The international responsibility to explore CCS: an interview with Julia Davies

Expanding on one of the first interviews with SK EarthOn's Ji Sung-hoon, who explained their Carbon Capture and Storage (CCS) investigation, today's interview is with Julia Davies at InCapture. InCapture is a carbon store project developer based in Australia, and is currently collaborating with SK EarthOn on a new project along the western coast of Australia. 

This enriching conversation with Ms. Davies, a CCS expert, introduced a new lens of viewing CCS as a complex international cooperation issue. The discussion about future actions needed to improve CCS, from setting an international carbon price to transboundary movement of CO₂, also provided an insightful overview of Australia's vision for achieivng net-zero through CCS.

Could you first describe InCapture's current CCS project and their main objectives? 

InCapture had a permit that was awarded to us called a Greenhouse Gas Permit. It's an aspiration permit and was awarded to us in August 2024 for a three-year period. We have three partners. So we are the operator with 75% interest. We have a larger partner called SK Earthon, which I'm sure you know, they have 20% in the project. And then we have a very small minor partner at a West Australian group of consultants called Carbon CQ exploring for storage sites offshore, about 110 kilometres off the coast. 

We have a three-year period where together we will identify storage sites that will be big enough and suitable for us to be able to apply for a declaration of storage with the Australian Government, such that we can go forward and do further exploration that will allow us to eventually store CO₂ in the subsurface.

How do you decide where to locate CCS projects based on emission sources or storage capacity? 

That's a good question. So we've been working before we started our collaboration with SK EarthOn and the CCQ. We come from an oil and gas background with exploration-focused geoscientists, geophysicists, engineers. And we already held the underlying oil and gas permit. So the underlying oil and gas permit, we had evaluated for, let's see, about six years prior to us starting to turn this over to a CCS site. We've got oil and gas fields all around us, but there was something quite different with our area. We couldn't seem to find any potential for oil and gas.

So we then try to understand why that is the case, why we've got areas to the left of us and to the right of us that have large scale oil and gas fields. And then we turned it over and we looked at all the other areas. We looked at the areas that had oil and gas and looked at the areas that had been large-scale producing gas fields. What we realised is that this area doesn't have the potential to easily get hydrocarbons into it. So therefore we started looking at it from a different perspective and the perspective now was looking at it to store CO₂ rather than be able to extract hydrocarbons.

That sounds really strategic. How can CCS then be seen from the emission reduction perspective?

Well, yes, let's then talk about emissions. So, Australia is quite a big emitter for its population. We're a large land mass, but our population is all sort of around the edges of the continent. So when you look at where we're located, you see that we have quite a lot of emissions. But then you have to look at what we do. Well, we are a big explorer of oil and gas, mainly gas, we're a big miner—we extract minerals, we extract coal, but we don't do a lot of manufacturing.

We tend to process our gas and oil, and then we tend to send them overseas. So, therefore, we need to look at a future where we can have zero emissions and the way that we can do that best is that we've got very good geology. The geology offshore allows us to be able to store the CO₂ as well as to be able to produce the oil and gas.

Aside from those advantages of Australian geology, what do you think was the main challenge in advancing CCS in Australia so far, for example, technical, financial, or regulatory?

So that's a very good question. So, from a general perspective, I suppose we've got to understand that, as I said previously, we are a mining nation. Whether we mine for hydrocarbons or whether we're mining for minerals, coal, or whether we're farming the land, we tend to extract. We're a big extractor.

Now, as I said, we need to be able to, like the rest of the world, get down to a net zero. So the world in general, and Australia included within that, is trying to get to a net zero capacity by the 2050s and a bit further beyond that, 2070s. We need to be able to look at a mechanism to do that. It's not currently in Australia. We do have the regulatory process in place—we have a good regulatory process in place that helps us understand and how to best look for oil and gas and how to best store CO₂. 

However, because we're a big manufacturing country, there are fines for those who emit. But until the fines become really, really onerous to a company, they won't do very much about it because they want to make money. And they don't want to support the operations in place to be able to make us compliant with no CO₂ emissions, because that's really, really expensive. To be able to take the CO₂ from an industry, and to be able to process it, and then to be able to pipe it somewhere, and then to be able to store it somewhere—it is really expensive.

It only doesn't go for Australia, that goes worldwide. I'm sure it's the same for Korea as well. So it's trying to get that balance between manufacturing and profitability, like exporting coal and oil. But at the same time, we've got to balance trying to not emit too much CO₂. 

So, the way we work here is we have the Australian carbon credit unit scheme (ACCU). If you emit and you're not able to store or you're not able to get rid of your emissions, you can buy an ACCU. So for every tonne that you emit into the atmosphere, you can buy an ACCU. So really, it's a balancing act, because currently CCS is very expensive. It's very expensive in Australia and it's very expensive around the world. There will come a time where we'll have to do this whether we like it or not. But naturally, until we are forced to do that, we will try and look at mechanisms where we pay fines.

Currently, I would say that unless you're in America or parts of the world where you're using what they call enhanced oil recovery (EOR), where you are pushing CO₂ into a field so you get oil and gas on the other end, [CCS projects are very expensive.] [The EOR is beneficial because oil has a] commodity price, $70 a barrel, $80 a barrel. But currently, there isn't an international price on carbon, and so it makes CCS very expensive. 

Also in Australia and some other parts of the world, CCS is seen as a way to lengthen the life of the oil and gas fields. The public who don't understand CCS will believe that companies are going to convert their fields eventually into a CCS project where they will store their emissions, but in the meantime they will produce their oil and gas. So, sometimes, some say that it's an enabler to continue producing oil and gas and therefore producing emissions. 

What kinds of support from government policies do you think are most crucial for CCS development?

So, in Australia, one of the things that InCapture is working quite closely with the government is being able to allow transboundary movement of CO₂, which currently some parts of the world do accept this and some parts. And believe it or not, Australia, although we're a big emitter, we don't have as much emissions as some other parts of the world, like South Korea, Japan, Singapore, and the Middle East. But these countries don't necessarily have the place to be able to store emissions.

So, a way forward is for those countries that can store, like for example, Australia, the United Kingdom, the North Sea, and parts of Europe, they have good rocks and they have good structures to be able to store CO₂. However, in order to be able to accept CO₂ from Korea, Japan, Indonesia, and other parts of the world, we have to have transboundary agreements between the two countries. Now, if we have transboundary movement of CO₂, that means that you could move CO₂ all around the world. And that would mean that it would then almost have a firm price like an oil price. So then carbon is worth something.

Currently, Australia doesn't have transboundary movement of CO₂, but we have all the other legislation in place. We are part of the London Protocol, like South Korea is, like Japan is, like parts of Europe are, but what we need to do is to ratify between two countries the movement of CO₂ from one place to the next.

So if we could do that, that would mean that where we build in Australia our storage sites, we could bring other CO₂ from other countries to be able to store it, and charge those countries to do that, which would then make, in Australia, CO₂ a lot less expensive or and more profitable.

And that would go for other countries as well. For example, the UK also doesn't allow the transboundary movement of CO₂. Norway has just started doing that. And once we are able to move CO₂ around the world, then I think we could look at a common price for CO₂, just like an oil price that we have. 

You mentioned the ACCU earlier. Could you tell us more about that?

The ACCU has been in existence for some time. So it's a dollar price for a unit of million tonnes of CO₂, and currently the price is $36 per tonne in AUD. It is not a lot, but what it does mean is that companies or people like farmers, and banks, can buy an ACCU as an offset. So if you can't get rid of your CO₂ emission and give it to somebody to bury it, then you can still emit, but in order to equate your emissions, you buy an ACCU, which is an offset. So, you can actually trade these offsets. If I had a lot of ACCU that I purchased and I stopped my business, then I could go and sell them to others that need to have an ACCU to offset their remissions. So they become tradable as well, almost like a bank note or a credit note.

So they've got a value, as I said, they're about 36 Australian dollars per unit currently—it's not a lot. However, there's only a certain amount that is in circulation. The government awards them and as they become more in demand and the rules get stricter and stricter, we have what they call the safeguard mechanism. So companies that emit quite a lot—coal industry, the energy companies, the cement factories, the fertilizer industry, the mining sector—have to satisfy a safeguard mechanism, which means that every year they have to report their emissions. And if they can't buy enough ACCUs, they have to pay a fine. 

So what, therefore, I foresee, is if companies are busy finding ACCUs, there will be more ACCUs required than there are in circulation, which means that the price of the ACCU will go up.

And it is predicted that by the end of 2025, this year, the price of an accu will go up to about $70 per million tons of CO₂. So almost double. There is no choice actually and eventually they will have to reduce their emissions. 

Has that policy and system also influenced your CCS projects? 

That's a very good question. You know, to be honest with you, I've talked to a number of companies earlier in the year, and some large companies have just said that they will pay the fine and pass that cost on to the customers. That's okay today, but that fine will increase every year, and so there will come a time when it won't be possible to pass that cost on to the customer. They will have to do something about their emissions.

Also, I feel that CBAM is going to affect some countries more than others, which is in effect in Europe now. This means that Australia's export, for example, will have to comply with Europe's CBAM requirements. If we send our raw product to Korea and Korea manufactures from our original product such as coal or steel, that has to comply with the CBAM regulations in Europe. So, there'll come a time where, worldwide, we're going to be forced into doing something collectively. And that's why I think it's important to eventually have a world carbon price, like a world oil price.

That's why we need transboundary, because some countries can't store CO₂ and other countries have a lot of storage space. And we also have the mechanism, such as ships or trucks or vessels or vehicles, where we can quite safely move the CO₂ from one place to another. And I think worldwide we've got to accept that we are going to have to accept other people's, let's say garbage, because that's what CO₂ is! But as soon as we realize and accept that it's doing something for the planet, then I think that it's a good thing. It will be a little bit of a hard road to go initially until collectively we get together and accept a way forward.

What is InCapture's long-term vision for carbon capture and storage in Australia's path to achieving net zero by 2050?

We are a little bit different to some of the other projects around. So we call our project a project for all. Because we are not designated with an oil and gas company or an oil and gas field, it means that anybody can actually deliver their CO₂ to our site. So we hope that SK Earthworm and its emitters from South Korea, when the transboundary is in place, then SK will ship their CO₂ to our storage sites just as easily as Yara or Rio Tinto will be able to use our site from the onshore and pipe their emissions off to our site. So it doesn't belong to anybody in particular and it doesn't belong to a field—it's a storage site for everybody. 

You mentioned how currently CCS is an expensive process. How do you think InCapture and other CCS companies can deal with that problem?

Yes, CCS is capital intensive. If it's a depleted field, it means you have to go back and make sure that all those wells are abandoned. You also have to put special steel in there which doesn't rust, because CO₂ is very corrosive. So, can you imagine the cost in replacing all of that? That's what I mean when I say it's labor-intensive and cost-intensive. The only way to be able to reduce those costs is to be able to share the facilities really.

I would see that the best way to keep costs down is to be able to ship CO₂ around the world, and to be able to bury it at various sites. And maybe exploring more for saline storage sites rather than depleted oil and gas fields. Certainly in the case of Norway—I believe that Norway is no longer looking at depleted oil and gas fields and now they are only looking at saline aquifers, because generally saline aquifers don't have so many wells and pipes that you need to rehabilitate.

Do you think in that sense, international cooperation is really important for CCS? 

Absolutely. It's absolutely important. I believe we need a common carbon price, like we have a common oil price. I think it needs to be done safely and well, but we've been doing the oil and gas industry safely and well for over a hundred years now. So it's not a new concept. It's something that we know we know how to do. It's just the acceptance of it, and being able to collaborate worldwide. 

[Parts of the world like] Europe, the Americas, Southeast Asia, Oceania and Australia—as a population I think we have to accept that we do have to accept and store other countries' CO₂ because they don't have the ability to store it themselves. At the end of the day, if you're willing, as a country, to send all your raw products somewhere else to be refined and processed, then you have the duty to take some of those emissions back.