If the CO2 price rises, storage via Porthos under the North Sea is particularly lucrative for industry News item

News item | 28-03-2024 | 4:30 PM

Only the government will bear the risks of CO2 storage under the sea for years to come, but does not share proportionately in the revenues

The Court of Audit conducted an investigation before Porthos actually existed. The government wants to use this technology more often within climate policy. The report published on March 28, 2024 shows that the ministers involved should have paid more attention in advance to the distribution of the benefits of this innovative project. This is being developed by the state-owned companies EBN, Gasunie and the Port of Rotterdam Authority. This involves an investment of billions. Customers are Dutch industrial branches of the British, American and French multinationals Shell, Air Products, ExxonMobil and Air Liquide. The State of the Netherlands is contributing, also financially, to this first large-scale CO2 storage under the seabed.

Risks for central government (indirect) during operation and after 2062

From this year onwards, the state-owned companies will be building the infrastructure for transport and storage of this CCS project (carbon capture and storage). In 2026, Porthos will start storing CO2 from industry in a former gas field under the seabed. Setbacks in this regard have indirect consequences for the central government (state-owned companies then pay less dividends). In 2042 the field will be filled with CO2 and closed. The industry will then no longer have to pay for storage under the seabed. Porthos remains responsible until 2062. After that, the central government is responsible for monitoring and damaging any CO2 leaks.

The government provides less subsidy, but still feels inadequate

Storage via Porthos is efficient for the central government, because less than the standard of 300 euros per ton of CO2 avoided is spent on subsidies. The Minister for Climate and Energy has promised subsidies to the industry for a maximum of € 2.1 billion because of Porthos.
Calculations by the Court of Audit show that large-scale CO2 storage under the North Sea is expected to be cheaper for the national government than ministers previously anticipated. As the CO2 price rises, less subsidy needs to be paid to industry. The financial benefits for the industry itself are also greater, because fewer EU emission allowances have to be surrendered for CO2 emissions. After all, the industry emits less CO2 and the value of these allowances is estimated to increase. The return on investment for the industry, even without subsidies, can be as high as 34%.
The central government does not benefit proportionately from a higher yield, while this could have been laid down in subsidy agreements or via the Mining Act. Because of the long-term risks, the central government is doing itself a disservice. The Netherlands can learn lessons from the Porthos project for future CCS projects.
The calculated return for the state-owned companies that operate Porthos is lower. They are expected to fall far short of their target return of 6.6%. Delays and unforeseen costs play a role in this.

Gas supply and additional costs not reported to parliament

The House of Representatives assumes that the gas field selected for CO2 storage was empty or exhausted. That appears not to be the case. There is still a residual amount of gas in the field. Due to rising gas prices, the owner of the gas field must be compensated. Porthos and the 4 industrial customers share this unforeseen expense. They pay tens of millions of euros to the current operator of the gas field. This agreement was a condition for the Minister for Climate and Energy to issue the guarantee scheme. The agreement and the additional costs were not reported to the House of Representatives by the minister when he issued a guarantee scheme for Porthos.

Ministers’ response to Court of Audit recommendations

The Court of Audit makes various recommendations, including about the participation of state-owned company EBN in Porthos. It is unclear whether CCS hinders the performance of EBN’s core tasks in oil and gas extraction. In response to this, the four ministers involved announce that they will test EBN’s tasks in the law. The ministers indicate that they are investigating how more benefits can flow to the government from CCS projects.
The ministers emphasize that with Porthos, the Netherlands is storing CO2 under the seabed on a large scale for the first time and thus encourages industry to emit less CO2 into the atmosphere – which contributes to the climate goals.
According to the Court of Audit, a more balanced distribution of benefits and risks in future CCS projects deserves more attention.