The UK has awarded its first round of carbon storage licenses as the country looks to become a global leader in the growing technology.
Spirit Energy, owned by British Gas’ parent company Centrica, is among 12 companies that have been offered 20 licenses to store carbon dioxide in depleted oil and gas fields off the British coast.
Sites include areas near Aberdeen, Teesside, Liverpool, Lancashire and Lincolnshire.
The awards mark a step forward in efforts to develop an industry that will capture and store carbon dioxide emissions from factories and others struggling to move away from fossil fuels.
Several companies have used carbon capture and storage to extract oil from depleted fields, but the use of the technology to reduce emissions is still in its infancy.
There are currently no active carbon storage sites in the UK, but the government wants around 30 million tonnes to be stored each year by 2030, around 9 per cent of current emissions.
The strong appetite for licenses (19 companies applied) reflects the growing commercial case for the technology, given the price UK polluters have to pay for carbon dioxide emissions has quintupled over the past five years.
Developers also hope to eventually save carbon dioxide imported from pollutants in continental Europe and elsewhere by making the most of Britain’s oil and gas fields.
Energy Efficiency and Green Finance Minister Lord Martin Callanan said Britain was in a “prime position” to “grow our economy to become a world leader in this emerging industry”.
Stewart Payne, chief executive of industry regulator the North Sea Transition Authority, said it was an “important day”.
“As a nation, we cannot achieve our carbon removal goals without carbon storage. This is net zero delivery in operation,” he said.
The industry is still in its early stages, however, and there is no certainty that storage sites will be built.
Developers with 20 licenses can now physically evaluate sites, but they will need other permissions and leases before they can begin commercial storage.
The government has pledged £20bn to the industry over the next 20 years, but is yet to finalize the details. But developers are still waiting for the exact form of that help before hitting the investment button. They estimate that each of the major sites would cost billions of pounds to build and run.
Many of the proposed licenses are oil and gas producers looking to re-use depleted fields.
Private company Neptune Energy, chaired by Sam Laidlaw, and London-listed EnQuest have confirmed they are among the winners.
However, the environment has changed for oil and gas producers since the licensing phase opened in June 2022.
The government has raised the oil and gas tax rate for the second time since January, meaning it is now 75 percent. Meanwhile, gas prices have fallen from last year’s record high.
“The windfall tax has an impact,” said David Whitehouse, chief executive of Offshore Energies UK, which represents oil and gas producers.
“It basically takes away the opportunity for organizations to invest.”
Regulators have not released the list of companies offering licenses because there are still terms to work through before the awards are approved.
Spirit Energy, which owns Centrica with Germany’s Stadtwerke München, has confirmed it has received a license to convert its gas fields at Morecambe Bay in north-west England to carbon dioxide storage.
Spirit Energy and Centrica chief executive Chris O’Shea said the project could create “thousands of jobs in the North of England”.
He said Centrica was “prepared to invest in excess of £1 billion” depending on the amount of government support for the sector.
While some carbon storage licenses have been granted on a temporary basis in the UK and Norway in recent years, Thursday’s announcement is the first round of carbon storage licensing in Europe.