Will COP28 be the showdown or the beginning of the payback for the oil&gas sector? With a record number of 2,456 accredited individuals associated with the oil&gas sector (among them, 34 from ENI/Saipem), it is possible to perceive for the first time the sense of uncertainty and fear that is shaking up a sector that is looking ahead, by a small extent, towards investing in renewables while it is factually continuing the explorations for new oil and gas wells, following a business-as-usual model.

Whether it is the Mediterranean Sea offshore Egypt, Nigeria, American Shale Gas reservoirs, Brazilian coasts (Lula just accepted to join OPEC+), or the Arabian desert, the world of exploration does not stand still. The Oil Majors’ mantra is the following: today’s 30-year investments in fossil fuels will pave the way for paying for the transition to renewables, hydrogen, and the nuclear energy of the future; methane gas is the transition fuel. American bigwigs even shrug, disowning their responsibilities till the last.

It is clear, however, that the destiny for a post-2050 phase out/down of fossil fuels appears inevitable, except for small quotas for emergency stockpiles, the petrochemical industry, and little else. The pressure between now and 2025 is set to soar and the climate movements as well as the political debate will have to focus on this issue.

The last big standing enemy in the climate challenge is Big Oil, mostly embodied by Saudi Arabia, Russia, Iran, and the United States, where most resistance to the transition hides. Certainly, there are other petrostates, like Venezuela and Iran, who would like to see their own economic recovery driven by oil drilling, but they hardly matter on the UN stage (Iran even pulled up its stakes).

Here comes the CCS

There is, however, an escamotage that could allow the oil&gas sector to keep on investing in fossil fuels. It is called Carbon Capture and Storage (CCS) and it is a set of complex and controversial technologies, not yet fully scalable at the industrial level.

While carbon compensation is already looked at critically, for CCS the question is more complex. The areas of applications are two: the production of electricity from fossil fuels and the hard-to-abate industrial sectors, where it is not always possible to reduce emissions to zero. If willing to protect industrial production but at the same time decarbonize the economy without transforming the processes or finding alternative energy sources, the capture, storage, and use of CO2 becomes a fundamental brick of polymer chemistry.

Because of this, one of the most heated issues of COP28 negotiations is linked to the wording of phasing down/out the “unabated” fossil emissions, namely those that do not make use of technologies to reduce or capture emissions, such as Carbon Capture and Storage or Carbon Capture and Usage (CCUS) or other modes of reduction, including carbon markets and other mechanisms embedded in Article 6.

Is CCS unavoidable?

According to IPCC, almost all decarbonization scenarios aligned with the target of limiting mean global temperature rise to 1.5°C by 2100, require the deployment of CCS or similar technologies to varying degrees, from a minimal contribution to the widespread use, depending on the scenario considered.

The authors of the report Unabated: the carbon capture and storage 86 billion tonne carbon bomb aimed at derailing a fossil phase out, drafted by the research and policy institute Climate Analytics, warn that there are two main risks connected with using these technologies at various levels. On the one hand, these technologies might create the false impression that climate goals are achievable even while maintaining large-scale fossil fuel consumption.

On the other hand, the report reads: “If the term ‘unabated’ is poorly defined, it could reopen a closing door on the large-scale use of fossil fuels” frustrating the use of CCS technologies. One solution is to carefully and precisely delimit the perimeter of use, e.g. by listing a select group of hard-to-abate industries, such as cement and steel, but not for electricity generation, as required by the oil&gas sector.

At the moment, around the world, there are approximately 40 operational commercial carbon capture facilities, sucking out of the atmosphere around 45 million metric tons of CO₂ per year, equivalent to 0.12% of energy-related emissions in 2022. “CCS is a technology whose role will be more significant in the future for achieving net zero, so much that both IEA and IPCC forecast a bigger development after 2050. Most importantly, it cannot serve to maintain the status quo, namely to continue fossil fuels exploitation at today’s rate. Indeed, doing so, the use of this technology would in no way be sustainable, implying considerable costs (up to 3.5 trillions/year between now and 2050) and out-of-scale electricity consumption” explains Chiara di Mambro, head of decarbonisation policy at ECCO Climate, to Renewable Matter.

Are costs still too high?

According to data from the International Energy Agency, investment costs per installation are currently high, ranging between €124 and €317/tonne CO₂, depending on the technology adopted, Operating costs are up to 120 €/tonne of CO₂. Moreover, the costs related to the risks and long-term management of storage, that will fall on future generations for the maintenance and monitoring of the sites, should be added to the equation. Also, it must be ensured that CO₂ does not escape from the deposits, creating “carbon bombs” which can be dangerous for human safety, given the high concentrations. Ultimately, high investments in safety are needed in the context of an industry, the oil&gas sector, which is no stranger to maxi-accidents.

In Italy, the potential for abatement through the use of CCS to reach carbon neutrality is currently estimated to range between 20 and 40 million tonnes of CO₂ (Mton/year). In the medium term, there are no specific targets yet. These should be identified with the Piano Nazionale Integrato Energia e Clima in mid-2024. The main project under development that is being discussed is that of ENI and Snam in Ravenna which has a target of 4MtCO₂/year starting in 2026, for the industrial phase, with a possible post-2030 increase of 16-20MtCO₂/year (if compared to the 417.6 MtCO₂eq emitted in 2021, 4MtCO₂ is 0.96% while 16-20 MtCO₂, 4.3%). Renewable Matter sent requests for details to Eni, which should be published shortly.

What can happen in Dubai?

If the Parties will agree to include the phase down/out of “unabated” fossil fuels in the final text, this will open Pandora's box that will foster a flood of new private and public funding for CCS and CCUS, as well as a new generation of subsidies deemed to be “environmentally benign”, but in fact aimed at protecting the survival of fossil fuels. It is enough to look at the 10.4 billion euros in fossil subsidies that Canada offered these days as tax credits for CCS technologies for new oil and gas extraction.

Complex scenarios could open up along these lines, and these would have to be operated very strictly - and it will not be easy to find, in seven days, a clear definition of which sectors can fall under the exceptions of the use of gas, oil or even coal for the usage of capture and storage technologies or other mechanisms. In short, let’s pay attention to all the mentions of CCS in the coming days, especially in Article 35, where, in the draft final document, the phase down/phase out of fossil fuels, an emblematic political element of this COP, is mentioned.

This article is also available in Italian / Questo articolo è disponibile anche in italiano

Photo by COP / Kiara Worth

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