Meld. St. 33 (2019–2020)

Longship – Carbon capture and storage — Meld. St. 33 (2019–2020) Report to the Storting (white paper)

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4 The result of the targeted work on carbon capture and storage

4.1 Follow-up of the Government’s strategy for CCS work

The Government will contribute to developing technology for carbon capture, transport and storage. The Government presented its strategy for carbon capture and storage (CCS) work in 2014.1 The strategy comprises a broad range of measures in research and development, demonstration, work on realising a full-scale demonstration facility and international work.

Technology Centre Mongstad has been operational since 2012. A large number of technology suppliers have tested and are planning to test their technology at the centre. The CLIMIT research and development programme has supported the development of several different technologies and solutions that can make CCS safer and more efficient, and a new research centre for environment-friendly energy (FME) dedicated to CCS has been established. Through its international work, Norway has contributed to the development of CCS at a global level.

The set of available policy instruments has been well-suited to support the development of full-scale CCS demonstration in Norway.

4.1.1 Gassnova SF

Gassnova SF contributes to technology development and competence building by supporting specific CCS projects. The entity is responsible for key policy instruments for the development of CCS technology and is the advisor to the Ministry of Petroleum and Energy on issues related to CCS. Gassnova administers the state’s interests in Technology Centre Mongstad (TCM) and shares administrative responsibilities with the Research Council of Norway for the national research programme for CCS technologies CLIMIT. In recent years, a number of activities undertaken by both TCM and CLIMIT have been specifically aimed at solving challenges related to the project now known as Longship. Gassnova has coordinated the different sub-projects and worked on benefit realisation in the main project. Gassnova has also been responsible for following up and evaluating the actors’ projects, including the potential for benefit realisation.

4.1.2 National policy instruments for promoting research, development and demonstration

Technology Centre Mongstad

Technology Centre Mongstad (TCM) is the biggest and most flexible facility in the world for the development, testing and qualification of carbon capture technology. TCM contributes to international dissemination of accumulated experience in order to reduce the costs and risks associated with full-scale carbon capture. TCM has been operational since 2012. Alstom, Shell Cansolv, Aker Solutions, CCS Limited, ION Engineering and Fluor Corporation have all conducted extensive testing at TCM.

TCM has also tested different measuring devices and process components and carried out test campaigns with open results in cooperation with Norwegian and international universities and research institutes. A key part of the open campaigns is publication of results. Projects with funding from the US authorities have tested technology at TCM, and in 2018, the US Department of Energy allocated USD 33.7 million for four new advanced capture technology projects planning to test at TCM.

The Norwegian Government and the current industry owners of TCM have entered into a new operating agreement for the period from the end of August 2020 until the end of 2023. The state on its part wishes to increase industry participation and industry funding of TCM.

CLIMIT

CLIMIT is a national programme for research, development and demonstration of technologies for carbon capture, transport and storage. Support from the programme is intended to develop knowledge, expertise, technology and solutions that can reduce costs and lead to widespread international dissemination. CLIMIT has made an important contribution to full-scale CCS by funding the development and demonstration of technology that will now be employed in the project, e.g. by funding pilot testing of carbon capture technology. CLIMIT also supports projects that look at capture solutions from other emission sources in Norway.

ACT

CLIMIT has also funded international projects and knowledge sharing through Accelerating CCS Technology (ACT).2 ACT is an international collaboration for joint calls for proposals for research projects related to CCS, the goal of which is to coordinate efforts between countries and facilitate international cooperation on research projects. ACT’s activities are supported by the EU Commission through the Horizon 2020 programme. It was established in 2016 and comprises 16 participating parties. ACT has developed projects of relevance to Norway’s CCS project. The collaboration can contribute to integrating emission sources from Europe into the Norwegian CO2 transport and storage infrastructure. The initiative has also contributed to enhancing international research efforts in the field of CCS.

Research centres for environment-friendly energy (FME)

Norway has one research centre for environment-friendly energy (FME) dedicated to carbon capture and storage. The Norwegian CCS Research Centre (NCCS) started up in 2016.3 The centre will have a duration of eight years. NCCS has around 30 research and industry partners and a budget of NOK 570 million over eight years.4 SINTEF Energy Research manages the centre in close cooperation with, among others, the Norwegian University of Science and Technology (NTNU) and the University of Oslo (UiO). The centre works specifically on industry-driven innovation for accelerated demonstration of CCS.

European CCS Research Infrastructure ECCSEL

Norway also leads the ECCSEL ERIC consortitum (the European Research Infrastructure Consortium organised under the European Carbon Dioxide and Storage Laboratory Infrastructure) the main objective of which is to strengthen European research on carbon capture, transport and storage [42]. The consortium comprises 21 operators from 77 research facilities in Norway, the Netherlands, France, Italy and the UK. Overall, the Research Council of Norway has awarded close to NOK 250 million in funding since 2013 for the Norwegian part of the consortium. The consortium is important for research cooperation between countries and for implementation of CCS research projects in CLIMIT and NCCS, as well as international projects.

4.1.3 International work

The Norwegian project underlines the need for and the value of international cooperation on technology development and emission reductions. International cooperation and successive projects in Europe and globally are prerequisites for CCS to become an efficient and competitive climate policy instrument. This is also essential in order to succeed in commercialising the solutions in Norway’s project. Norway has implemented a number of measures aimed at sharing CCS knowledge. Learning effects will contribute to reducing the costs of CCS. At the same time, international cooperation is important to create better understanding of how important CCS is in achieving our climate targets.

The Ministry of Petroleum and Energy cooperates with other ministries, the foreign service system, the Research Council of Norway and Gassnova to promote CCS internationally.

Norway also works closely with the EU and participates in a number of forums and bodies working, among other things, to develop CCS frameworks and regulation. The Ministry of Petroleum and Energy has a close dialogue with the European Commission on CCS. The Ministry is head of the Government Group for the Zero Emissions Platform5, which is the technical adviser to the EU on the deployment of carbon capture and storage, and carbon capture and utilisation. The Ministry is also represented in an expert group for the Innovation Fund, and has contributed to drawing up the rules for funding innovative technology, including CCS.

The Ministry also participates in the European Strategic Energy Technology Plan (SET Plan).6 The SET Plan forms an important element of the Energy Union in the EU. The plan provides guidelines for work on energy research in the EU. Norway and the Netherlands are leading the work on carbon capture, utilisation and storage under the SET Plan.

The Ministry also works through regional forums, such as the North Sea Basin Task Force and Nordic Baltic Networking Group on Carbon Capture, Utilisation and Storage. The North Sea Basin Task Force works to establish common principles for safe CO2 transport and storage in the North Sea basin, and comprises representatives from the authorities and industry in Norway, the UK, the Netherlands, Germany and the Belgian region Flanders. The Nordic Baltic Networking Group on Carbon Capture, Utilisation and Storage was established for the purpose of sharing experience and knowledge about carbon capture, utilisation and storage between the Nordic and Baltic countries.

Together with the USA, the UK and Saudi Arabia, the Ministry is head of the Carbon Capture, Utilization, and Storage (CCUS) Initiative under the Clean Energy Ministerial (CEM). A key objective of the initiative is to strengthen cooperation between public and private sector actors on CCS.

It cooperates with the Oil and Gas Climate Initiative (OGCI)7 and with the major development banks and other international financial institutions on establishing common principles for funding of CCS. Norway has been one of the most important donors to the World Bank’s capacity building fund for CCS, and we support the World Bank's inclusion of CCS funding principles in its strategy.

The Research Council of Norway is responsible for following up the memorandum of understanding between the Ministry of Petroleum and Energy and the Department of Energy in the USA [43]. Active efforts have been made for several years under this agreement to increase cooperation. This has led, among other things, to faster upscaling of capture technologies through cooperation at TCM, sharing of data on CO2 storage between a number of countries, and US participation in ACT.

4.1.4 Planning of the project

On the basis of the CCS strategy set out in the Ministry of Petroleum and Energy’s Proposition No. 1 to the Storting (2014–2015), Gassnova carried out a pre-feasibility study in 2015 that identified several emission sources and storage locations that were technically suitable for carbon capture and storage, as well as industry actors that were interested in participating in future studies. The pre-feasibility study focused on existing land-based emission sources that emitted more than 400,000 tonnes of CO2 per year.

A broad assessment of CO2 storage possibilities on the Norwegian continental shelf and coordination of storage with other countries was also conducted. Transport by pipeline and ship were also assessed. The CO2 transport study was conducted by Gassco.

The pre-feasibility study made a clear recommendation to establish a transport and storage actor that could provide services to industry actors with CO2 emissions that lacked expertise in CO2 transport and storage. Subsequently, the study recommended to divide the value chain into segments, where actors would only have to be concerned with the activities they carry out in their undertaking and in which they have expertise, whilst the state should alleviate the actors from the risk in the interface between segments. The interface risk involves ensuring the integrity of the value chain throughout the project design phase and into the realisation and operational phases, both with regards to interfaces, schedules, and operational risk.

In the Ministry of Petroleum and Energy’s Proposition to the Storting (2016–2017), the Government proposed continuing this work and conducting feasibility studies. As part of the feasibility studies, Norcem assessed carbon capture at its cement factory in Brevik. Yara assessed carbon capture at an ammonia factory in Herøya, while Fortum Oslo Varme (then part of the Energy Recovery Agency (Energigjenvinningsetaten) in the City of Oslo) assessed carbon capture from its waste-to-energy plant at Klemetsrud. The feasibility studies were completed in the summer of 2016 and showed that carbon capture was technically feasible to implement at all three emission locations.

In addition, a study was conducted of transport by ship and three potential storage locations: the Sæter structure in Utsira Sør, the Heimdal structure and Smeaheia east of Troll. A development concept was identified with an onshore receiving facility and pipeline to an injection well in the Smeaheia area. This concept had the lowest risk, greatest operational flexibility and greatest potential for future capacity expansion. Although the Heimdal structure appeared to be suitable for CO2 storage, it would among other things be necessary to develop an offshore loading and unloading system for CO2, as well as solutions for direct injection of CO2 from ships. The technical and operational risk associated with the direct injection concept was considered to be higher. The feasibility study also concluded that the structure investigated in Utsira Sør was not suitable as a storage location for the project due to an insufficient storage capacity in the structure for the envisaged volume of CO2.

In 2016, the Ministry of Petroleum and Energy conducted a concept selection study for the project [44]. The concept selection study was quality assured by Atkins and Oslo Economics in quality assurance phase 1 (QA1) of the project [45]. A socioeconomic analysis was also conducted under QA1. The analysis indicated in particular that the project benefits were uncertain, especially in terms of whether there would be subsequent CCS projects that could benefit from the learning effects of Norway’s project. The QA1 report recommended not to continue the project until the resulting benefits could be better substantiated.

The Ministry of Petroleum and Energy proposed continuing the project nonetheless, and extensive efforts were initiated to identify the project benefits in addition to implementing measures to increase the probability of achieving the project goals. This work is hereinafter referred to as benefit realisation.

In autumn 2016, Gassnova announced two competitions for state aid to carry out concept selection and front-end engineering design (FEED) studies, one competition for studies on carbon capture from industrial facilities and one competition for studies on geological storage of CO2. Notification of the concept selection and FEED studies was submitted to the EFTA Surveillance Authority, which approved the notification [46].

On the basis of the competition, Gassnova signed carbon capture study agreements with Fortum Oslo Varme, Norcem and Yara in spring 2017. Gassnova also signed a CO2 storage study agreement with Equinor.

After the concept selection and FEED studies had been awarded, Equinor ASA, A/S Norske Shell and Total E&P Norge AS formed a collaboration for the study phase. This collaboration was named Northern Lights. Gassco was given responsibility for conducting the concept selection studies of CO2 transport by ship.

The carbon capture concept selection studies were completed in autumn 2017. The Government decided at this time to present the project to the Storting. Proposition No. 85 to the Storting (2017–2018) provided a comprehensive presentation of the work on full-scale CCS. The Storting pledged funding to initiate the FEED studies at Norcem and Fortum Oslo Varme.

The Ministry recommended not proceeding with the project at Yara’s ammonia factory in Porsgrunn due to low learning potential compared to the two other actors and uncertainty related to other aspects of the facility. Yara was also of the opinion that it would not be industrially sensible to continue their project.

The concept selection studies on CO2 transport were completed in autumn 2017. Responsibility for further studies of transport was transferred to Equinor, among other things to reduce the number of interfaces and actors in the project. The concept selection study on CO2 storage was completed in autumn 2018.

In the course of the concept selection study phase, Northern Lights concluded that the storage capacity of the selected storage location Smeaheia was too uncertain. An alternative storage location in the nearby Johansen formation, which had also been studied in connection with planning for the Mongstad full-scale project, had a greater storage capacity potential. This area was therefore selected as the storage formation. The change from Smeaheia to the Aurora complex in the Johansen formation reduced the risk associated with the project while also increasing the potential for storing CO2 from other sources.

The FEED studies of carbon capture and the bulk of the transport and storage work was concluded in autumn 2019.

Late in 2018, the need to drill a verification well in the Johansen formation in the storage complex given the name ‘Aurora’ was identified. This drilling took place from November 2019 to February 2020. Certain parts of the FEED studies comprising the actual storage location were therefore not completed until the spring of 2020.

The Ministry has placed particular emphasis on substantiating the project’s benefits. Gassnova has delivered benefit realisation plans in connection with a number of milestones throughout the project phases. The most recent benefit realisation plan also builds on an updated socioeconomic analysis conducted by Gassnova in cooperation with DNV GL in autumn 2019.

4.2 Longship – a cost-effective solution for full-scale CCS

Societal and impact goals for the project were defined in connection with the concept selection studies and the quality assurance phase 1 (QA1). These goals govern prioritisation in the project in general, and for work on benefit realisation in particular.

Societal goals

‘The demonstration of CCS shall provide the necessary development of CCS to ensure that Norway and the EU’s long-term climate targets can be achieved at the lowest possible cost.’

Four impact goals have been defined to achieve this societal goal:

  1. The project shall generate knowledge to show that full-scale CCS is feasible and safe.

  2. The project shall provide productivity gains for forthcoming projects through learning and economies of scale effects

  3. The project shall provide learning related to regulation and incentivisation of CCS activities

  4. The project shall facilitate business development

A solution for industrial-scale CCS has been matured to facilitate further development of CCS in both Norway and Europe. The project has encompassed carbon capture from Norcem’s cement factory in Brevik in Porsgrunn municipality, and carbon capture from Fortum Oslo Varme’s waste-to-energy plant at Klemetsrud, in the City of Oslo. Northern Lights has been responsible for the transport and storage part of the project, which has comprised ships for transport of liquid CO2, a reception terminal in Øygarden municipality, and a pipeline to a well where CO2 will be injected into a storage formation beneath the seabed under the exploitation licence 001, also known as Aurora; see Figure 4.1.

Figure 4.1 Longship

Figure 4.1 Longship

Source Gassnova

Norcem, Fortum Oslo Varme and Northern Lights’ work throughout the FEED phase has been regulated by study agreements with Gassnova. All of the companies have submitted comprehensive FEED reports that have been assessed by Gassnova and by Atkins and Oslo Economics as external quality assurers in accordance with the state’s project model.8

The actors have matured their respective projects from the concept phase through the FEED phase. This maturation has mainly entailed continuing work on the selected solutions to reduce uncertainty in the implementation phase.

Norcem and Fortum Oslo Varme have among other things verified their selected carbon capture technologies, optimised integration, prepared contracts with main suppliers and drawn up benefit realisation plans. Northern Lights has drilled a verification well, the results of which show that the reservoir is suitable for CO2 storage. Solutions for transport by ship have also been developed as well as a Plan for Development and Operation (PDO) and a Plan for Installation and Operation (PIO), with the pertaining Impact Assessment (IA).

Some changes have also been made to the technical solutions through this phase. Fortum Oslo Varme, for example, has changed the transport solution from the facility to Oslo Port, and Northern Lights has simplified the design of the onshore reception facility.

The overall progress schedule for the project indicates that if the implementation phase is initiated in January 2021, Norcem and Northern Lights could be in operation in the course of 2024. When Fortum Oslo Varme can become operational is dependent on external funding; see section 2.6. The funding period is set to last until 2034.

All actors followed up the work on benefit realisation in the FEED phase.

All industry enterprises in the project have made investment decisions in their respective sub-projects based on the FEED reports and the draft contracts negotiated between the state and industry, conditional on the state also deciding to support the project.

4.2.1 Norcem

Cement production represents around seven per cent of global CO2 emissions [47]. Two thirds of the emissions from cement production result from the process of turning limestone into cement. As long as limestone is used, emissions from this process can only be reduced by CCS. The cement industry is therefore dependent on carbon capture to achieve a carbon neutral industry and products.

Norcem AS is a wholly owned subsidiary of HeidelbergCement Group AG. Norcem has produced cement in Brevik since 1916. Following upgrades, the facility is in many respects now one of the most modern cement production facilities in Europe. In 2019, Norcem emitted around 900,000 tonnes of CO2 from its factory in Brevik. Of this, around 100,000 tonnes of CO2 were from biogenic sources and around 800,000 tonnes of CO2 were from fossil sources [48].

Norcem is planning to develop and operate a carbon capture facility that can capture around 400,000 tonnes of CO2 per year of its existing emissions from the cement factory in Brevik. Norcem is planning to use the residual heat from the cement factory as an input factor in the carbon capture facility, and access to residual heat will thereby determine the proportion of emissions it is possible to capture. To capture all of its emissions, Norcem would need more energy and the costs would have been higher.

Two thirds of Norcem’s emissions result from the process of turning limestone into cement. The remaining third of Norcem’s emissions from Brevik are a result of combustion, around 35 per cent of which comes from biogenic sources. Extensive efforts have therefore already been made to reduce emissions from cement production, among other things by introducing alternative fuels.

Norcem has chosen Aker Carbon Capture as its main contractor and supplier of carbon capture technology. CO2 is separated from the flue gas and liquefied before it is temporarily stored in storage tanks at Grenland Port, which has the capacity to store CO2 from approximately four days of production.

Figure 4.2 Illustration of Norcem’s carbon capture facility

Figure 4.2 Illustration of Norcem’s carbon capture facility

Source Norcem

On assignment from Norcem, Multiconsult has conducted an impact assessment of Norcem’s carbon capture project [49]. The impact assessment has not revealed any factors indicating that the measure should not or cannot be implemented. Multiconsult considers the negative impacts of the measure to be minimal. The project will mean that some of the pollution currently emitted to air, will be discharged to sea as a result of implementing the capture process. Amines will become new components in the emissions to air, but the amounts are minimal and Multiconsult has deemed them harmless. Storing CO2 in pressurised tanks entails a risk, but according to Multiconsult, this risk is very low.

In relation to the employment effects of the measure, Gassnova, based on Norcem’s FEED reports and additional documentation, estimates that the project will trigger a direct employment effect during the construction phase equivalent to around 900 full-time equivalents [49]. This is primarily employment with the project suppliers. If indirect effects and consumption effects are taken into account, Gassnova estimates that Norcem’s project will have an employment effect of around 1,800 full-time equivalents during the construction phase. The bulk of the work will take place during the second half of 2023, but there will also be major activity related to groundwork and foundation construction from autumn 2022.

Norcem has contributed to the benefit realisation work during the FEED phase. The project has been presented in various forums and contexts, and learning from the project has been shared. Norcem is in dialogue with national and international actors that are closely following the development of its carbon capture project. Norcem has also received many visitors to its facility.

Figure 4.3 Illustration of Norcem’s carbon capture process

Figure 4.3 Illustration of Norcem’s carbon capture process

Source Gassnova, based on the FEED reports

4.2.2 Fortum Oslo Varme

Waste management is a growing industry globally. Greenhouse gas emissions from waste management make up around five per cent of total global emissions [50]. The transition from landfills to sorting, recycling and energy recovery from waste reduces greenhouse gas emissions and the general environmental impact considerably. CCS will be an important tool to achieve carbon neutrality for this industry. The industry is also in a position to contribute to carbon-negative emissions, which the UN Intergovernmental Panel on Climate Change among others considers important to achieve the goals of the Paris Agreement [4].

The waste-to-energy plant at Klemetsrud started up in 1985. Fifty per cent of Fortum Oslo Varme is owned by the Finnish energy company Fortum Oy and 50 per cent by the City of Oslo. The waste incineration facility produces steam for electricity production and district heating. Around half of the waste that is incinerated in the facility comes from biogenic sources. This means that using carbon capture and storage at Fortum Oslo Varme will remove CO2 from the atmosphere. Since it comes from biogenic sources, the CO2 cannot be included in Norway’s emission obligations. Waste incineration with district heating forms part of the City of Oslo’s main infrastructure.

Fortum Oslo Varme is planning to build and operate a carbon capture facility that can capture around 400,000 tonnes of CO2 per year of its existing emissions from the waste incineration facility. Emissions from Fortum Oslo Varme are not encompassed by the European Emissions Trading System (EU ETS); see Box 2.2. CO2 is separated from the incineration facility flue gas, liquefied and temporarily stored in tanks at Klemetsrud. From these tanks, trucks will transport the liquid CO2 to Oslo Port, which has the capacity to store CO2 from approximately four days of production. Fortum Oslo Varme has chosen TechnipFMC as its main contractor and Shell as the supplier of CO2 capture technology.

Figure 4.4 Fortum Oslo Varme’s carbon capture facility

Figure 4.4 Fortum Oslo Varme’s carbon capture facility

Source Fortum Oslo Varme

According to Fortum Oslo Varme, more than 2 billion tonnes of waste is produced in the world each year, and management of this waste leads to huge greenhouse gas emissions [51].

Based on Fortum Oslo Varme’s FEED report [51] and additional documentation, Gassnova estimates the direct employment effect during the construction phase to be around 1,400 full-time equivalents. If indirect employment effects and consumption effects are taken into account, the employment effect is estimated to be around 2,800 full-time equivalents during the construction phase. Since the engineering work will be managed from TechnipFMC’s Lyon office, employment is initially expected to be highest outside Norway. Much of the local employment will be seen in 2022 and 2023.

Fortum Oslo Varme has contributed to the benefit realisation work during the FEED phase. The project has been presented in various forums and contexts, and learning from the project has been shared. Fortum Oslo Varme is in dialogue with waste incineration facilities in Norway and abroad that are following the development of the carbon capture project at Klemetsrud. Fortum Oslo Varme has also received a large amount of visitors to its facility.

Figure 4.5 Illustration of Fortum Oslo Varme’s carbon capture process

Figure 4.5 Illustration of Fortum Oslo Varme’s carbon capture process

Source Gassnova, based on the FEED reports

4.2.3 Northern Lights

Northern Lights is a collaboration between Equinor ASA, A/S Norske Shell and Total E&P Norge AS. Northern Lights will transport CO2 by ship to a new receiving terminal in Øygarden municipality. From here, CO2 will be pumped through a pipeline to a template on the seabed and injected into a geological formation around 2,600 metres beneath the seabed for permanent storage.

Figure 4.6 Illustration of Northern Lights’ receiving terminal in Øygarden municipality

Figure 4.6 Illustration of Northern Lights’ receiving terminal in Øygarden municipality

Source Northern Lights

Northern Lights is planning a two-phase development: The first phase is planned to have an estimated capacity of 1.5 million tonnes of CO2 per year, over an operational period of 25 years. A potential second phase is planned to have an estimated capacity of 5 million tonnes of CO2 per year.9 A further increase in capacity above 5 million tonnes of CO2 per year going through the infrastructure will require more investment than a phase 2 expansion (development phase 3).

The work to verify a safe and suitable CO2 storage solution is costly and time consuming. To verify the storage potential of the Aurora complex, Northern Lights drilled a verification well with state funding. The well showed the presence of sandstone and an acceptable storage potential in the relevant formation. The well will later also be used as an injection well. Steps have been taken to enable a second well to be drilled in the course of phase 1 on certain conditions.

Arrangements have also been made for Northern Lights to invest in up to three ships in phase 1 to transport CO2 from different capture facilities to the onshore facility in Øygarden. See section 8 for more details about the Northern Lights project.

Northern Lights has also contributed to the benefit realisation work during the FEED phase. An important part of this work is activities that contribute to business development, which is described in more detail in section 4.2.5. The companies participating in Northern Lights will also use their experience from the project in their own research and development work. Experience from this project can also be utilised in any possible future projects or in the further development of Northern Lights.

Figure 4.7 Northern Lights – concept overview

Figure 4.7 Northern Lights – concept overview

Source Northern Lights

4.2.4 Cost estimate

In the quality assurance phase 2 report (QA2), a cost estimate for Longship based on the actors’ FEED reports has been prepared. A project comprising carbon capture from Norcem’s facility and transport and storage is expected (P50) to cost a total of NOK 18.7 billion, of which NOK 12.9 billion is investments between 2021 and 2024 and NOK 5.7 billion is operating costs for a subsequent ten-year operational period. A project comprising carbon capture from Fortum Oslo Varme’s facility and transport and storage is estimated to cost a total of NOK 20.7 billion, of which NOK 13.9 billion is investments between 2021 and 2024 and NOK 6.8 billion is operating costs for a subsequent ten-year operational period. The overall cost for both capture projects, and transport and storage, is estimated to be NOK 25.1 billion, of which NOK 17.1 billion is investments and NOK 8 billion is operating costs. The state’s costs and risks associated with the project are described in section 6.2.

Table 4.1 Cost estimate (P501) for overall investments and operating costs for the period 2021–2034. Atkins and Oslo Economics (QA2).

NOK Mill. 2021 (P50), with exchange rates at 2 June 2020

Transport and storage and Norcem

Transport and storage and Fortum Oslo Varme

Transport and storage and two capture facilities

Investment costs

12,900

13,900

17,100

Operating costs 10 years

5,700

6,800

8,000

Total P50 10 years

18,700

20,700

25,100

1 P50 is the estimated project cost level for which there is an estimated 50 per cent probability of not exceeding.

It is challenging to make a direct comparison of the cost development from QA1 to QA2. Significant changes have been made to the project since QA1, which at the same time has matured during the FEED phase. Since QA1, there has been an overall cost increase in basic capital expenditures for the carbon capture facilities of 34 per cent and 75 per cent for Norcem and Fortum Oslo Varme, respectively. Seen in isolation, there has been a slight cost increase of 3 per cent to 7 per cent from the implementation of QA2 Part 1 to QA2 Part 2. If additional investments in a third transport ship and an additional injection well are included, the cost increase for the transport and storage part of the project is around 30 per cent. The estimates for the annual operating costs of the project were reduced somewhat after the concept selection phase.

4.2.5 Benefit realisation

Gassnova has developed a framework for the work on benefit realisation based on the Norwegian Agency for Public and Financial Management’s guidelines [52].

The work on benefit realisation is based on the societal goals and impact goals, as well as the economic assessments made during the project. It involves identifying benefits and increasing the probability of achieving the impact goals and thereby also the societal goals. The benefits to which the project should contribute to achieving have been defined and a plan has been developed for different measures and responsibilities. This is documented in a benefit realisation plan [53]. The benefit realisation plan has been updated a number of times during the project lifetime.

The industry actors in the project have described their contributions to benefit realisation as part of their FEED phase. The benefit realisation plan is a tool that can be used to coordinate and collate the plans of the industry actors and the state. Figure 4.8 shows the relationship between the project goals and benefits.

Figure 4.8 The relationship between the project goals and benefits

Figure 4.8 The relationship between the project goals and benefits

Source Gassnova’s benefit realisation plan

The benefit realisation work has a broad scope and the industry actors, Gassnova and the Ministry of Petroleum and Energy have invested great resources in this work throughout the FEED phase. Northern Lights’ business development work is a key part of the benefit realisation efforts. Experience has also been shared with a number of succeeding projects, academia and the authorities in other European countries. International seminars, a European CCS conference with the European Commission, and study visits from the authorities of other countries and industry actors have been organised. In addition, a website has been developed to efficiently share reports and experience with stakeholders. Input has also been provided on the development of the EU Innovation Fund. Work on regulatory clarifications, such as the London Protocol, is also a benefit realisation from the project.

Northern Lights is working with emission owners in Europe that are considering using a Norwegian storage facility, on the condition that a full value chain for CO2 capture, transport and storage is established. Carbon Limits and Thema Consulting, on assignment for the Ministry of Petroleum and Energy, have assessed relevant projects under development in Europe [25].

The consultants found 41 projects under development in Europe at different levels of maturity. Eight of these projects are planning to develop their own CO2 storage facilities, but are considering using Northern Lights as a back-up solution. These are shown in the top lines of Figure 4.9 ‘Projects planning for other/own storage’. Eleven projects are planning to store CO2 in a Norwegian storage facility, and are referred to as ‘potential candidates capture Northern Lights’. A further 22 potential projects have been identified that are in the early planning phase and are ‘future possible prospects Northern Lights’. These projects are mainly based in countries without their own CO2 storage facilities and, if implemented, may entail increased demand for CO2 storage in Norway. Carbon Limits and Thema Consulting therefore consider Northern Lights’ overall market potential to be between 20 and 60 million tonnes of CO2 per year; see Figure 4.9.

If all potential and possible future carbon capture candidates for Northern Lights were implemented according to schedule, a storage capacity of 1.5 million tonnes of CO2 per year would be utilised from start-up in 2024, while the capacity of 5 million tonnes of CO2 in phase two would be filled from 2026. It remains uncertain how many of the identified projects will actually be implemented, and the emission sources are also dependent on third-party funding.

Figure 4.9 Market potential of Northern Lights’ transport and storage infrastructure leading up to 2030, according to Carbon Limits and Thema [25]

Figure 4.9 Market potential of Northern Lights’ transport and storage infrastructure leading up to 2030, according to Carbon Limits and Thema [25]

Source Carbon Limits/Thema

Northern Lights’ efforts to create a market for CCS in Europe show a similar result. In September 2019, Northern Lights signed a Memorandum of Understanding (MoU) with a number of industry actors in Europe on CCS cooperation; see Box 4.1. Figure 4.10 shows the current market potential according to Northern Lights. This is a very dynamic image. Each colour in the figure represents an emission source in Europe that Northern Lights is in contact with. The increase in volume illustrates that the various industrial companies have signalled that they initially want to capture a lesser volume of carbon and then increase the volume when they have more experience. Uncertainty is attached to the projects and volumes in the figure, and third-party funding will be necessary for a number of the projects.

Figure 4.10 Market potential in Europe for the transport and storage infrastructure

Figure 4.10 Market potential in Europe for the transport and storage infrastructure

Source Northern Lights

Textbox 4.1 Northern Lights’ memoranda of understanding

In September 2019, Equinor signed MoUs with seven European industry actors to develop CCS value chains.1 The MoUs were signed with Air Liquide, Arcelor Mittal, Ervia, Fortum Oyj, HeidelbergCement AG, Preem and Stockholm Exergi. They entail cooperation on potential CCS in industries with high CO2 emissions and transport to Northern Lights.

Air Liquide is a leading European industrial company in the field of gases, technologies and services for industry and health. Air Liquide is also part of the Antwerp@C consortium, which is a collaboration between Antwerpen Port and surrounding industry. The consortium’s ambition is to halve current emissions of around 18 million tonnes of CO2 by 2030. Antwerp@C applied for funding from the EU’s Connecting Europe Facility (CEF) this spring, and during the Northern Lights Summit 2020, they communicated that they want to send the first delivery of CO2 to Northern Lights as early as in 2025.

ArcelorMittal is the biggest steel manufacturer in Europe, Africa and the USA. The company’s ambition is to become carbon neutral in Europe by 2050. The MoU entails cooperation on a number of joint activities, including the development of logistics, exploring potential commercial models and advocating carbon capture, utilisation and storage as an important step towards successful decarbonisation of European industry. ArcelorMittal has collaborated with Northern Lights at three of their factories in Dunkirk, Ghent and Hamburg, respectively, as part of a Project of Common Interest (PCI).

Ervia is responsible for the Irish national gas and water infrastructure. Ervia aims to have a net zero emission gas network by 2050. CCS is a critical element to achieving this ambitious goal. Ervia is working on a feasibility study to assess the role of CCS in decarbonising the gas network. This study will among other things look at the storage possibilities in the Irish Kinsale Head gas field and CO2 exports to Norway and the Northern Lights project.

Preem is the biggest fuel company in Sweden. It is currently implementing a demonstration project at its refinery in Lysekil, using technology from Aker Carbon Capture. Part of the project is to implement a value chain analysis for the whole CCS value chain with transport to Northern Lights. The project has been awarded funding from Norwegian and Swedish authorities, with around NOK 10 million in funding from CLIMIT and around SEK 9 million from the Swedish Energy Agency.

Stockholm Exergi produces district heating for customers in the Stockholm area. The City of Stockholm owns 50 per cent and Fortum owns 50 per cent of the company. Stockholm Exergi, with funding from the Swedish energy authorities, has developed a test pilot and conducted a test campaign at Värtaverket in Stockholm. An industrial-scale facility at Värtaverket would be able to capture around 800,000 tonnes of CO2 per year. Stockholm Exergi expects a facility to be ready for operation in 2025.2

The agreements with HeidelbergCement and Fortum Oyj were entered into on a group level. These two agreements therefore also state that the groups will further build on experience from developing the carbon capture projects at Norcem (Heidelberg) and Fortum Oslo Varme (50 per cent ownership by Fortum) to identify and develop more capture projects in their portfolios.

1 https://www.equinor.com/en/news/2019-09-cooperation-carbon-capture-storage.html

2 https://www.stockholmexergi.se/nyheter/kvv6/

4.2.6 Frameworks for investment and operation

The Ministry has negotiated with the companies involved in Longship for several years on the distribution of costs and risk during the investment and operational phase. In these negotiations, the Ministry has placed emphasis on the companies having incentives to make good industrial decisions throughout the project, and that the risk in the project is to be distributed between the state and industry. The companies will bear some of the costs and risks associated with the project.

Notification of state aid for investment and operations as negotiated in the agreements with the actors and the framework for the project has been submitted to the EFTA Surveillance Authority (ESA). On 17 July 2020, ESA made a decision on the state aid arrangements for the project, which it found to be in accordance with the EEA Agreement and therefore had no objections [54]. In the event of changes to the negotiated arrangements, it may be necessary to obtain a new approval from ESA.

4.2.6.1 Carbon capture

Negotiations with Norcem and Fortum Oslo Varme have taken place in parallel with the same draft contracts.

The most important instrument for cost and risk distribution is the model for investment funding and operational funding. The state has committed to covering all costs up to a threshold. Above this point of impact, the state will cover 75 per cent of the costs, while the companies will cover 25 per cent. This model was chosen, among other things, to give the companies good cost control incentives. The Ministry considers that 25 per cent of all costs above the threshold will provide sufficient incentives in the range where the company has the possibility to influence costs. A similar model was chosen for operating costs. The funding period is set to ten years from the start of operations. The threshold is part of the companies’ tenders.

Norcem and Fortum Oslo Varme’s direct profit from the project will come from savings on CO2 emissions. The actors compete in sectors with relatively low margins. They are nonetheless willing to bear a share of the costs and risk, and their costs will increase if the project’s overall costs increase more than anticipated.

To limit the state’s responsibility, a maximum cost has been agreed. As part of the FEED phase, the companies developed a cost and uncertainty analysis, which shows the probability distribution of estimated costs. The maximum cost is equivalent to an estimated 85 per cent probability of the costs remaining within that amount. It is also the level the state normally uses as the cost frame for state investment projects. Neither of the parties is obliged to implement the project if the maximum cost is reached, but if one of the parties chooses to complete or both parties agree to complete the project, the other party is obliged to perform their remaining rights and obligations under the contract.

Through the negotiations, additional funding was agreed for CO2 that is not included in the EU ETS, whereby the funding recipient receives funding equal to the allowance price for each tonne of CO2 captured. If the emissions are subject to a tax, the value of the carbon tax will be subtracted from the allowance price in the EU ETS, resulting in the additional funding amount being the difference between the carbon tax and allowance price. The additional funding also applies to CO2 from biogenic sources.

Certain adjustments have been made to the agreement with Fortum Oslo Varme that reflect the conclusion on co-financing from other sources and how the risk is to be distributed given the Government funding. If the start-up of Fortum Oslo Varme is later than in 2024, this also entails a shorter funding period for operating costs.

4.2.6.2 CO2 storage

Negotiations on the framework for investment and operation of the CO2 storage facility were carried out with Equinor, in cooperation with Shell and Total (Northern Lights).

A cost distribution was agreed for the project whereby the state covers 80 per cent of the investment costs and the companies cover 20 per cent. In the operational phase, the state will cover 95 per cent of the costs for the first year of operation, 90 per cent the second year, 85 per cent the third year and then 80 per cent from the fourth year of operation and the remainder of the funding period, which is ten years from the start-up of operations. If a second well and/or third ship is needed, the state will cover 50 per cent of these costs, with the maximum amount of funding limited to NOK 830 million. The state will also bear a share of the cost risk for unexpected incidents; see section 6.2.3.

In the same way as in the carbon capture agreements, a maximum cost has been included to prevent the state’s obligation to cover costs from exceeding the level corresponding to an 85 per cent probability of the costs remaining within that amount. Through the funding model, Northern Lights will cover a share of the operating costs and risk by storing CO2 from Norcem and, potentially, Fortum Oslo Varme’s facilities. Northern Lights has no revenues from storing CO2 from the Norwegian project, which gives incentives to sell capacity to other carbon capture projects. The effect of this is evident, for example through the MoUs they have signed with seven European companies on the development of CCS value chains; see Box 4.1.

After a CO2 storage facility has been discontinued, all obligations relating to monitoring and corrective measures will be transferred to the state in accordance with the Regulations relating to exploitation of subsea reservoirs on the continental shelf for storage of CO2 and relating to transportation of CO2 on the continental shelf (the transfer of responsibility and regulation is covered in more detail in section 4.3).

4.2.7 Evaluation and ranking of Norcem and Fortum Oslo Varme

Since the feasibility study phase, the framework for developing carbon capture has been structured to resemble a tender process. This was done among other things in order to avoid allocating more state aid than necessary and to have a clear framework for assessing subsequent projects.

Gassnova announced a competition for concept selection and FEED studies in 2016 based on the societal and impact goals for the project. The tender documents set out delivery requirements and evaluation criteria. The competition and evaluation criteria were also considered by the ESA in connection with the notification of state aid for concept selection and FEED studies [46]. Norcem and Fortum Oslo Varme conducted feasibility studies, concept selection studies and FEED studies within the framework of the competition. Both companies have also negotiated the investment and operation framework with the Ministry since 2017. The Ministry has assessed the projects on the basis of the FEED reports and the results of the negotiations. Gassnova and the Ministry together set out the following criteria for the competition:

  1. Capture capacity, the facility’s suitability

  2. Submitted progress schedule

  3. Ability to execute the project

  4. The state’s risks and costs

  5. Contribution to technology development

  6. Facilitation of knowledge transfer

Norcem and Fortum Oslo Varme’s FEED reports submitted in October 2019 form the basis for the Ministry’s and Gassnova’s assessment and evaluation of the projects. In connection with the investment and operation framework negotiations, both actors submitted tenders for their own contribution to the project, based on a draft contract that is identical for both actors.

Gassnova has conducted an evaluation of Norcem and Fortum Oslo Varme’s projects, comprising four parts:

  1. Technical evaluation

  2. Assessment of the quality of the actors’ cost estimates

  3. Evaluation of contribution to benefit realisation

  4. Ranking

Gassnova’s ranking was based on the technical evaluation. The quality of the cost estimate and the actors’ contribution to benefit realisation were also taken into account in the final ranking. This means that of the six criteria established to assess the projects, Gassnova assessed the technical criteria 1–3 followed by an assessment of benefit realisation in accordance with criteria 5 and 6. Gassnova did not assess the actors under criteria 4 ‘the state’s costs and risks’. Gassnova allocated points to the actors on a scale from 1 to 5, where 1 is ‘unsatisfactory’, 3 is ‘as expected’ and 5 is ‘excellent’. Successful implementation of the project is a prerequisite for expedient demonstration of CCS as a climate measure. Gassnova has therefore placed considerable weight on the industry actors’ ability to execute the project in its evaluation. Table 4.2 summarises Gassnova’s technical evaluation.

Table 4.2 The results from Gassnova’s technical evaluation [55]

Gassnova’s technical evaluation at maturity level DG3

Fortum Oslo Varme

Norcem

Main criteria

Weighting

Points

Weighted points

Points

Weighted points

Capture capacity, the facility’s suitability

25 %

3

0.8

4

1

Submitted progress schedules

15 %

3

0.5

4

0.6

Ability to execute the project

60 %

3

1.8

4

2.4

Total score

3

4

Gassnova’s evaluation concludes that both Fortum Oslo Varme and Norcem’s projects have good technical solutions and that the projects are sufficiently mature for implementation. The technical evaluations show that Norcem scored 4 ‘good’ on all technical criteria. Fortum Oslo Varme scored 3 ‘as expected’ on the technical evaluation. Gassnova also concluded in the assessment of the quality of the actors’ cost estimates and the evaluation of their contribution to benefit realisation, that Norcem scored somewhat higher than Fortum Oslo Varme, but that both had delivered as expected or better.

Gassnova therefore ranks Norcem above Fortum Oslo Varme from an overall perspective. Gassnova recommends that both Fortum Oslo Varme and Norcem’s projects can be continued as they are described in the FEED reports.

The Ministry drafted contracts based on negotiations with Norcem and Fortum Oslo Varme, which formed the basis for inviting the two actors to submit tenders for funding for construction and operation of carbon capture facilities. Norcem accepted the draft contract, while Fortum Oslo Varme’s offer was conditionial upon certain amendments to the contract wording. The proposed changes would have led to somewhat higher cost and interface risks for the state than originally envisaged in the Ministry’s draft contract.

The Ministry’s assessment is that the state’s costs and risks are clearly lower for Norcem’s project than Fortum Oslo Varme’s project, and it therefore ranks Norcem above Fortum Oslo Varme on criteria 4 ‘the state’s costs and risks’.

Atkins and Oslo Economics have quality assured the projects in accordance with the framework agreement under the KS quality assurance scheme, and the QA2 report [56] is based among other things on the companies’ FEED reports and Gassnova’s evaluations. Atkins and Oslo Economics have not therefore assessed the criteria for the competition for state aid, but have carried out assessments relevant to the Ministry’s assessment. One of the main conclusions of the QA2 report was that it may be better to implement one carbon capture project rather than two, since this makes a greater storage volume available to other carbon capture projects, and because it reduces the cost without necessarily lowering the learning effects significantly. QA2 states that Norcem’s carbon capture facility is preferable to that of Fortum Oslo Varme, primarily due to lower life cycle costs.

Overall, the Ministry is of the opinion that both projects are possible to implement. The project can therefore be implemented with two carbon capture projects. At the same time, Norcem clearly ranks highest based on the criteria set for the competition.

4.3 Relevant regulations

Effective and comprehensive regulation of capture, transport and storage of CO2 is an important prerequisite for the establishment of CCS projects. Clear regulations and frameworks must be in place for commercial companies to decide to invest in projects. This is also necessary to assure the authorities, industry and civil society that CCS takes place under proper, safe conditions.

There are several international and national laws and regulations that set out the framework for CCS in Norway. The most important of these are described below.

4.3.1 International and regional frameworks

The London Protocol

In international environmental law, the Protocol of 7 November 1996 (the London Protocol) to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter of 29 December 1972, forms the basis for allowing CO2 storage beneath the seabed.

In principle, the London Protocol prohibits the intentional dumping or storage of wastes or other matter at sea, on the seabed or in sub-seabed geological formations. An amendment was made to the protocol in 2006, which added storage of CO2 in sub-seabed geological formations to the list of ‘permitted dumping’. The amendment entered into force in 2007.

The London Protocol nonetheless contains a prohibition on export of all wastes and other matter to other states for dumping or incineration at sea. In 2009, the parties to the Protocol adopted an amendment that opens for export of CO2 to other states for storage purposes on certain conditions. This amendment has not formally entered into force, since too few of the parties to the Protocol have ratified it.

Norway approved the amendment in 2010. The fact that the 2009 amendment has not formally entered into force is a legal obstacle to cross-border cooperation on CCS. Norway is working to encourage more countries to ratify the 2009 amendment so that it will enter into force for all parties to the London Protocol.

In 2019, the parties to the London Protocol supported a Norwegian–Dutch proposition to allow provisional application of this amendment10 while awaiting ratification by two-thirds of the 53 parties. Countries that so wish can make arrangements for transport of CO2 across national borders by submitting a declaration to the International Maritime Organization (IMO). In June 2020, Norway submitted a declaration of provisional application of the 2009 amendment. The declaration enables cross-border cooperation on capture and permanent geological storage of CO2.

According to the 2009 amendment, bilateral agreements between the countries cooperating on transport and storage of CO2 are also required. Such agreements must confirm and make reference to obligations to provide individual permits for transport and storage of CO2. These obligations follow from the London Protocol and other applicable international law.

In order for Norway to be able to enter into cross-border cooperation on transport and storage of CO2, it is therefore necessary that the collaborating country declares formal provisional application of the 2009 amendment to the London Protocol to the IMO, and that Norway and the collaborating country enter into a bilateral agreement. Furthermore, it is an advantage if the collaborating country ratifies the 2009 amendment. The Ministry of Petroleum and Energy will follow this up according to regular procedures with the authorities of countries in which industry actors are interested in exporting CO2 to Norway for storage on the Norwegian continental shelf.

The Oslo-Paris Convention (OSPAR)

The objective of the OSPAR Convention is to protect and conserve the marine environment. In 2007, the OSPAR Commission adopted amendments to the appendix to the OSPAR Convention to allow storage of CO2 in geological formations beneath the seabed. In connection with the amendments to the Convention, OSPAR has adopted a decision to ensure environmentally safe storage of CO2 in geological formations and OSPAR Guidelines for Risk Assessment and Management of Storage of CO2 Streams in Geological Formations.

The OSPAR Commission has also adopted a prohibition on storage of CO2 in the water column at sea and on the seabed due to the potential negative environmental impacts of such activities.

The UN Intergovernmental Panel on Climate Change’s Guidelines

Under the UN Framework Convention on Climate Change, Kyoto Protocol and the Paris Agreement, the UN Intergovernmental Panel on Climate Change’s Guidelines apply to greenhouse gas emissions accounting.11 In accordance with the guidelines, the amount of CO2 emissions and injected CO2 at each storage facility for permanent storage of CO2 in geological formations is reported on an annual basis.

The European Emissions Trading System

Norway participates in the European Emissions Trading System (EU ETS) and is subject to Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading (the EU ETS Directive), which was incorporated in the EEA Agreement in 2007. The EU ETS Directive is implemented in Norwegian legislation through Act No. 99 of 17 December 2004 relating to Greenhouse Gas Emission Allowance Trading and the Duty to Surrender Emission Allowances (the Greenhouse Gas Emission Trading Act) and pertaining regulations (the Greenhouse Gas Emission Trading Regulations). Operators conducting activities that are incorporated in the EU ETS must annually surrender allowances corresponding to the total amount of emissions that are subject to the trading system.

Operators can subtract CO2 that has been captured and stored from activities subject to the EU ETS from their emissions accounting. This means that they do not need to surrender allowances for this volume. Norcem will be an example of this when this project has been implemented.

Fortum Oslo Varme’s activities are not subject to the EU ETS, but the Norwegian Tax Administration has conducted a public consultation on a proposal for a Storting resolution concerning a carbon tax on waste incineration. If the proposal is adopted, a carbon tax will be introduced on the part of the emissions produced by combustion of fossil sources. In such case, Fortum Oslo Varme will not have to pay the tax if its emissions are captured and stored.

The Norwegian project entails that captured CO2 will be transported by ship to the storage actor’s reception terminal. This has raised certain legal issues with regard to the EU ETS, since the EU ETS regulations explicitly regulate transport by pipelines, but make no mention of transport by ship.

In July 2020, the European Commission endorsed Norway’s interpretation of the regulations, which entails that the capture facilities will be able to subtract CO2 from their emissions accounting when CO2 is transferred from the ship to the reception terminal. The capture operator may not subtract allowances for CO2 that leaks during transport and must thus surrender allowances for these emissions. The financial loss that results from such leakages during transport can be regulated in private legal contracts between the operators. Each capture facility must have detailed and adapted monitoring plans developed in consultation with the Norwegian authorities that regulate leakage and emissions of CO2 during transport.

CO2 emissions from biomass (biogenic CO2) are not included in the EU ETS and such emissions are counted as zero in the emissions accounting. This also means that it is not possible to subtract biogenic CO2 that is captured and stored in the emissions accounting. The EU ETS regulations thus do not provide any incentives to capture biogenic CO2 or for what is known as negative emissions.

Capture and storage of CO2 from biomass is included in most of the UN Intergovernmental Panel on Climate Change’s emission pathways aimed at achieving the temperature goals set out in the Paris Agreement [3]. It is therefore a challenge that there are currently no incentives to capture biogenic CO2.

The European Commission will assess how incentives for bioenergy with carbon capture and storage can be developed in its ongoing work under the European Green Deal. The European Commission has initiated a process to assess potential incentives for nature-based solutions for CO2 removal, including using CCS on emissions produced from biogenic sources.12

4.3.2 National regulations

Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon dioxide (the Storage Directive) sets out the legislative framework for the environmentally safe storage of CO2 within the EEA. The Directive aims to ensure that there is no significant risk of CO2 leakage or harm to health or the environment, as well as to prevent negative effects on the safety of the transport network or CO2 storage facilities. The Storage Directive stipulates requirements for, among other things, the establishment of a licensing scheme for exploration for storage locations, monitoring of stored CO2, financial security and third-party access to pipelines that transport CO2 and to storage locations.

The Directive was incorporated in the EEA Agreement in 2012, and the Ministry of Petroleum and Energy, the Ministry of Labour and Social Affairs and the Ministry of Climate and Environment are responsible for different parts of the Directive in Norwegian legislation. The Directive was implemented through new regulations, The Regulations relating to exploitation of subsea reservoirs on the continental shelf for storage of CO2 and relating to transportation of CO2 on the continental shelf (the CO2 Storage Regulations), a new chapter in Regulations No. 931 of 1 June 2004 on pollution control (the Pollution Control Regulations), and a new chapter in Regulations No. 653 of 27 June 1997 relating to petroleum activities (the Petroleum Regulations). Together with Regulations No. 186 of 25 February 2020 relating to safety and working environment for transport and injection of CO2 on the continental shelf (the CO2 Safety Regulations), these make up a comprehensive regulatory framework for transport and storage of CO2 in Norway.

The CO2 Storage Regulations include inter alia provisions concerning the conditions for the transfer of responsibility to the state (Section 5-8), financial security for obligations pursuant to the Regulations during the operational period and a subsequent period until the transfer of responsibility (Section 5-9), financial contribution to cover the state’s costs for a period after the transfer of responsibility (Section 5-10), and third-party access to facilities for transport and storage of CO2 (Section 5-12). Section 7A in Chapter 35 of the Pollution Control Regulations set out partially overlapping provisions.

The Ministry’s assessment of these matters for the project planned for implementation under Exploitation Licence 001 are detailed below. This does not entail a limitation of the Ministry’s competence or stipulate guidelines for future administrative practice.

Transfer of responsibility to the state (Section 5-8)

Following closure of a storage site, all obligations concerning monitoring and corrective measures are transferred to the state in accordance with the CO2 Storage Regulations. Section 5-8 of the CO2 Storage Regulations sets out four conditions for transferring responsibility to the state.

The first condition is that all available information indicates that the stored CO2 will remain completely and permanently contained. To fulfil this condition, the operator must e.g. be able to document that the actual behaviour of the injected CO2 conforms with the modelled behaviour, that leakage cannot be proven, and that the storage site is evolving towards a condition of long-term stability.

The second condition is that a minimum period determined by the Ministry has elapsed. This minimum period shall be no shorter than 20 years, unless the Ministry, upon application from the operator before or at this time, is convinced that the requirement in the first condition is complied with before the expiry of this minimum period.

The third condition is that the financial obligations mentioned in Section 5-10, which are detailed below, have been fulfilled.

The fourth condition is that the storage site has been prudently abandoned and the injection facilities removed.

The state will not stipulate a longer minimum period than necessary to determine that the first and second conditions of the first paragraph in Section 5-8 are fulfilled. The state will not object to a transfer of responsibility if it is clear that the conditions set out in the first paragraph in Section 5-8 have been fulfilled.

More specific stipulation of the criteria for transferring responsibility and the length of the minimum period must take into account experiences from operation of the storage facility. This must take place through dialogue between the storage operator and the relevant authorities. Through this process, it will be possible to clarify the details concerning transfer of responsibility well before the closure of operations. It is natural to base this dialogue on experience from the established monitoring plans developed by the operator in accordance with the requirements in Appendix II to the CO2 Storage Regulations. The monitoring plan must be updated every five years and after closure of the storage site. When responsibility is transferred to the state, the operator must present an updated plan demonstrating the requirements set out in the CO2 Storage Regulations.

If the operator believes that the conditions of the Regulations have been met, the operator can submit an application to transfer responsibility to the state. In the Ministry’s assessment, the basis for such an application will generally be in place after the first five-year period. Pursuant to the CO2 Storage Regulations, it is nonetheless not decisive how much time has passed, but that the conditions for the transfer of responsibility have been met.

Assessments made pursuant to Section 5-8 concerning the transfer of responsibility, length of the minimum period and any transfer of responsibility before this period has expired will be based on all information available at the time of assessment.

Financial security (Section 5-9)

Section 5-9 of the CO2 Storage Regulations stipulates financial security requirements. In applications for permission for injection and storage of CO2 pursuant to Chapter 35 of the Pollution Control Regulations, the operator shall document that appropriate dispositions can be made in the form of financial security or equivalent to ensure that all obligations arising from the Pollution Control Regulations can be fulfilled. The documentation is based on more specific provisions prescribed by the Norwegian Environment Agency. The financial security shall be valid and effective before injection starts. The Ministry of Climate and Environment and the Ministry of Petroleum and Energy will jointly assess the financial security.

Chapter 35 of the Pollution Control Regulations sets out partially overlapping provisions in Section 35-15, which also stipulates a financial security requirement to ensure that all obligations pursuant to Chapter 35 can be fulfilled, including those that follow from the provisions concerning procedures for closure of the storage site, operation after the storage site has been closed and any obligations that follow from the Act relating to Greenhouse Gas Emission Allowance Trading and the Duty to Surrender Emission Allowances(the Greenhouse Gas Emission Trading Act). The financial security is periodically adjusted to take account of changes to the risk of leakage and the estimated costs. When a storage site has been closed after the conditions have been fulfilled or on application, the financial security shall remain valid and effective until the responsibility for the storage site has been transferred to the state in accordance with the Regulations. When a permit has been withdrawn, the financial security shall be valid and effective until a new permit has been issued or the storage site has been closed and the state’s costs have been covered in accordance with the Regulations.

How the financial security is designed and what security mechanisms are accepted will depend on a specific assessment of e.g. what obligations are to be covered, what conditions apply to the product, how the state’s right to coverage has been addressed, and the operator’s financial soundness and liquidity. When delimiting the amount, an appropriate assessment will be made based on the size of the estimated costs that can be expected after a reasonable assessment in relation to e.g. monitoring programmes, any corrective measures, closure, post-closure operations, and the cost of allowances in the event of leakage. The size of the financial security will be assessed at regular intervals and adjusted to any changes in the assessed risk of leakage and estimated costs of all obligations. In the assessment of what is considered adequate coverage of allowance costs in the event of leakage, the state will consider what is deemed probable based on the knowledge available when the financial security is provided, with subsequent adjustments.

The scope of the financial security for this project must also take into account that through the funding agreement, the state is responsible for a significant share of the potential costs related to injection of 1.5 million tonnes of CO2 each year and CO2 emissions from the state-funded CO2 capture project. There is a need for dialogue between Northern Lights and the authorities to determine the content and scope of the financial security.

Financial mechanism (Section 5-10)

Section 5-10 of the CO2 Storage Regulations stipulates the requirement that the operator shall make a financial contribution available to the State, represented by the Ministry of Petroleum and Energy, as specifically decided by the Ministry before the transfer of responsibility takes place. The contribution shall take into account the criteria mentioned in Appendix I to the CO2 Storage Regulations, as well as elements that relate to the historical storage of CO2 of relevance for the determination of obligations after the transfer. The financial contribution shall, as a minimum, cover anticipated monitoring costs for a period of 30 years. The contribution may be used to cover the state’s costs after the transfer of responsibility to ensure that the CO2 is safely stored after the transfer of responsibility.

The size of the financial contribution will in principle be determined on the basis of expected monitoring costs for a 30-year period, based on what is deemed to constitute a necessary monitoring programme following an appropriate technical assessment. Following a specific assessment in accordance with Section 5-10, other elements may also provide grounds for increased contributions. Monitoring requirements after the transfer of responsibility must be based on the knowledge available and risk assessment conducted when the transfer of responsibility is imminent, based in particular on the experience gained from the storage site’s operating period. In principle, the financial contribution should not be greater than what is deemed necessary, following an appropriate assessment, to cover the expected costs for the state after the transfer of responsibility.

Costs will be related to identifying future risks at the time responsibility is transferred. The size of the financial contribution will be decided when responsibility is transferred, but must as a minimum cover the costs of data collection that can provide a good picture of the stored CO2. The data collection must be based on recognised methods and available technology at the time of application.

Dialogue between Northern Lights and the authorities on these matters will be necessary in the course of the operational period to ensure that, through this process, the details concerning the financial mechanism are clarified well before responsibility is transferred.

Third-party access to facilities for storage of CO2 and storage sites (Section 5-12)

Section 5-12 of the CO2 Storage Regulations stipulates that agreements on the use of facilities and storage sites that are covered by Section 4-5 concerning the Plan for development and operation of a subsea reservoir for injection and storage of CO2, or by Act No. 72 of 29 November 1996 relating to petroleum activities (the Petroleum Act) shall be submitted to the Ministry for approval. The Ministry may, in connection with approval of agreements or if an agreement is not reached within a reasonable time, as well as in connection with instructions pursuant to the regulations, stipulate tariffs and other conditions or subsequently change the conditions that have been approved or set, in order to ensure that storage of CO2 is implemented based on the consideration for resource management and that the owner of the facility is afforded a reasonable profit, e.g. based on investment and risk. Section 6-3 of the CO2 Storage Regulations also states that the Ministry may impose conditions on a licence to install and to operate facilities and tariffs for use of the facility.

A condition for the project’s success is that it contributes to the implementation of more CO2 capture projects in Europe. Key policy instruments to achieve this are to establish a storage facility with the capacity to receive volumes of CO2 in addition to the agreed volumes from Norcem and potentially Fortum Oslo Varme, that the storage companies manage this capacity, and that the storage companies are able to earn a reasonable profit from storing volumes of CO2 from Europe.

A prerequisite for the companies accepting a share of the costs is that they are given an opportunity to generate revenues from selling storage capacity, which affords a reasonable profit. If the real return for the transport and storage companies is higher than ten per cent during the funding period, the funding agreement entitles the state to part of the profit.

Footnotes

1.

The Ministry of Petroleum and Energy’s Proposition No. 1 to the Storting (2014–2015)

2.

See http://www.act-ccs.eu/ for more information.

3.

https://www.sintef.no/nccs/

4.

The Research Council of Norway finances NOK 240 million, industry NOK 210 million and R&D partners NOK 120 million. This includes other projects associated with the centre.

5.

https://zeroemissionsplatform.eu/

6.

https://ec.europa.eu/energy/topics/technology-and-innovation/strategic-energy-technology-plan_en

7.

https://oilandgasclimateinitiative.com/

8.

Public versions of the FEED reports are available at https://ccsnorway.com/reports/

9.

The pipeline will have the capacity to transport around five million tonnes of CO2 per year. This will lead to somewhat higher costs compared to a pipeline with a capacity of 1.5 million tonnes of CO2 per year, but significantly lower costs than if a new pipeline had to be laid later on.

10.

The Vienna Convention on the Law of Treaties allows for provisional application of parts of a treaty pending formal entry into force, if the negotiating states have in some other manner so agreed; see Article 25.

11.

2006 IPCC Guidelines for National Greenhouse Gas Inventories.

12.

https://etendering.ted.europa.eu/cft/cft-display.html?cftId=6709

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