5 Gassnova and the external quality assurer’s assessment

5.1 Gassnova’s assessment

Gassnova’s 2015 pre-feasibility study recommended that the demonstration project for full-scale carbon capture and storage (CCS) should be implemented in accordance with established industry practice.

Gassnova’s overall tasks in the planning phase have been to ensure the development of a CCS value chain that satisfies the state’s maturity requirements that apply at the end of the various project phases, and to contribute to providing the state with a sufficient basis on which to decide whether it will grant funding to the implementation of full-scale CCS. Gassnova has emphasised utilising the significant CCS expertise it has built over many years from previous CCS projects, as the administrator of the state’s ownership in Technology Centre Mongstad and through the research and development programme CLIMIT. During the concept selection and FEED phase, Gassnova, following a mandate from the Ministry of Petroleum and Energy, evaluated and ranked the capture projects, ensured that the transport and storage project was carried out in line with the study agreement, coordinated the CCS chain, coordinated and carried out work related to benefit realisation, and conducted socioeconomic assessments of the project in cooperation with DNV GL.

5.1.1 Gassnova’s evaluation of the capture projects

Gassnova’s evaluation concludes that the projects of both Fortum Oslo Varme and Norcem have good technical solutions and that they are sufficiently mature for implementation. Gassnova ranks Norcem in first place and Fortum Oslo Varme in second place. The evaluation of Fortum Oslo Varme and Norcem’s capture projects was concluded in December 2019 and was based on the capture actors’ FEED reports.

Gassnova has conducted a technical evaluation, an assessment of the quality of the actors’ cost estimates, and an evaluation of their contributions to benefit realisation. Successful implementation of the project is a prerequisite for expedient demonstration of CCS as a climate measure, and Gassnova’s evaluation has therefore placed emphasis on the industry actors’ ability to execute the project. This includes an assessment of, among other things: Planned organisation and implementation of the project, the HSE and quality management systems, risk management, and elements that affect how easy it is to plan the construction phase and construct the project. Gassnova has also conducted an assessment of the design of the carbon capture facility, documentation of the selected technology’s maturity and the progress schedules submitted.

Based on the actors’ FEED reports, Gassnova’s assessment is that Norcem will be in the best position to implement a carbon capture project. Norcem is considered to have a more thorough implementation plan than Fortum Oslo Varme and has come further in its preparations for relevant approvals from the respective authorities. Norcem also provided a better description of its methods for construction and installation of the carbon capture facility and has better documentation that the technical elements of the project work well at their facility.

With a few exceptions, both Norcem and Fortum Oslo Varme have matured the basis for their basic cost estimates to the right level for an investment decision. This is due to the long time interval from the FEED was completed until the investment decision, and that funding agreement negotiations with the state had not been concluded at the end of the FEED phase.

Based on Norcem and Fortum Oslo Varme’s equipment lists and stated quantities of pipes and steel, a cost analysis was performed by comparing these with other industry projects. The main conclusion from this analysis is that the estimates appear to be at the right level for Norcem, while Fortum Oslo Varme’s estimate is somewhat high.

Both actors have done a good job when it comes to their contribution to benefit realisation. Demonstrating that carbon capture is feasible within a cost level that is considered acceptable is an important contribution to benefit realisation. This means that if the cost becomes too high, the value of the CCS demonstration will be lower, or potentially negative. The cost of the measure is higher for Fortum Oslo Varme than Norcem, and therefore, seen in isolation, implementing Fortum Oslo Varme’s project will have a lower demonstration value than implementation of Norcem’s project.

However, Fortum Oslo Varme has identified more potential subsequent projects than Norcem, has received a very high number of visitors to its facility and actively shares knowledge. Gassnova considers these to be positive factors.

Both Fortum Oslo Varme and Norcem have continued their work on selected activities after the concluded FEED study.

Fortum Oslo Varme has also adjusted the layout of the capture facility in order to facilitate the establishment of a new potential incineration line in the energy recovery facility. This has led to a reduction in the estimated costs of Fortum Oslo Varme’s project. Gassnova has evaluated this information and believes that the changes are not of such a nature to influence the conclusion of the evaluation.

Both actors have identified their biggest risks in connection with construction and operation of their facilities. Risks to indicate that it would not be possible to implement the CCS chain did not emerge during this process.

5.1.2 Gassnova’s assessment of the CO₂ transport and storage project

In Gassnova’s assessment, the CO₂ transport and storage project has been sufficiently studied to enter the implementation phase. Gassnova regards the overall CO₂ transport and storage system developed by Northern Lights as suitable to manage CO₂ from Norcem and Fortum Oslo Varme, as well as being capable of receiving CO₂ from other actors. The basis for the basic cost estimates for the CO₂ transport and storage project has matured to the right level for an investment decision to be made.

It has been verified that the Aurora area is highly suitable for CO₂ storage. This has been verified by inter alia drilling a combined verification and injection well, and developing a good plan for monitoring the storage facility. Overall, Gassnova considers that these activities have reduced the technical risk of the CO₂ transport and storage project to an acceptable level.

Northern Lights has developed a ship design for CO₂ transport that enables safe and efficient transport of CO₂ from the capture facility to the interim storage in Øygarden. Thorough efforts have also been made to select the location for the onshore facility and pipeline route. The fact that Northern Lights has chosen to reuse the oil and gas infrastructure at the Oseberg A platform for managing and monitoring the well has reduced the cost estimate for the project.

Northern Lights has performed thorough work on benefit realisation. It has worked systematically to identify subsequent projects and on sharing knowledge and technology development. Gassnova’s assessment emphasises that several elements of the CO₂ transport and storage project facilitate further technology development in the field of CO₂ transport and storage. Examples include the development of cost-effective installations on the seabed, and bigger ships for more efficient transport of liquefied CO₂ over longer distances.

5.1.3 Gassnova’s overall assessment

In Gassnova’s opinion, the state can achieve CCS demonstration by realising a CCS chain with Norcem’s and/or Fortum Oslo Varme’s project. Both capture projects have been studied to a level that is sufficient to enter an implementation phase for industrial projects. Gassnova has also assessed Northern Lights’ CO₂ transport and storage project and concludes that it is complete, of high quality and studied to the right level for implementation.

Both the UN Intergovernmental Panel on Climate Change and the IEA indicate that CCS must become a technology that can be quickly and widely deployed in order to reach international climate ambitions. Early demonstration projects will generate learning and experience that can reduce barriers and lead to cost reductions for subsequent projects. Developing a CCS project takes a long time, particularly the identification and qualification of a suitable and safe CO₂ storage location. Gassnova believes that Norway has a good possibility of realising a good demonstration project, and that this will have an impact on future technology development internationally.

The work on identifying subsequent projects and sharing experience and knowledge with relevant actors, particularly internationally, has been carried out expediently by all of the actors involved in the project. The Northern Lights project has additional capacity in its transport and storage infrastructure, which makes it possible to recruit new carbon capture projects. Northern Lights has made systematic efforts to this end.

In Gassnova’s assessment, a good foundation has been established for subsequent projects that wish to utilise the transport and storage infrastructure. It will probably be necessary for the projects, during a transitional period, to utilise new EU funding schemes, as well as those of certain nation states. Gassnova believes that utilisation of the infrastructure is the most important contribution to reducing future CCS costs.

In cooperation with DNV GL, Gassnova has updated the socioeconomic analysis that Atkins and Oslo Economics carried out as part of the state’s quality assurance process in 2016 (QA1).

The updated analysis shows that CO₂ reductions in sectors not included in the European Emissions Trading System (EU ETS) may be of more value to Norway than CO₂ reductions in sectors included in the EU ETS, since Norway has separate domestic targets for this sector. From a global perspective, however, every tonne of CO₂ emissions prevented has the same value, regardless of the origin of the stored CO₂.

The updated socioeconomic analysis concludes that a CCS value chain with both one and two capture projects can be economically profitable, but that the profitability of the project will depend on whether future international climate policy is pursued in line with the adopted targets. In a situation where international climate policy is moving in the direction of the goals in the Paris Agreement, the analysis shows that implementation of Norcem’s project will generate greater socioeconomic value than implementation of Fortum Oslo Varme’s project, mainly due to the differences in the project costs.

5.2 The external quality assurers’ assessment

The project has been quality assured in accordance with the state’s project model. Atkins and Oslo Economics carried out the quality assurance process. Quality assurance of the concept selection study was completed in 2016 (QA1). Quality assurance of the specific projects (QA2) was carried out in two parts to adapt to the industry projects’ progress schedules. QA2 Part 1 was submitted in 2018, and QA2 Part 2 was submitted in summer 2020.

In the QA2 report [56], Atkins and Oslo Economics highlight that the measure has matured through the FEED phase and appears to be adequately documented and feasible to implement, but with some uncertainty remaining in a number of processes. In the quality assurers’ opinion, systematic work has been conducted on all of these remaining processes.

The quality assurers consider the costs to be high. The overall expected investments for the project (P50) will be somewhere between NOK 12.9 and 17.1 billion, depending on whether it is decided to invest in one or two capture facilities. Corresponding annual operating costs are expected on average to be between NOK 570 and 800 million during the ten-year funding period (P50). The overall cost estimate for investment and operation is between NOK 18.7 and 25.1 billion (P50). The external quality assurers estimate the state’s costs, including ten years of operation, to be between NOK 14.4 and 21.11 billion (P50) depending on how many and which capture projects are implemented.

The quality assurers state that the project may be beneficial from a socioeconomic perspective, given an ambitious climate policy in line with the global temperature goals in the Paris Agreement. The external quality assurers have not performed an independent socioeconomic analysis in connection with QA2, but base their assessment on Gassnova’s analyses and reviewed methods and assumptions. The quality assurers believe the most important factor of whether subsequent CCS facilities are developed to be the cost of CO₂ emissions in relation to the cost of CCS.

There is great uncertainty about the benefits and the measure may therefore turn out to be very unprofitable. Third-party funding is necessary for the implementation of subsequent facilities. According to the quality assurers, it may be better to implement one capture project rather than two, since a greater volume of storage is then available to other capture projects, and because it reduces the cost without necessarily lowering the learning effects to any degree.

On the basis of the quality assurers’ assessment, Norcem’s capture facility would appear to be preferable to that of Fortum Oslo Varme, primarily due to it having lower lifetime costs. The quality assurers highlight in particular the importance of the transport and storage project’s role in the work on benefit realisation and creating a market for CCS in Europe.

In general, the quality assurers also believe the management and organisation plans to be expedient, although somewhat immature on the part of the state. The actors have extensive experience with major investment projects. The project may be challenging to manage, particularly if changes are required. The funding agreements with the industry actors appear to be well drafted and mechanisms to address expedient establishment and operation of the project have been established.