1st SEEL/Sumitomo Global CCUS Seminar: London – Autumn 2023

Since Sumitomo’s divestment of its UK E&P business, Summit Exploration & Production Limited, in mid 2022, and the incorporation of its new subsidiary, Summit Energy Evolution Limited (SEEL), Sumitomo’s global energy focus has shifted rapidly towards the development of new energy systems in tune with a net zero future.  Part of this, and one in which SEEL aims to play a key role, is in Carbon Capture, Utilisation and Storage (CCUS).  As such, SEEL hosted a one-day seminar on the topic in Sumitomo Corporation’s Europe London headquarters. The 40 attendees included experts from several external institutions, as well as from a variety of Sumitomo businesses around the world.

The prime objectives of the seminar were to:

• Promote awareness and discussion within Sumitomo of CCUS issues;

• Encourage collaboration between and across divisions within Sumitomo;

• Raise awareness of the value chains in which SEEL is active, including how the wider organisation can leverage SEEL to be competitive;

• Promote discussion on the role Sumitomo’s Energy Innovation Initiative (EII) can play in growing CCUS businesses around the world.

To a large degree the objectives were met, first in a series of keynote presentations and panel sessions in the morning involving external experts, followed by afternoon discussion and brainstorming sessions involving the Sumitomo representatives, all moderated by SEEL’s Board Advisors Andy Samuel and John Austin.

The seminar was opened by SEEL CEO, Paul Lafferty, who set the scene for the day by introducing SEEL’s activities, focused on development of the Bacton Energy Hub, plus other related activities in blue hydrogen production and CCUS.  

SEEL (and before it SEPL) has worked closely with the NSTA on the Bacton project for over two years, so it was appropriate that the first keynote speech was delivered by Matt Redrup of NSTA, who gave important insights from the government regulator point of view on the development of CCUS as a business in the UK.  

Ruth Herbert, CEO of the Carbon Capture and Storage Association (CCSA), followed with another keynote on how she sees the CCUS market developing.  Mike Carpenter, CEO of Inherit Carbon Solutions, gave his perspective on the small-scale carbon capture from biogas his company is targeting, followed by Prof. Jon Gluyas of the Durham Energy Institute opining on projects engaged in by Durham University on the technology of carbon storage and monitoring.  

The keynote session was concluded by Chris Manson-Whitton, CEO of Progressive Energy - SEEL’s partner in the Bacton project, and also a key player in the Hynet Track 1 project - who eloquently spoke about the importance of hydrogen in the new energy mix, which of course is dependent on carbon storage if blue hydrogen is produced from natural gas.

Overall the keynote speakers identified many important issues, many of which are common to CCUS in other countries and therefore beneficial for discussion within the global framework of Sumitomo’s businesses.  CCUS is a complex new business, requiring good collaboration between many stakeholders in order to ensure that returns are acceptable for investors, while net zero targets are met in a timely and cost-effective manner.  Political difficulties in the UK, with some (apparent) recent rowing back on net zero targets, are not helping progress and there is a feeling that the UK has lost important ground over the last two years, especially with increased competition from the US after the IRA announcement.

Nevertheless, there are 90 carbon capture projects in development, with 12 industrial carbon capture clusters also progressing.  Europe is targeting 50 Mtpa of carbon storage by 2030, with UK targeting 30 Mtpa, and doubling by 2050.  Shipping and port development will be key for the UK to benefit as a potential CO₂ importer from Europe.  It is also important to remember the contribution of biogas plants which generate methane from anaerobic digestion while also generating 40% CO₂ (which must also be captured to deliver negative emissions).  There will need to be hundreds of such CO₂ capture plants across Europe as biogas doubles by 2030.  With total UK energy demand of 1740 TWh, and offshore wind currently only providing 35 TWh, some of the gap must be filled with hydrogen as a fuel, whether a replacement of natural gas in the pipeline network, as fuel for transport, for use in power stations, or some combination of all these.

A sobering observation is that currently only around 2 billion tonnes of CO₂ are sequestered every year, compared with close to 40 gigatonnes emitted, and almost all sequestration is through forests.  This also encapsulates the scale of the business opportunity, providing the carbon markets are effective.

In the second morning session, attention was focused on the European CCUS market, in a panel involving not only keynote speakers, but also Ted Matsuda from Sumitomo’s Norway office and Dan Paterson of Xodus.  Overall, there was considerable positivity and optimism about the way the market is developing, with technical barriers not insurmountable, plenty of investor interest, and a rising carbon price to encourage investment.  Shipping is regarded as a good future area for investment, at a larger scale than at present.  Cross border issues are moving slowly, although UK has a key role to play in storing EU carbon.  A single European market is seen as feasible, although even within EU, different treatment of ETS needs to be addressed.  For a company like Sumitomo, there will be abundant opportunities across the supply chain and as investments in the full value chain.  Additionally, although IRA is attracting investment to the US now, this is not sustainable in the long term, and the UK and European market is seen as more mature and investible.  

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The final panel session in the morning addressed Sumitomo’s current CCUS footprint, with contributions from Junya Takahashi, Head of CCS in the Tokyo HQ, Rui Kakuda, Deputy GM for the EII in the London office, and Andy Howard, SEEL’s Energy Transition Director.  The objective was to increase awareness of Sumitomo’s global exposure to CCUS projects and to seek synergies and learnings for potential new projects.  Although CCUS is a very new business, Sumitomo already has initiatives and projects running in Canada, US, UK, Scandinavia, Middle East, East Asia and Australia.  The UK and EU are seen as strong markets, so are in particular focus for Sumitomo.  The Energy Innovation Initiative, established by Sumitomo in 2021, has a reach across all Business Units in the company and a brief to develop new businesses aimed at effectively achieving carbon neutrality.  EII therefore plays an important role in the energy transition and seeking out opportunities which may bridge across several business units.  Encouraging collaboration, promoting discussion, information sharing and knocking down pre-existing barriers to investment are all works in progress, but events such as this seminar are seen as important in this regard.

After bidding farewell to our external participants, the afternoon sessions were devoted to a more detailed discussion and debate among the Sumitomo attendees, with an aim to identify Sumitomo’s strengths and weaknesses in energy transition, discuss how to collaborate more effectively across business units and around the world, and finally to consider how to succeed in the world of new energy.

While the findings from our internal sessions will not be distributed publicly, it is clear that with the help of our external experts in the morning, all the Sumitomo participants were able to have a much more informed discussion on the sometimes-difficult topics addressing our business strategies for the future.

The bottom line is Sumitomo (and SEEL) is in a good place, well-positioned in several key markets relating not just to CCUS, but also other energy transition initiatives.  We came away with the following strong statements which will guide us through the next stage of developing our business:

• We can – and will – collaborate more effectively.  

• We are big enough to take the lead on key projects, to aggregate many smaller components, and to invest for the longer term.  

• We are also able to start small in some areas, finding the right partners to work with to grow the businesses.  

• We have the power of a company-wide Energy Innovation Initiative which will drive all aspects of Sumitomo’s businesses towards decarbonisation.

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