EnQuest Criticizes UK Carbon Capture Funding Strategy Amid Concerns

EnQuest, the operator of the Sullom Voe Terminal in Shetland, has voiced its disappointment regarding the UK Government’s strategy for funding carbon capture and storage (CCS) projects. The company highlighted that the UK risks relinquishing its opportunity to lead in the CCS sector, despite holding approximately 25 percent of Europe’s total carbon storage capacity.

The UK Government, in response, asserted that its funding initiatives aim to position the country as a leader in innovative clean energy technologies. CCS plays a pivotal role in the proposed transition towards net zero emissions at the Sullom Voe Terminal. EnQuest holds two carbon storage licenses from the UK Government, located in the Magnus and Thistle fields northeast of Shetland, which connect to the terminal via pipeline.

Veri Energy, a subsidiary of EnQuest managing the transition at Sullom Voe, indicated plans to capture carbon dioxide (CO2) from emitters and transport it by ship to the terminal. From there, it would be sent through repurposed pipelines for permanent storage in depleted oil and gas reservoirs, with aspirations to store up to ten million tonnes of CO2 annually.

Despite this progress, concerns linger over the long-term funding support from the UK Government. In its half-year results released last week, EnQuest stated that Veri Energy’s model is designed to mitigate risks throughout the carbon capture and storage value chain, thus easing the financial burden on both the government and emitters. Nonetheless, the company expressed disappointment that the UK Government does not plan to provide additional investment in carbon storage beyond what was outlined in its most recent comprehensive spending review.

EnQuest emphasized that the current strategy restricts support to Track 1 projects, which limits business development funding for Track 2 initiatives. The company warned that this approach undermines the value proposition for emitters and could lead to the UK falling behind in CCS development.

A spokesperson from the UK Government’s Department for Energy Security and Net Zero stated, “We are delivering first-of-a-kind carbon capture projects in the UK, backed by £9.4 billion over this parliament and £21.7 billion over the next 25 years.” This funding is intended to ensure that UK industries remain competitive globally, stimulate growth, and lead in pioneering clean energy technologies.

The initial two clusters funded under Track 1 include HyNet, covering Merseyside and North Wales, and the East Coast cluster, which spans Teesside and Humberside. The government plans to support the development of Track 2 clusters, Acorn and Viking, leading up to their final investment decisions. Acorn aims to transport CO2 to St Fergus in northeast Scotland before it is sent offshore for storage, while the Viking cluster will send CO2 offshore from the Humber region.

EnQuest and Veri Energy reaffirmed their commitment to producing e-fuels at Sullom Voe, focusing on integrating green hydrogen and biogenic CO2 into their processes. Their initial target involves producing e-diesel for Shetland’s marine and power sectors, with future ambitions to expand into export markets, including sustainable aviation fuel. The report noted, “The combination of infrastructure, natural resources, and skilled labor makes Sullom Voe Terminal a compelling hub for low-carbon fuel production.”

In addition to carbon capture projects, EnQuest is advancing plans to install wind turbines at the terminal, with a final investment decision anticipated later this year. Previous documents indicated intentions to install two wind turbines, each approximately 150 meters tall. Shetland Aerogenerators is also progressing with its wind project and battery storage system near Sullom Voe, having reduced its proposed number of turbines from ten to eight.

Collaboration between Shetland Aerogenerators and Veri Energy aims to utilize energy generated at Neshion to support a new low-carbon fuel plant at Sullom Voe. Wind turbines at Neshion could potentially supply electricity to the terminal by 2030, while the terminal’s existing gas-fired power station is set to be decommissioned in the coming years as it transitions to grid power.

EnQuest is also making strides in the phased decommissioning of its oil stabilization, processing, and storage facilities at the terminal. The half-year report highlighted that EnQuest remains focused on optimizing Sullom Voe for future operations and is advancing strategic projects to connect the terminal to the UK’s electricity grid. These initiatives align with the North Sea Transition Authority’s target of zero routine flaring obligations by 2030, expected to yield a 90 percent reduction in overall emissions from Sullom Voe.

Amjad Bseisu, Chief Executive of EnQuest, has urged the UK Government to enhance support for the North Sea oil and gas sector. He pointed out that successive governments have rendered the UK North Sea “globally uncompetitive through fiscal policy.” Bseisu noted, “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.” He called on the government to act promptly to avert the accelerated decline of this industry and protect the UK’s energy transition goals.