If the project succeeds, and the Court of Auditors is optimistic about this, it will yield significant climate benefits. The CO2 that does not enter the air thanks to the project brings the achievement of a climate target significantly closer.
Substantial contribution to climate goals
That goal is for the industry to emit almost 21 megatons of CO2 less annually by 2030 than in 2022. Porthos saves 2.3 megatons, 11 percent of the target. “That is direct and very concrete,” says Barbara Joziasse, director of the Court of Audit. This independent body checks whether government money is spent according to the rules.
Porthos is also a lucrative business for companies that can reduce their CO2 emissions. “The government is selling itself short if you look at the benefits and burdens,” says Joziasse. “The risk lies mainly with the government, while the benefits in the form of returns mainly fall on companies. This should be possible differently.”
The customers of the project – which is run by three state-owned companies – are four major CO2 emitters in the Port of Rotterdam: the oil giants Shell and ExxonMobil and the gas companies Air Products and Air Liquide. They will especially benefit from the first time that this invention to reduce CO2 emissions is applied in the Netherlands.
What is it?
It’s all about capturing CO2 and then pumping it through a pipe into a – usually empty – gas field. This is called carbon capture and storage, abbreviated to CCS. The CO2 disappears under the seabed, so participating companies do not have to buy emission allowances for it at a designated auction.
The price of these rights is expected to rise in the coming years. The number of available rights is being reduced. The higher the price, the more it saves the companies. They can sell allowances that they already had and do not have to use for their own emissions at a profit. Or it saves them purchasing expensive rights, Joziasse explains.
Substantial return
All in all, it gives companies a profit of 34 cents per euro they invest. On the other hand, the return for the companies that build Porthos will probably be 2.2 percent. A lot lower than the 6.6 percent that had been expected.
The project is being carried out by EBN, Gasunie and the Port of Rotterdam Authority. These companies are all state-owned. The lower their return, the less dividend they can transfer to the treasury.
Lessons for the future
The state could have made better agreements about this, the Court of Audit concludes. If only because if something goes wrong with the project in the distant future, the bills will all end up with the state.
In 2026 – if all goes well – a start will be made on filling the gas field with CO2. That stops in 2042. Then the field will be full. Then the companies pull their hands away. If anything goes wrong, the three state-owned companies involved will be responsible.
Their responsibility also ends somewhere, the agreement is in 2062. And from then on the state bears all the risks. “Because of the long-term risks, the central government is doing itself a disservice,” the Court of Audit ruled.
Less or even no subsidy required
The government itself also benefits from the expected high price for CO2 emission allowances. The 2.1 billion euro subsidy pot may not need to be used, according to the Court of Audit. And that saves taxpayers money.
This potential windfall is offset by an – albeit smaller – setback. Gas remains in the field where the CO2 is injected. The owner of the remaining gas, oil and gas company Taqa from Abu Dhabi, will receive compensation for this. Pumping up the gas is ‘unfortunately a thing of the past’, according to Joziasse.
Major setback due to high gas prices
And that compensation may be hundreds of millions of euros higher than estimated due to the increased gas price. How much higher is unclear, because it concerns confidential information, according to the Court of Audit.
Porthos and the industry do have an agreement to divide the extra costs fairly. Although there are a few catches here, the Court of Audit discovered. The first millions of euros in compensation are for Porthos (read: the state).
In addition, a ceiling has been agreed up to which the ‘fair sharing’ principle applies. That ceiling runs into hundreds of millions. Everything above is once again Porthos’s alone. A further interesting detail is that the House of Representatives was not informed about this setback by the Ministers of Economic Affairs and Climate Policy who were involved in Porthos.
Even the simple fact that the gas field was not empty at all was never reported to the House. “We find that remarkable,” says Barbara Joziasse.
Tags: Court Audit CO2 storage seabed cash register businesses
