Common Themes in the COPs: Petrostates and Carbon Capture & Storage (CCS)

Two notable trends stood out in the last two COPs: they were all hosted by petrostates, and there was a marked increase in interest in Carbon Capture and Storage (CCS) technologies.

Given the rising pressure to decarbonize, petrostates are in a delicate balancing act between maintaining oil and gas production and reducing carbon emissions. CCS has emerged as a viable tool for these countries to mitigate emissions without abandoning their economic lifeline.

Carbon Capture & Storage (CCS) in Petrostates

In petrostates, CCS offers a way to address the dilemma of reducing emissions without entirely abandoning oil and gas production—a crucial source of revenue.

Why CCS? The increasing focus on CCS technologies stems from their potential to capture and store carbon emissions from industrial processes, particularly those related to fossil fuel extraction and consumption. Unlike renewable energy, which requires a complete shift away from fossil fuels, CCS allows petrostates to reduce their carbon footprint while continuing to produce and export oil and gas.

CCS offers a distinct advantage by enabling enhanced oil recovery (EOR). In this process, captured CO? is injected into depleted oil reservoirs to extract more oil. This dual-purpose application reduces emissions and extends the life of existing oil fields, further aligning with the economic interests of petrostates. As a result, these nations are particularly drawn to CCS as a way to balance decarbonization with maintaining fossil fuel production.

Scaling CCS in Petrostates: Challenges and Opportunities

While CCS holds promise, scaling these technologies in petrostate economies comes with a range of challenges:

1. High Cost and Financing Challenges

CCS projects are capital-intensive, requiring significant upfront investment for infrastructure like CO? capture plants, pipelines, and storage facilities. Investing in CCS without immediate financial return is a substantial hurdle in economies reliant on oil revenues, where profit-driven projects dominate. Additionally, CCS projects often rely on government subsidies or carbon pricing mechanisms to generate income, which are either underdeveloped or absent in many petrostates.

2. Infrastructure Limitations

The success of CCS hinges on the availability of geological storage sites capable of securely storing captured CO?. While some petrostates have depleted oil fields suitable for this purpose, extensive research and monitoring are required to ensure these sites meet safety and environmental criteria. Moreover, developing the infrastructure to transport CO? from capture sites to storage locations is complex and costly.

3. Regulatory and Policy Support Gaps

Many petrostates need more regulatory frameworks to incentivize and govern CCS deployment. Effective policies, such as carbon pricing and tax incentives, are critical to making CCS economically viable. Furthermore, the tension between international climate commitments and domestic economic interests often leads to delayed or insufficient policy support, limiting the scaling of CCS.

4. Economic Dependence on Fossil Fuels

The "fossil fuel lock-in" effect means that CCS can inadvertently prolong the life of oil and gas industries by making them appear more environmentally friendly, potentially delaying investments in renewables. This dynamic makes it difficult for petrostates to shift focus and resources toward cleaner energy alternatives.

5. Technological and Efficiency Barriers

CCS operations are energy-intensive, requiring substantial power to capture, transport, and store CO?. In many cases, this additional energy demand leads to carbon leakage, where some of the benefits of CCS are offset by emissions generated during the process. This limits the overall effectiveness of CCS in reducing carbon footprints.

6. Public Perception and Environmental Concerns

Public skepticism around CCS remains a barrier, with environmental groups and communities often questioning the safety of long-term CO? storage. Fears of potential leaks from underground storage sites and concerns that CCS might serve as a "license" for continued fossil fuel use contribute to resistance against the technology.

7. Volatile Oil Markets

Fluctuating oil prices present another challenge to long-term investment in CCS. Petrostates may be reluctant to commit significant capital to CCS projects if they expect revenue volatility from oil exports. In times of high oil prices, there is often little incentive to invest in costly decarbonization projects like CCS.

Saudi Aramco: Pioneering CCS in the Middle East

Saudi Aramco has led CCS deployment with its Hawiyah natural gas processing plant project. This facility captures CO? and pipes it to the Uthmaniyah oil reservoir for enhanced oil recovery (EOR). The project serves the dual purpose of reducing emissions and increasing oil output. By 2027, Saudi Aramco aims to capture 9 million metric tons (mtpa) of CO? annually through its broader CCS efforts.

ADNOC (Abu Dhabi National Oil Company): Middle East Leader in CCS

ADNOC has made significant strides in CCS, with its Habshan project storing 1.5 million tonnes of CO? annually. This initiative is part of ADNOC's broader strategy to have a carbon capture capacity of 10 mtpa by 2030. As part of its long-term energy transition plan, ADNOC is also partnering with international companies to further explore CCS technologies.

QatarGas: CCS for Lower-Carbon LNG

QatarGas, a significant player in the liquefied natural gas (LNG) market, has implemented CCS in its LNG operations. The company currently captures 2.2 million metric tons of CO? annually, with plans to increase this capacity to 7-9 million metric tons by 2030. QatarGas's focus on CCS highlights its commitment to making LNG exports more environmentally sustainable.

SOCAR (State Oil Company of the Azerbaijan Republic): Exploring CCS and Decarbonization

SOCAR works closely with the Japan Bank for International Cooperation (JBIC) to explore CCS and other decarbonization technologies. SOCAR aims to incorporate CCS into its broader efforts to align with global decarbonization trends.

Conclusion

The last three COP meetings highlighted the complex role of petrostates in the global energy transition. While these nations are key players in fossil fuel production, they increasingly turn to CCS to reduce emissions without abandoning their primary economic engine. CCS offers a pragmatic approach to align with global climate goals while maintaining oil and gas production for the UAE, Azerbaijan, Qatar, and Saudi Arabia.

Scaling CCS in petrostates will require overcoming significant challenges, including high costs, infrastructure limitations, regulatory gaps, and public skepticism. However, with strong international collaboration, policy support, and investment, CCS has the potential to play a central role in the decarbonization strategies of these fossil fuel-dependent economies.