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UK gives nod to North of England CCS, hydrogen projects, infuriating Scottish leadership

Highlights

Disappointment for 'most cost-effective and deliverable' project

Stanlow, Drax operators greet progress on decarbonization plans

BP-led project to store 27 million mt of CO2/year by 2030

The UK government on Oct. 19 unveiled financial backing for two carbon capture and storage projects intended to curb emissions from North of England industrial facilities, but infuriated Scottish authorities by sidelining the long-standing Acorn carbon capture project seen as promising a greener future for the North Sea industry.

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The London government said it was providing "Track-1" financial backing for the BP-led East Coast Cluster and Hynet North West, a project led by Italy's Eni, but was leaving in "reserve" the Acorn project, backed by Shell and London-listed Harbour Energy.

The decision comes less than two weeks before the start of the COP26 climate talks in Glasgow, ahead of which the government has been keen to demonstrate leadership with its plans for net-zero emissions.

But in a statement, Scottish Net Zero and Energy Secretary Michael Matheson described the Acorn project -- designed to help decarbonize sites such as Grangemouth refinery and the ExxonMobil Fife Ethylene Plant at Mossmorran that rely on North Sea oil and gas -- as the UK's "most cost-effective and deliverable" CCS opportunity.

Scottish First Minister Nicola Sturgeon, in a coalition with Green Party politicians, has herself been accused of wavering in her support for the North Sea industry, which produces crude grades such as Brent and Forties, in turn part of Platts' Dated Brent benchmark used by the worldwide industry.

"The decision today shows a clear lack of ambition and leadership on climate change by the UK government. All credible evidence, advice and analysis has demonstrated that carbon capture, utilization and storage is critical for meeting not only Scotland's statutory emissions reduction targets, but those set across the UK," Matheson said. "The Scottish government... has been a firm supporter of the Scottish cluster's bid... It is clear that the Acorn project is the most cost-effective and deliverable opportunity to deploy a full chain CCS project."

"It is therefore completely illogical that the UK government has taken the decision" not to grant Track-1 status, he said.

The projects granted Track-1 status and earmarked to start operating in the mid-2020s are the East Coast Cluster, which will store emissions from the Humber and Teesside regions under the North Sea, and the Hynet project, which will store emissions in depleted Liverpool Bay gas fields, energy minister Greg Hands told parliament. He said "reserve" status for the Scottish project meant it had "performed to a good standard" when evaluated and the government would "continue to engage" with the project in the next phase of CCS plans.

BP and Eni welcomed the news, which entitles their projects to a share of GBP1 billion ($1.4 billion) in government funding, with the projects also seen as a step to hydrogen fuel production. Eni CEO Claudio Descalzi said there was a need to be "pragmatic" on emissions and described CCS as "an important solution that is safe, effective and immediately available to reduce emissions from sectors that have no technological alternatives."

Industry welcome

Industries expected to benefit from storage of their emissions were also upbeat. Will Gardiner, CEO of Drax Group, which aims to implement a bioenergy-with-CCS project at Drax power station, described the decision as a "crucial next step on the UK's decarbonization journey."

Essar Oil UK, which hopes to link the Stanlow oil refinery to the Hynet project, also greeted the announcement, saying Stanlow would host planned hydrogen production facilities. CEO Deepak Maheshwari described it as a "transformative decision which further boosts Essar's growing momentum as we transition to low carbon operations."

In a statement, the East Coast Cluster partners said they plan to store up to 27 million mt of CO2/year by 2030, equivalent to 50% of UK "industrial cluster" CO2 emissions. As part of the scheme BP is leading the Northern Endurance Partnership -- alongside Shell, TotalEnergies, Eni, Norway's Equinor and the National Grid -- which will be responsible for transport and storage of CO2 from two industrial zones known as Zero Carbon Humber and Net Zero Teesside.

The East Coast Cluster partners described the decision as a "major step" in developing "the first 'net-zero' carbon industrial cluster in the UK by 2040," adding it would "create and support an average of 25,000 jobs/year between 2023 and 2050."

Projects that failed to received Track-1 status also included the V Net Zero Humber Cluster, which aims to decarbonize the Humber and Lindsey refineries and nearby Immingham power plant -- led also by Harbour -- and Delphynus, a project led by London-based Neptune Energy to take CO2 from the South Humber region.

The V Net Zero partners told Platts: "While we are clearly disappointed... we remain committed to progressing the V Net Zero Humber Cluster, to decarbonizing the Immingham [area] and to capture 50% of the existing Humber industrial emissions through CCS."

Critics say the UK has yet to resolve some regulatory issues related to CCS, notably over liability for secure storage in the event of storage sites changing hands.