Australia’s gas industry will keep pumping and become a storage site for industrial pollution under industry and government plans.
A technique known as carbon capture and storage (CCS) would trap emissions from gas fields and pump the gases underground in depleted wells or rock formations.
A variant is carbon capture utilisation and storage (CCUS), where the emissions are turned into another product such as hydrogen.
In fact, it might be the only way to maintain a sovereign oil and gas industry in a world that is aiming for net-zero emissions.
“CCS will have a critical role to play in helping to decarbonise fossil fuel production,” Chris Kinnersley, partner at investment firm Snowcap, told AAP.
“The difficulty is finding credible, large-scale projects that also meet return requirements,” he said.
“Our concern is that companies are using speculative CCS promises as a trojan horse for greenlighting new upstream projects that otherwise would not make sense.”
Resources Minister Madeleine King says the “safe, key proven technology” will support the petroleum sector to transition.
And with rival projects underway in the United States and Europe, the industry has been told to get on with it and not expect generous taxpayer subsidies.
Also pushing oil and gas companies to use technology to decarbonise, the recently legislated safeguard mechanism changed the rules for big emitters by requiring greenhouse gas emissions to fall by 4.9 per cent a year.
Energy analyst Tom Allen said emissions reduction technologies like CCS have become an increasingly important consideration for new developments, particularly those with higher reservoir carbon such as Santos’ Barossa project and Woodside’s proposed Browse project.
“We’re increasingly seeing energy companies allocate capital to energy efficiency measures and those which reduce combusted emissions in the gas production process too, such as installing electric drive compressors and LNG trains,” he told AAP.
“The cost of abatement has become a key component of the project economics supporting an investment decision.”
The Albanese government may have axed a coalition program that provided CCS grants of up $25 million, but potentially lucrative carbon credit units can be earned from the method and get the business case across the line.
Australia’s only onshore CCS project, Moomba in outback South Australia, is aiming for first injection next year.
Carbon dioxide separated from liquefied natural gas at the Moomba gas plant will be re-injected into the rock it came from, and aims to store up to 1.7 million tonnes of carbon a year.
Santos has successfully registered the $220 million development with the federal Clean Energy Regulator for a future Australian carbon credit revenue stream. And safeguard sites, including gas plants, could earn bonus credits from future carbon storage.
Administered by the federal Clean Energy Regulator, the CCS method aims to encourage projects capturing emissions that would otherwise have been released into the atmosphere.
The CCS method came into effect in October 2021, but no carbon credit units have been issued under it to date, the regulator told AAP.
For Santos, the regulator-approved method for generating carbon credits was essential to make the Moomba project work financially.
To the north, Santos last month signed a memorandum of understanding with Italian giant Eni on CCS in northern Australia and Timor-Leste.
Santos has also said the Bayu-Undan area it operates in offshore East Timor could host CCS activities.
Bayu-Undan CCS has the potential to reduce the direct emissions of Australian gas projects, as well as other industries in the Northern Territory, by providing carbon storage in depleted gas reservoirs.
Customers in Asia who are seeking to capture emissions from industry and electricity generation could ship carbon back to Australia for safe, permanent sequestration deep underground, according to Santos.
This would be one way – albeit expensive and logistically challenging – to tackle emissions from exported gas, which is expected to be caught in future international climate pacts.
Within Australian waters, federal Labor last year approved the first new offshore greenhouse gas storage areas since 2014.
The permits were awarded to an INPEX, Woodside and TotalEnergies joint venture in the Bonaparte Basin and to Woodside Energy for an area in Browse Basin.
“The government’s current focus on carbon capture and storage investment is to reduce risk and create certainty through clear legal and regulatory frameworks,” a spokesperson for Climate Change Minister Chris Bowen told AAP.
“The International Energy Agency recognises that CCS and CCUS will play an important role in helping to achieve net zero by 2050, particularly in hard-to-abate industrial sectors.”
Meanwhile a federal parliamentary inquiry is examining amendments to a marine pollution protocol that would allow carbon to be transported across international boundaries, with a report to be released in coming weeks.
“In a time of climate emergency Australians do not want to see our marine environment put at risk by new fossil fuel projects,” Greens senator Peter Whish-Wilson told AAP.
Australia already hosts the world’s largest carbon capture project on Barrow Island off Australia’s northwest Pilbara coast, run by Chevron.
The plant was a condition of development approval in 2009 for the world’s biggest liquefied natural gas project, Gorgon.
The Gorgon CCS plant has fallen well short of carbon storage targets but Chevron insists the technology works.
A surge in production as customers sought to replace Russian gas has also entrenched Gorgon as one of Australia’s top emitters.
“The CCS industry has largely been a failure,” according to Senator Whish-Wilson.
“It is a ploy and a distraction designed to greenwash a dirty industry and delay the inevitable transition away from fossil fuels.”
Nevertheless Santos has proposed its Bayu-Undan offshore gas production facility in Timor-Leste as a future CCS hub to offset new gas.
The Bonaparte, Browse and Barossa fields in Australian waters to the north could send carbon to the facility, amounting to millions of tonnes of carbon per year.
Santos is also keen to develop what it calls an international carbon transfer service from South Korea, Japan and Singapore, and has four MOUs signed with potential customers.
However, as Bayu-Undan is located within Timor-Leste waters, it is not an area within scope for the Australian government.
A maritime boundary treaty ratified in 2019 gave Timor-Leste sole jurisdiction over the Bayu-Undan contract area.
Santos has targeted 2025 for the complex final investment decision on Bayu-Undan CCS, but investment bank UBS says Australian laws would need to be changed to allow exported carbon stored in East Timorese waters to generate Australian carbon credits.
Onshore, a planned precinct near Darwin has carbon capture at its heart and the backing of territory and federal governments.
CSIRO is building a business case with gas giants INPEX, Santos and others on the Middle Arm peninsula that would be fed by offshore pipelines from liquefied natural gas fields and future Beetaloo Basin gas.
They see Darwin as an ongoing area of globally significant industrial activity and a gateway to Asia.
About 500km southeast of Darwin, Beetaloo contains an estimated 500 trillion cubic feet of gas, making it one of Australia’s most energy resource-rich areas.
While fracking has been used in Australia’s coal seams for decades, fracking for Beetaloo shale gas would go much deeper below the surface.
Jingili elder and deputy chair of Nurrdalinji Aboriginal Corporation Samuel Janama Sandy said the Albanese government should listen to Traditional Owners who want to protect country and do not want fracking in the Beetaloo Basin.
“Our communities need support to install solar, better housing, health and education services so they can grow stronger and the federal government’s $1.5 billion for Middle Arm would go a long way to help,” he said.