Carbon capture programme still lacking ‘clarity’

Chancellor Rishi Sunak has come under fire for “failing to provide much-needed clarity” on future carbon capture projects after a snub for the Acorn project last week.

Mr Sunak reaffirmed the government would allocate £1billion to development of carbon capture utilisation and storage infrastructure (CCUS) as he delivered the Autumn Budget.

At the same time, it emerged the Treasury expects to see increased tax receipts from the North Sea oil and gas sector.

Last week the HyNet project in north-west England and the East Coast Cluster for Tees and the Humber were selected by the government to become the UK’s first two CCUS projects, leaving out the Scottish Cluster.

The business community including Sir Ian Wood and Scottish Net-Zero Minister Michael Matheson have implored the government to reconsider and include Acorn at St Fergus within Track 1 due to its importance in meeting Scotland’s net-zero targets.

Ruth Herbert, chief executive of the CCSA trade body, welcomed the funding but also criticised the lack of clarity about the next steps.

She said: “Given last week’s net-zero strategy also included an increased ambition of storing 20 to 30 million tonnes of CO2 per year by 2030, which requires Track 2 clusters to be operational by 2027, (the) Budget fails to provide much-needed clarity on the timeline for the Track 2 cluster process and the wider deployment of all CCUS clusters in the UK.

“We note that the net-zero strategy states the government’s intention to announce a funding envelope in 2022 to enable the award of the first contracts with emitters.

“The CCSA is keen to work with the government to urgently define a multi-year budget for CCUS over the next decade to give industry certainty to invest in projects now.”

Under the government’s 10-point plan, four clusters will be developed, with the first two up and running by the mid-2020s and the second by 2030, each receiving a share of the £1billion pot.

Industry is awaiting an announcement on the Track 2 process.

Meanwhile, the Treasury has increased its expectations for tax receipts from the North Sea oil and gas sector ahead of the COP26 climate conference.

Figures released by the Office for Budget Responsibility (OBR) set out that higher oil and gas prices mean the Treasury has significantly boosted its expectations of the tax take for the sector in coming years, increasing by £1.4bn on average per year through to 2025-26.

The Treasury expects receipts of £900million from the North Sea in 202122, £2.1billion in 22-23, £1.4bn in 23-24, £1.2bn in 24-25 and £1.3bn in 25-26. It comes as the UN COP26 conference is due to begin in Glasgow this weekend and amid growing pressure for the government to prevent development of new oil and gas fields.

A key battleground for protesters has been the Cambo field, west of Shetland, which is awaiting approval from the Oil and Gas Authority (OGA).

The OBR forecast for gas prices is based on futures prices over the 10 days to September 15.

However, since then oil prices have risen 4.7% while gas prices have soared 65.7%.

This would typically add £2.3bn to receipts in 202223, but only £1.2 billion by 2026-27, reflecting the sharply downward sloping forward curve for gas prices.

Oil and gas prices fell at the onset of the pandemic but have changed dramatically in recent month amid international supply bottlenecks.

WAITING: The St Fergus gas terminal was touted by many as

Ruth Herbert, CCSA CEO

a favourite to receive funding as part of the Acorn carbon capture project but did not receive Track 1 approval.