Deepak Maheshwari | Panel discussion at @FinancialTimes's #FTEnergy Event

Good afternoon everyone and thank you for joining us for the next panel looking at abated energy production and the growth of carbon capture and storage. Perfect way there, we had Ian Conn say that the only thing money is going into is EVs, solar, and wind because they are scalable. But we have people on stage here and broadly held expert opinion that carbon capture and storage needs to be part of the energy transition too if we're going to find a way to get to net zero. Joined by a fantastic panel today: Jerry Farro, Senior Vice President of Acre Solutions; Gustavo Bakero from Harbor Energy; Deepak Maheshwari from EET Fuels, Chief Executive Officer; and Alex Hen, Chief Operating Officer of Levian. Gentlemen, let's get straight into this. Carbon capture and storage – we've heard a lot about it over the years. It's one of the great hopes for decarbonizing sectors, particularly those hard to abate and hard to switch to renewable energy. I'm interested to get your take first on where the sector is at this time. Jerry has had the bad luck of sitting next to me, so I'll ask him first.

Oh, thank you. Where's the sector at the moment? I think it's at a crossroads. There have been a few false starts in the UK on carbon capture projects fairly recently, with the White Rose project not too long ago. But I think there's growing optimism now within the supply chain that it will happen this time. I work for Acre Solutions, a tier-one engineering company, so I'm coming at this from a contractor perspective. There's growing optimism, but still some skepticism and caution.

Okay, Gustavo, I'm going to come down the line. We'll keep this nice and simple. Your company, Harbor Energy, not too long ago received Track 2 status in the UK for the development of one of the carbon capture projects in an industrial cluster. Big moment for you as a company, but is this all happening fast enough? There was frustration that it took a long time between the initial push towards Track 1 clusters and Track 2. Is this all going a little bit slowly for your taste?

I would say yes. We could have had a year of delay so far. But once the decision of Track 2 was made – and by the way, we have two projects on Track 2, so for the audience, there are four projects that have been in the Track process. We have Viking, which we operate together with BP as part of ERs, and we also have Acorn, the Scottish cluster, which was also Track 2. So we have two Track 2 projects now out of the four that exist in the UK. I think Track 2 was a significant milestone because it creates momentum. Now we need to have discussions with the emitters that will be part of that ecosystem, and that gives us clarity towards front-end engineering and hopefully, in a few years, final investment decision. It takes time, there's bureaucracy, but we shouldn't underestimate the importance of collaboration because these projects are massive and need many stakeholders.

Deepak, you were one of – I won't say lucky, because people make their own luck in this industry – but you got Track 1 status on the project EET Fuels is involved in. Give us a little longer to be involved in the sector. What's your sense right now? Are you confident this will follow through, we will get FID, we will see a real carbon capture project take hold in the not-too-distant future in the UK?

Okay, for Alex, you're coming at this from a slightly different angle – traditional carbon capture, taking it out into the North Sea or similar to store underground. What's your sense for people proposing alternative methods of carbon capture and storage? Is the support there from the government right now in the UK?

I think the UK landscape is challenging. Levian is a carbon capture and use business. We have a point-source, pre-combustion carbon capture methodology that captures carbon into graphene, a high-performance additive for batteries, tires, composites, or thermoplastics. What we see is funding and support available for the large projects these gentlemen mentioned, but for more innovative technologies coming through – point-source, disruptive, where you maybe don't need large-scale logistics to pipe something underground – the support is limited. In other markets, like the US through the IRA and some Middle Eastern countries, there is a push to adopt these technologies before they hit the economic proof point and prove they can work and scale. For us, carbon is a valuable part of the life cycle, so let's use it – put it into an EV battery to make it perform better, into a tire to reduce particulates and rolling resistance. We've worked really hard on it.

For carbon capture to really sort of – what's your sense from the general public about that? Do you feel the general public understands what carbon capture is trying to achieve, that there is this sense of how it can work and how it's going to operate? Come to Jerry, that's a really good question.

I think – I mean, my barber was asking me about carbon capture recently when I was getting a haircut, so that tells you something – it is kind of in general societal interest now. There's a slight suspicion that CCS is going to be used for oil production, and that's a reasonable viewpoint given that so far most of it has been. So there's work to do to get the general public over. The key is the speed of implementation of projects that aren't necessarily EOR projects. We can move faster and get good news stories out there. For example, Acre Solutions is working on the Brevik project, which will be the world's first CCS project from a cement factory, and that should go live next year. Projects like that will have a big impact – people will see it's real, capturing carbon and storing it. And back to Gustavo's point, in the UK the progress has been okay but not fast enough. We need to keep that momentum going and get these good news stories, and I think the public will come with us.

Then Gustavo, how important do you think carbon capture is in that sense for keeping some traditional industries going in the UK? When we look at these industrial clusters, many are in heavily industrialized areas. Is this the key for them being able to maintain it?

Let me just also back to – there's no scenario to get to net zero that does not include carbon capture in its equation. We need to recognize there's no single silver bullet. Carbon capture will play a significant role. I've been in different places to see where the best ecosystems are. You need three things: geology – reservoirs; industry already there so you can repurpose infrastructure; and skills and labor. This normally happens around industrialized hubs, better if you have reservoirs offshore. That's why the UK is so well positioned to be one of the first countries to achieve carbon capture at very large scale. To give you specific figures: Viking, the project we operate in the Humber, will preserve 20,000 jobs and create 10,000 more, with investments around £7 billion just for that project. The virtuous cycle is very important. We haven't done a good enough job explaining that to the public, but we're trying because this is a virtuous cycle tackling climate change.

Just coming back to your original question, David, I think there are two problems for the public. One is that carbon capture in most senses is invisible – hard to see, touch, feel, see in action. One nice thing about our technology is you can genuinely see black dust coming out of the back of the box, so you know you're capturing carbon. The other problem is scale. The numbers we talk about are monstrous – 30 billion tons per year added to the CO2 problem, 2 trillion tons of emissions overall. These are mind-boggling numbers hard for anyone to get their head around. I think it's really hard for the public to grapple with, and our politicians don't help that either.

To come to Deepak – okay, so politicians have some grasp of this. They're helping with taxpayers' funding to see what is an industry. I think there's broad-based party support for that because this is new. They're trying to make these industrial hubs with CCS happen. What do you think the longer-term projection is? Is this an industry that one day will be able to stand on its own two feet, perhaps with a carbon price to make that feasible, or is it one that will likely require some form of long-term public government support?

Building on that, I think there's a very interesting capital rise happening at the moment – one in the US with the Inflation Reduction Act, and one in the UK. These are massive capital-intensive projects with returns yet to be seen, but in our economics, the margins are very thin compared to traditional projects. The US has taken a more market-driven approach through the 45Q tax credit, where you get a credit depending on how much CO2 you inject. In the UK, it's much more government-driven with the Track process. I'm curious to see which will be more effective. I do think carbon capture at scale will happen in very few geographies in the next five years: the US Gulf Coast, the UK, perhaps Australia and Norway. The fiscal regimes they establish will be interesting. We're at a very interesting moment where we'll see which regime attracts the most capital to execute these major projects.

When we talk about the models, can I make an observation? I'm keen to get the panel's view on this: is much of this not ultimately driven by a market in the UK and Europe in the form of the carbon price? If the carbon price is very high, then storing carbon and capturing it makes a lot more sense, and you can build a merchant model less reliant on government subsidy. Is that fair comment, and is that a stable basis on which to build the future of the carbon capture and storage industry?

I would agree. If you see where the carbon price is now in the UK, it's much lower than before, and that volatility will remain. What we're trying to solve is to capture as much CO2 as possible and store it for decades. It's about incentives. That's why the IRA is creating an incentive – the more you capture, the more you win. But yet to be seen for how long those incentives will be in place. The 45Q incentives were increased, and depending on who is in government in the UK or US, they can revert. That's why the moment we are in is fundamental. Companies like ours, ready to deploy billions of dollars, need a commercial and fiscal framework that guarantees our investment with a decent return.

I'll give a counterpoint to that. Our model is not so reliant on those carbon prices because we have monetization through graphene. We can give a successful and economic commercial model to our customers that derisks them away from that. So it lends support to a pre-combustion capture technology and usage rather than straight storage.

In terms of the pre-combustion approach, how scalable do you think that is? Obviously, the larger projects we're seeing are going – I hesitate to use the word 'traditional' because traditional in carbon capture storage doesn't make a great deal of sense – but how scalable do you think the pre-combustion approach you're pursuing could be?

It's certainly difficult, and scale, as I mentioned, is monstrous. But coming back to another point: there's no one technology or solution that will win out in a huge way. Any government or business looking for a silver bullet that will deliver 50% of our journey to net zero – that's simply not going to happen. We have a unit that captures 1,000 tons of carbon per year, and we are well on our way to a 10x unit and a 100x unit. The contribution can be pretty significant. If you look at graphene usage needed per annum in three verticals, you're talking about 20 million tons over the next five years. It's a small contributor but not insignificant, and it probably runs faster than some of these giga projects that are very complex to deliver.

On pre-combustion, different technologies, Alex, but in Norway, the Sleipner project is a pre-combustion project where CO2 is captured from the gas stream and reinjected into the subsurface. It's been storing 1 million tons of CO2 since the mid-1990s – 30 years. So this can be done; pre-combustion technology at scale can be done.

So the broad view is the technology is there; we just need to find out how to make it happen, how to fund it, how to get it done. I think from our point of view, you need to give innovative technologies time to succeed. A lot of government funding is aimed at very large projects and well-developed technologies. What we'd like to see from both private and government markets is some targeting at those more innovative, disruptive technologies. I think that's the IRA – everybody talks about the amount of money being put into it, but one interesting thing is that the threshold of projects that can qualify for funding has been massively reduced: from 100,000 tons down to 12,500 for industrial projects, and for direct air capture from 100,000 down to 1,000 tons. That's a small emitter, so it will kick off that market in small emitters, which we don't have in the UK at the moment. We can already see that happening; we have conversations with a number of US customers at small scale.

That feeds in very nicely to a question I've had come in from one of our viewers online, and then I will open it up to the floor for questions here in the room. This is to the broad panel: how much do you think COP28 is going to unlock capital for carbon capture and put CCS on the map?

Not much, is the short answer. The unlock of capital is private capital, and COP28 is not going to get into specific fiscal and commercial regime discussions like investment allowances in carbon capture. That's a decision by a specific government or entity. So I think it's going to be very little.

I'll give an alternative view. I think COP28 has been very progressive and encouraging of smaller businesses, giving them a platform to get in front of bigger funders and venture funders. So it moves the needle a small amount, and any opportunity to get that platform and face-to-face time is always valuable.

Let me throw open to the floor. Yes, we have a question. It already has the microphone. Thanks very much for an interesting panel and discussion. I'm Richard Pew from SAA. Question really in terms of from a target cost of abatement point of view, what do you need? What is the sort of – notwithstanding the volatility in the carbon offset price, which is fully understood – but if you were to have an IRA-esque target to aim for, what sort of cost of abatement is realistic?

I'm Richard Pew from SAA. Question: from a target cost of abatement point of view, what do you need? What is the sort of – not withstanding the volatility in the carbon offset price – but if you were to have an IRA-esque target to aim for, what sort of cost of abatement is realistic?

I think a generally accepted figure is about $100 per ton. Acre Solutions has assisted a company called A-Carbon Capture; they own the capture technology and are quoting for their full-service CO2 removal service between $75 and $150. The IRA established $85 per ton, for example. That gives you an idea, and there's line of sight on economics depending on the development concepts. I would tend to go more or less on that level. That's for technology-based solutions, not nature-based solutions, which are much lower.

Have another question from the audience towards the back there, please.

Hi, I'm St from Mar angers. A quick one for Gustavo: do you foresee any significant potential for carbon capture carriage by vessels in shipping?

Oh yes, I think so. There's one major project happening at the moment: Northern Lights in Norway, which is transporting CO2 and injecting it in the Norwegian continental shelf, operated by Equinor with Shell and Total as partners, with significant initial funding from the Norwegian state. It will play a role regionally. In the North Sea, you have the larger European emitter, Germany, which doesn't have the reservoirs, so they have to ship or pipe it. I do think there will be economies around the North Sea. In Southeast Asia, there will be economies around Japan, Singapore, South Korea, needing places like Australia or Indonesia that have storage capacity. Also in the Gulf of Mexico area, perhaps later. Mainly the North Sea and Southeast Asia where CO2 shipping will play a role in the midterm.

Are we really talking about a regional or potentially even global market whereby those that have the ability to sequester large amounts of CO2 will be making money from areas that do not but wish to meet their climate targets? This is the merchant model. I don't think long-distance shipping for CO2 will happen – it's going to be too costly to move this, and remember this is about waste management. I don't think the margins are going to be massive either. So no, I think it would stay regional, either piped or regionally shipped, around collaboration of countries that need the service and countries that can provide it. I see the UK as a service provider because of the reasons I said before. I see Norway, and perhaps others trying to get there like Denmark and the Netherlands, but scale-wise they're not at the same level as Norway and the UK for the North Sea, at least.

Okay, we've got time for one last – or we don't have time, but let's do this anyway. We have a question from the floor, please. Appreciate that. Thank you. Answer generally, I'll take very quickly. So my question to panelists is: in your view, what is the single biggest blocker for this technology to be adopted at scale? Thank you.

Fantastic. I'm sorry to say we've run out of time, but I'd like to first of all thank all our panelists for a fantastic discussion and great insights, and also to the audience for some brilliant questions. Thank you very much to everyone. Hope to see you back here soon.