Time To Seize CCUS Opportunity! Why a CCUS Regulatory Framework is Essential for Egypt's Oil & Gas Sector

As a geologist working in the petroleum industry, I've always been concerned about the environment, specifically the significant impact of fossil fuels such as oil and gas. Following the Paris agreement on climate change (2015), passing through the annual UN Climate Change Conferences of Parties (COP), which witnessed one of its versions in Egypt in 2022 ( COP27 - UN Climate Change Conference ), there was a serious discussion about phasing out fossil fuels. Is that Possible?! In my opinion, it is impractical given the increasing global energy demand that renewables alone can not currently satisfy. Therefore, achieving a balanced approach by reducing carbon footprint, particularly in sectors like oil and gas, is a good compromise.

A couple of years ago, I encountered Carbon Capture and Storage (CCS) for the first time, which seemed to offer a promising solution, particularly in a country like Egypt. Considering the current global and regional instability, along with its impact on energy landscape and the challenges that have emerged, Carbon Capture, Utilization, and Storage (CCUS) could as well arise as a game changer for the oil and gas industry. I believe it holds the potential not only to reduce the sector's carbon footprint but also to unlock substantial economic benefits urgently needed. For Egypt, CCUS presents a unique opportunity, highlighting the abundance of geological storage sites, the potential for increased FDI, and the environmental benefits. Yet, to capitalize on this potential, a robust regulatory framework is essential.

Egypt's Geological Advantage: A Strategic Reserve of Storage Sites

Egypt's oil & gas sector boasts a long and successful history. This translates to a wealth of geological data, a crucial asset in the context of CCUS. Depleted oil and gas reservoirs, carefully mapped and understood over decades, offer excellent potential as secure and permanent storage sites for captured carbon dioxide. This abundance of suitable storage sites positions Egypt at a significant advantage when compared to other countries venturing into CCUS projects.

Furthermore, Egypt enjoys a long-standing history of collaboration with international partners throughout its various concessions. This established network of expertise and experience can be leveraged to accelerate CCUS adoption and attract further Foreign Direct Investment (FDI) into the sector.

So, out in the open, investors are prioritizing projects that demonstrate a commitment to sustainability. By embracing CCUS technology, and taking advantage of the countless storage sites, Egypt can be positioned as a leader in responsible resource management within the oil and gas sector. This proactive approach will not only enhance the sector's environmental credentials but also make it a more attractive destination for green funds and environmentally conscious investors. The potential benefits extend beyond just attracting new investments. A robust CCUS framework can breathe new life into existing fields, extending their productive life by enabling Enhanced Oil Recovery (EOR) techniques. This allows for the extraction of additional oil reserves that would otherwise be unrecoverable, maximizing the return on investment in mature assets and increasing Egypt's oil production, which is desperately needed.

The Regulatory Hurdle: Building a Framework for Success

Despite the immense potential of CCUS for Egypt's oil and gas sector, a significant hurdle remains – the lack of a clear and comprehensive regulatory framework. Currently, there are no established guidelines or regulations governing CCUS projects. This ambiguity creates uncertainty for potential investors, obstructing project advancement.

A well-defined regulatory framework is crucial for unlocking the full potential of CCUS in Egypt. This framework should ensure clarity on several key aspects including permitting and licensing procedures, which if streamlined, can accelerate project development, and attract investors. Additionally, clear guidelines for monitoring and reporting CO2 capture, transport, and storage are essential to guarantee environmental safety and build trust with stakeholders. Finally, defining clear lines of responsibility, liability and risk allocation regarding potential environmental risks associated with CCUS projects will provide comfort to investors and operators.

However, crafting an effective regulatory framework doesn't exist in a vacuum. It's crucial to learn from the experiences of countries that have already implemented CCUS technologies. Examining successful models like Norway's CO2 storage project or the technological advancements in the United States can inform the development of a framework tailored to Egypt's specific needs and geological context.

Beyond Production Sharing Agreements: Exploring Innovative Models

Regarding the legal framework and the type of agreement appropriate for such technology in the petroleum sector, we all know the Production Sharing Agreements (PSAs) system, but I find it logical to think of other frameworks that are more appropriate for carbon storage to encourage partners and achieve a satisfactory economic return for all parties.

The traditional Production Sharing Agreements (PSAs) that dominate Egypt's oil and gas sector may not be the most suitable model for CCUS projects. These agreements primarily focus on maximizing hydrocarbon production. CCUS, on the other hand, prioritizes CO2 capture and storage, with oil production playing a potentially secondary role. Exploring alternative contractual models could incentivize the adoption of CCUS technology. Revenue-sharing agreements based on the amount of CO2 captured and stored could prove more effective in this context. Additionally, the framework could consider carbon credits as a form of compensation for companies undertaking CCUS projects.

Therefore, establishing a robust legal framework marks the initial step toward incentivizing partners and investors to fund carbon capture and storage projects within the petroleum sector. Without such partnerships, navigating the path forward will prove challenging. The role of international partners (IOCs) and investors is crucial. Their expertise and financial resources can significantly contribute across the board: from feasibility studies assessing the viability of CCUS in specific Egyptian oil fields, to funding research that optimizes CCUS technologies for Egypt's geology. Additionally, they can support capacity building by training the Egyptian workforce in CCUS and project management, fund pilot projects to demonstrate technical and economic feasibility before large-scale deployment, and even contribute to building the necessary infrastructure for CO2 capture, transportation, and secure storage.

A Call to Action:

The Time is NOW. To unlock the full potential of CCUS in Egypt, we need a collaborative approach. I strongly advocate for the creation of a dedicated working group within the Ministry of Petroleum or The Egyptian General Petroleum Corporation (EGPC) to spearhead CCUS development in Egypt. Karim Badawi

A multi-disciplinary working group shall be established, encompassing geologists, engineers, legal experts, economists, and representatives from various stakeholder groups. This includes industry leaders from Egyptian oil and gas companies, with a strong focus on geologists due to their crucial knowledge of existing reservoirs for CO2 storage. Government officials from relevant ministries like Ministry of Environment will ensure alignment with national goals. Additionally, researchers and professors from academic institutions will contribute expertise in carbon capture technologies, storage solutions, and environmental assessments. Finally, representatives from International Oil Companies (IOCs) and Service Companies will provide invaluable knowledge gained from deploying CCUS technology elsewhere, accelerating the learning curve and ensuring a smooth implementation process in Egypt.

In addition, this working group will be tasked with several key areas: conducting a comprehensive review of international best practices in CCUS regulation and implementation, developing a robust and transparent regulatory framework specific to Egypt, identifying suitable depleted reservoirs for CO2 storage through detailed geological assessments, and exploring potential CCUS project opportunities within existing oil and gas concessions.

To conclude, Egypt can take a significant leap by creating a comprehensive CCUS regulatory framework. This framework will be the foundation for successful CCUS projects, benefiting a wide range of stakeholders.

The oil and gas sector will gain enhanced environmental credentials, access to new investment opportunities, and the potential to extend the life of existing assets.

The environment will see a reduced carbon footprint and improved air quality. The Egyptian economy will benefit from job creation, technology advancement, and the potential to attract green funds.

Ultimately, embracing CCUS technology positions Egypt as a leader in responsible oil and gas development, paving the way for a more sustainable future for the industry.

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