NEW NORWEGIAN-LITHUANIAN PROJECT TO COMPETE FOR EU FUNDING

Tamar Hallerman
GHG Monitor
6/21/13

A new joint Norwegian-Lithuanian carbon capture and storage project is one of nine large-scale ventures that appear to be vying for European money in the second round of the European Union’s New Entrants Reserve competition (NER 300). The new 250 MW post-combustion project, MoreCCS, plans on capturing more than 760,000 tons of CO2 annually from a gas plant on Norway’s west coast and transporting the commodity via ship to Lithuania, where it will be used for onshore enhanced oil recovery operations, the project’s developers confirmed to GHG Monitor. The project’s two main partners, the Norwegian technology company Sargas AS and the Lithuanian oil company UAB Minijos Nafta, said they plan on forming a consortium to manage the project. General Electric would supply the gas plant’s combustion technology, while Daewoo Shipbuilding and Marine Engineering would be in charge of the plant’s turnkey engineering and construction and SNL Lavalin for project delivery, which could begin operations as early as 2018, the developers said.

MoreCCS is perhaps most notable in the fact that it includes a CO2 utilization component. Europe has only recently begun looking seriously at the potential for EOR, particularly for many of the old and abandoned oilfields in the North Sea. Early characterization work is only now beginning off the eastern coast of the United Kingdom. Sargas and UAB said that if constructed, the MoreCCS project would be the first large-scale CCS demonstration project utilizing EOR in Europe. “The successful building of CCS demonstration projects in the USA and Canada is mainly due to the commercial opportunity derived from injecting the captured CO2 into existing oil and gas fields, i.e. for enhanced oil and gas recovery. In Europe, using CO2 for EOR/EGR has not materialized. MoreCCS will see the first large-scale demonstration of using CO2 for EOR,” Sargas and UAB said in a project fact sheet.

Nine CCS Projects Vying for EC Support, For Now

MoreCCS is one of nine large-scale capture projects vying for European Commission (EC) support in NER 300’s second round, according to an EC document released this week. While that project count is not yet final—EU states have until July 3 to submit bids—the list showcases a number of proposals that could be submitted by member states. The document does not specify which CCS projects have been put forward, but the communication indicates that two pre-combustion, four post-combustion, two oxy-fuel and one industrial capture project have been submitted so far. The CCS projects will be competing against a pool of what is currently 73 “innovative renewables” projects for EU funding.

The EC kicked off NER 300’s second round in April, saying that it hopes to award funding to winning projects by summer 2014. Bidders will be competing for a share of funding from a pot whose size will be determined by the going rate of 100 million carbon credits on the EU’s Emissions Trading System. It will also include an additional €275 million ($362 million) in funding rolled over from NER 300’s first round late last year. That money was initially set aside for the only CCS project selected as a winner under the first round of the competition. But that industrial capture project, a “green” steelmaking pilot in France that was backed by the world’s largest steelmaker, ArcelorMittal, was withdrawn at the last minute due to unspecified “technical difficulties.” The rest of the €1.2 billion ($1.58 billion) pot from the first round was allocated to 23 renewable energy projects in 16 countries.

Does CCS Have a Chance in Round II?

EU officials have recently indicated that CCS projects could have the edge in the second round over renewables since the latter swept the first tranche of funding. But others underscored that member governments and project developers must first provide the level of financial certainty that the EC is requiring to win funding. The EC said during its announcement of first round winners in December that it was not able to approve any CCS projects because member states were unable to provide the level of political and financial support the EC wanted. More than a dozen CCS project had initially bid into the first round of the competition.

Looking ahead, many observers said they are not optimistic about the prospects for CCS projects being able to move forward in NER 300’s second round given the state of the industry and current rock-bottom carbon prices (emissions allowances were trading at €4.40 each as of press time). “A low carbon price and tight competition rules mean any funding for CCS projects will likely be too low to help developers actually build projects. Any funding gaps must be met by the member state and most have been hesitant to provide enough public money. We think that the chance of the NER300 second round supporting projects is slim,” Kieron Stopforth, a CCS analyst at Bloomberg New Energy Finance, told GHG Monitor in April. Others, though, have indicated that they are more optimistic that the scheme can fund two to three CCS projects.

Lawmakers on a committee in the EU Parliament voted June 19 in favor of temporarily withholding allowances on the Emissions Trading System in order to prop up the market as prices continue to hover near record-lows. If that measure ultimately passes the European legislature, it could lead to more money being available for NER’s second round. The full body voted narrowly in April to reject such a “backloading” proposal.