The International Energy Agency (IEA) consistently includes Carbon Capture and Storage (CCS) in its analysis as a vital technological development necessary for mitigating climate change impacts. CCS has the potential to perform its important role in a number of ways including by being retro-fitted to existing power and industrial plants; by sequestering CO2 directly from the reservoir; and by the removal and sequestering of CO2 via direct air capture technologies.
Australia has the potential to reduce greenhouse gas emissions through CCS. Western Australia (WA), in particular, has immense potential for CCS projects both in onshore depleted reservoirs, salt caverns and existing geological storage formations. However, despite pioneering efforts such as the Gorgon Project, Australia continues to lag global leaders in CCS deployment. This article examines the current state of CCS in Australia, key legal considerations, and the reasons behind this lag, focusing on government initiatives and the current political landscape.
Key takeaways
- Geological potential: WA boasts favourable geological formations and existing infrastructure that is strategically located that could be repurposed for CCS.
- Notable projects: Significant CCS projects in Australia include the Chevron operated Gorgon Project which is operating at scale and the Santos operated Moomba Project which is progressing to first-injection in mid-2024, although the country lags behind global leaders. Mitsui E&P Australia and its partners conducted an injection test in 2024 relating to the potential to develop the exciting onshore Perth basin as a potential CCS hub.
- Legal framework: The Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) and the recently enacted WA CCS laws provide a robust framework, yet opportunities remain for a more comprehensive regime.
- Government strategy: The Australian Government's Future Gas Strategy underscores CCS's importance in achieving net-zero emissions by 2050.
- Economic impact: CCS development in WA could create thousands of jobs and significantly boost state GDP. It could also repurpose existing infrastructure which might otherwise be required to be decommissioned – extending the useful life of deployed capital.
Current state of CCS in Australia
Australia's commitment to net-zero emissions by 2050 highlights the critical role of CCS. Key projects include the Chevron-operated Gorgon Project, which incorporates the world’s largest CCS system and which has stored in excess of 9 million tonnes of CO2 since 2019, and the Santos-operated Moomba Project in South Australia which secured US$150 million in financing earlier in 2024 and according to recent announcements of Santos is targeting first-injection in mid-2024. In addition to these projects, various other CCS projects are in various stages of development including the Santos-led Reindeer Project in WA and Bayu Undan CCS, the Woodside-led Angel CCS Project in WA, the Inpex-led Bonaparte CCS as well as CCS projects announced by deepC Store, Pilot Energy, GeoVault and InCapture.
The objectives of many of these projects are two-fold. Firstly, they offer a solution to decarbonise existing upstream LNG operations. However, the growing part of the future business case underpinning many of these projects is to develop a regional hub where CCS is offered as a ‘service’ or solution to heavy-emitting domestic customers and customers within the Asia Pacific, such as in Singapore, South Korea and Japan, seeking to export CO2 to countries with substantial storage capacities, including Australia.
Notwithstanding the opportunity for CCS hubs in Australia, Australia’s CCS deployment is seen by many as behind leaders like the United States and Norway in terms of both levels of investment and policy support.
Geological and economic potential of WA
WA’s favourable geology and existing infrastructure make it an ideal location for CCS hubs. The WA CCUS Hubs study that was recently released by the Global CCS Institute and CSIRO found that:
- WA contributes 82 million tonnes per annum of CO2 equivalent, or 17%, to Australia’s total greenhouse gas emissions;
- Industries such as oil and gas, mining and power generation contribute 66 million tonnes per annum to Australia’s total greenhouse gas emissions;
- a CCS hub located in the Pilbara, with additional CO2 from Kwinana emitters, could meet 33% of WA’s emissions reduction targets and up to 90% of emissions in the Pilbara region adjacent to the hub; and
- CCS development could also create thousands of jobs (an estimated 37,000 jobs in construction and 500 permanent ongoing jobs) and significantly boost the state GDP by $55 billion between 2030 and 2050.
Reasons for lagging behind
Australia’s CCS deployment has been sluggish, primarily due to insufficient government incentives and policy support. The absence of a clear post-2030 emissions reduction strategy exacerbates the issue. While projects like the Gorgon and Moomba CCS demonstrate progress, broader deployment is hindered by economic factors and the need for higher carbon prices to render CCS investments appealing. Additionally, the considerable costs associated with CCS, particularly offshore projects, necessitates substantial financial incentives to become feasible.
The Australian regulatory framework for CSS is generally considered robust, yet it has gaps that need addressing. WA’s CCS legislation (discussed in our previous article), recently received royal assent, however it will come into effect on a date to be proclaimed and the supporting regulations relating to permitting and injection site approvals are still forthcoming. Regarding WA’s regulations, there is a need for further clarity concerning the specifics of the environmental plans and management of plume migration. Plume migration is important for project proponents to understand, particularly where the spatial extent of a formation may fall outside an existing title area, it may require cooperation and collaboration between adjacent title holders prior to any CCS projects being delivered which is likely to complicate the development of CCS projects and impact timelines for project development.
Furthermore, the ‘CCS as a service’ business model will depend on cooperation between State and Federal regulators as well as international regulatory collaboration to enable the transboundary transportation of CO2, and agreement between countries in relation to the transfer of responsibility for CO2 as well as what will constitute a “greenhouse gas” for the purposes of sequestration and generating carbon credits. Clear regulatory guidelines and approval pathways will be required by both developers and government decision makers alike if the scale-up of CCS projects as envisioned in Australia is to become a reality.
Government initiatives and political landscape
The Australian Government's Future Gas Strategy, released in May 2024, underscores the importance of gas and CCS in the transition to net zero. The strategy outlines six key principles:
Supporting global emissions reductions
Maintaining affordable gas for Australian users
Ensuring new sources of gas supply to meet demand
Adapting gas and electricity markets for the energy transformation
Sustaining Australia as a reliable energy trading partner
Facilitating a gradual shift towards higher-value gas uses
The strategy aims to support the decarbonisation of the Australian economy, safeguard energy security, and entrench Australia’s reputation as an attractive trade and investment destination. Immediate actions proposed include updating offshore retention lease policies, working with regulators to reduce gas venting and flaring, and introducing a new Transboundary CCS Program. Additionally, the government has committed $12 million over three years to provide regulatory and administrative certainty for offshore CCS projects.
Funding and financial incentives
Federal funding has historically supported CCS projects through grants and specific programs. Key funding avenues include the Carbon Capture Use and Storage (CCUS) Development Fund, which provided $50 million for CCS projects, including $15 million for the Moomba CCS Project. The CCUS Hubs and Technologies Program allocated $250 million for CCS initiatives, and the Low Emissions Technology Commercialisation Fund, announced in November 2021, is a $1 billion fund (combined federal and private sector) supporting low emissions technology, including CCS, through debt and equity finance. Additionally, the Australian Renewable Energy Agency (ARENA) offers grants aimed at reducing CO2 compression, transport, and storage costs to below $20 per tonne. This government support is now somewhat historical with very few recent announcements of support in relation to CCS in Australia, aside from the Carbon Capture and Technologies Program, announced in late 2023, which aimed to accelerate the development of carbon capture technologies, including Direct Air Capture (DAC), Bio-Energy with Carbon Capture and Storage or utilisation technologies.
CCS projects can generate Australian Carbon Credit Units (ACCUs) under the Emissions Reduction Fund, providing a revenue stream for offsetting emissions. The creation of ACCUs is governed by the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth), with eligibility criteria including regulatory compliance and project novelty.
While Australia currently lacks a carbon tax, the government’s Long-Term Emissions Reduction Plan includes a voluntary incentive to achieve net-zero emissions by 2050. Internationally, mechanisms like the European Union’s Carbon Border Adjustment Mechanism (CBAM) may influence Australian exporters, increasing the incentive for CCS adoption. Additionally, CCS project proponents in Australia are increasingly looking to the voluntary carbon markets or direct bilateral engagement with counterparties seeking assurances in relation to high quality carbon credits; in the international community, carbon credits generated by CCS projects where CO2 or other forms of greenhouse gases are measured at the inlet point are increasingly perceived as the most accurate form of carbon credit on the market, and less exposed to the uncertainty of accounting principles associated with nature based carbon sequestration, as was identified in the Chubb Review in Australia in 2022.
Conclusion
The legal landscape for CCS in Australia is evolving, with significant regulatory frameworks and financial incentives in place. However, gaps remain, and addressing these issues through enhanced government incentives, comprehensive regulatory updates, and robust international collaboration is essential to fully harness CCS's potential in WA and beyond.
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