Report backs CCS tax break for oil industry
16 Jun 2015
The government must introduce tax breaks and other fiscal incentives to encourage the use of Carbon Capture and Storage (CCS) in boosting oil recovery rates in the North Sea, says report.
A Joint Industry Project today published findings of its analysis of injecting carbon dioxide (CO2) derived from CCS plants to enhance oil recovery (EOR) from existing North Sea fields.
The report claims that part of the CO2 that would otherwise go directly to dedicated storage in CCS projects could be used to drive EOR, bringing significant benefits to the wider UK economy – including extending the producing life of the North Sea, reducing imports of oil, maintaining employment, developing new capability to drive exports, and additional direct and indirect taxation revenues.
New enabling fiscal regimes for CO2–EOR projects and clusters are needed, similar in size to existing brown field or development allowances
SCCS report
However, it claims that a lack fiscal incentives to drive collaboration between power companies developing CCR and North Sea oil & gas is holding back development of CO2-EOR projects.
“International comparisons show that explicit fiscal recognition of CO2–EOR by the UK is currently inadequate, and clear supportive legislation is lacking,” says the report, published by Scottish Carbon Capture and Storage (SCCS).
“New enabling fiscal regimes for CO2–EOR projects and clusters are needed, similar in size to existing brown field or development allowances. Those new regimes must make investing in CO2–EOR in the UK competitive with the alternative global investment opportunities open to international oil and gas companies.”
The report was funded by the Scottish Government, Scottish Enterprise, 2Co Energy, Nexen Petroleum UK and Shell - which is currently developing a £100 million CCGT CCS plant at Peterhead with Scottish and Southern Energy and plans to store the captured CO2 in the Goldeneye gas field.
SCCS director at the University of Edinburgh Professor Stuart Haszeldine said: “North Sea oil and gas are facing an existential cost challenge, and at the same time the UK is struggling to fund its electricity decarbonisation clean-up.
“The beauty of this new analysis is that it shows how to help develop big projects in the power industry, while also supporting a transition of the abilities and profits from offshore hydrocarbons into new, sustainable jobs.”
