plans to develop wind turbines at Sullom Voe, with a final investment decision anticipated later this year. This venture aligns with Shetland Aerogenerators’ project to install wind turbines and a battery storage system nearby, with ongoing consultations indicating a reduction in the number of proposed turbines.

As the energy landscape evolves, the debate surrounding carbon capture funding and renewable energy development at Sullom Voe Terminal underscores the critical need for strategic investment to ensure the UK remains at the forefront of the global energy transition.