Onus on Australian operators to link carbon capture to gas field developments

April 12, 2023

Australia has revised legislation on direct Scope 1 emissions, potentially providing a boost to CCS projects in the region, according to Wood Mackenzie.

Related To: Wood Mackenzie

Offshore staff

LONDON — Australia has revised legislation on direct Scope 1 emissions, potentially providing a boost to carbon, capture and storage (CCS) projects in the region, according to Wood Mackenzie.

The reformed Safeguard Mechanism, due to take effect in July, will require projects to reduce emissions intensity on average 4.9% annually through 2030, followed by lower reductions.

With new gas projects, producers will have to abate or offset all reservoir CO₂ from first production.

Wood Mackenzie has identified 27 proposed or underdevelopment CCS projects in Australia. Of these, Chevron’s Gorgon CCS project offshore Western Australia is in operation and Santos’ Moomba CCS project onshore Queensland is expected to start up in 2024.

According to Anne Forbes, research analyst with Wood Mackenzie, “CCS’ route to a viable revenue stream is clearer, and getting financial backing will potentially become easier. I suspect this policy will generate a proliferation of CCS projects in Australia, because not only will upstream producers need abatement solutions, but so will all the other big industrial and mining emitters subject to the Mechanism.”

The revisions will impact projects differently, depending on their emissions and gas quality, and could affect some of Australia’s largest pre-final investment decision and underdevelopment projects, most of which are said to contain relatively high levels of reservoir CO₂.

“It is now critical for new projects, including Woodside’s Browse, Santos’ Barossa and Eni’s Evans Shoal/Verus [all offshore northwest Australia], to invest in a CCS solution that can operate from day one. And for new projects without a CCS plan, like Shell’s Crux development, CCS and greater purchase of carbon offsets has now become a crucial consideration.”

Government and industry will also need to work on incentives and regulatory structures to enable CCS projects to go forward in compliance with the terms of the Safeguard Mechanism.

For new gas projects, including fields that will supply existing LNG complexes, "best practice" baselines will have to be adopted, such as zero emissions from venting of a field’s reservoir CO₂, Forbes said.

“However, more guidance is required to determine what `best practice’ really means for the industry, particularly on zero-venting…

“To cut annual emissions in the near term, it is likely that operators will tackle the low-hanging fruit first, such as switching to non-routine flaring only and cutting down fugitive methane emissions. Longer-term more impactful solutions for cutting emissions will likely include using power sourced from the grid and/or renewable and the ramping up of CCS.”

04.12.2023