Part I: Germany's CCS environment
Players & Competitors
Germany, a powerhouse of industry, faces a significant challenge in reducing its carbon footprint. Carbon capture and storage (CCS) emerges as a potential option in this fight. However, unlike its European neighbors, Germany lags in developing CCS projects.
This analysis delves into the potential for CCS in Germany, with a specific focus on uncovering business opportunities. We'll explore three key areas:
Part I - Market Players & Competitors: Who are the potential stakeholders in Germany's CCS landscape?
Part II - Regulatory Framework: What are the legal and bureaucratic hurdles impacting CCS development?
Part III - Geosciences & Data: What are the geological considerations and data availability for safe and effective CCS implementation?
Companies with a Stake in Germany's CCS Future
This section identifies companies that might be interested in CCS opportunities in Germany, considering the current regulatory environment and the country's industrial profile. It's important to note this list might not be exhaustive.
Germany's slow progress in CCS development stands out when compared to its neighbors. Despite early exploration and trials dating back to 20041, the lack of a clear regulatory framework has hindered significant industry progress. Additionally, exporting CO2 due to the energy-intensive transportation and infrastructure requirements is not an ideal solution.
On the regulatory front, Germany only established an act regarding geological data in 20202. This lack of transparency hampered foreign players' entry into the German subsurface sector for decades, leaving local E&P companies with a dominant role in geophysical data.
However, Germany's situation presents a unique opportunity. It's a large industrial nation with carbon-intensive industries already regulated through the EU ETS system and a national carbon tax that increases annually. The recent draft of Germany's CO2 storage act paves the way for CO2 storage in the Exclusive Economic Zones (EEZ) of the North and Baltic Seas. Additionally, individual states can decide on onshore or offshore CCS implementation3.
Beyond individual companies, Germany's industrial oil and gas association, BVEG (Bundesverband Erdgas, Erdöl und Geoenergie e.V.), located in Hannover, is another key player to watch. BVEG serves as a crucial link between the industry and policymakers in Berlin. Through lobbying efforts, BVEG will likely play a significant role in shaping the regulatory landscape for CCS in Germany.4
Moving Forward
This analysis provides a starting point for exploring business opportunities in Germany's emerging CCS sector. By understanding the potential players, regulatory framework, and geological considerations, we can identify promising avenues for investment and development.
Traditional German E&P players
Germany’s oil and gas industry is mostly located onshore in the states of Lower Saxony and Schleswig-Holstein. Germany’s largest oil field - Mittelplate - is in Schleswig-Holstein. Lower Saxony contributes both oil and gas production. The center of Germany’s oil and gas industry is located around Hannover, where also plenty of oil service companies with global operations are based. Given that oil & gas industry is an important industry in Lower Saxony, it seems llikely that Lower Saxony could go for CCS.
A leading contender Wintershall Dea: https://wintershalldea.com/en
Germany's soon-to-be former upstream giant, Wintershall Dea, is poised to become a key player in the emerging CCS sector. While recently acquired by Harbour Energy, a company with experience in CCS projects like the Viking CCS initiative in the UK56, Wintershall Dea brings its own established expertise to the table.
Wintershall Dea boasts a strong operational presence on the German continental shelf through its Mitteplate project7. Although production ceased in 2021 at Germany's only offshore gas field (A6/B4)8, Wintershall Dea's headquarters are actively expanding their CCS portfolio. This includes involvement in the Danish Greensand project9 and their recent acquisition of Denmark's first onshore CCS license10.
Given their extensive experience operating offshore in Germany and neighboring regions (Netherlands, UK, Norway, Denmark), Wintershall Dea seems like a natural fit to lead the charge in Germany's CCS development. Furthermore, their collaboration with Equinor on designing a large-scale CCS value chain in the North Sea, including pipeline infrastructure, suggests German CCS projects could be a perfect complement to their existing capabilities11.
ExxonMobil (XOM): https://corporate.exxonmobil.de/
XOM’s upstream division in Germany faces a unique situation. While the company boasts a strong presence onshore, its assets are mature and declining, with reports suggesting they might be put up for sale12. The complex structure of its German concessions adds another layer of challenge, see also the BEB JV with Shell13.
However, with CCS development gaining traction, XOM could find a lifeline for its German subsurface expertise. The company's experience operating offshore through stakes in joint ventures like A6/B4 provides valuable knowledge of Germany's continental shelf. Additionally, its headquarters and international operation can offer support in further developing offshore CCS opportunities.
Furthermore, XOM's website hints at its involvement in "low carbon solution" businesses14. Considering Germany's draft CO2 storage act isn't limited solely to offshore areas, XOM's onshore experience and potential interest in CCS could position them for a strategic shift in the German market.
Neptune: https://www.neptuneenergy.de/
Similar to XOM, Neptune Energy primarily operates onshore in Germany. While it once held some German offshore licenses managed through its Dutch affiliate, Neptune’s international business was divested15, so with that access to a knwoledge pool regarding offshore operations has vanished. Currently, the German entity operates as a standalone business and hasn't publicly expressed interest in CCS.
However, a recent development suggests a potential shift. In January 2024, Neptune appointed a new director for "new energies" (Axel Wenke), with a focus on lithium and geothermal exploration16. Apart from lithium mining, Neptune’s onshore legacy gas field Altmark could be a playground to test CO2 injection, though it comes with challenges, please see17 ”This could indicate an openness to exploring CCS as another potential avenue. While Neptune currently lacks in-house offshore expertise, it could forge partnerships with other players to address this gap
Onedyas: https://onedyas.com/
Similar to Neptune Energy, OneDyas presents a wildcard opportunity in the German CCS sector. Its operations within the GEMS area, encompassing the German-Dutch offshore border, grant valuable subsurface expertise directly relevant to German geology (skilled subsurface team). This, combined with its experience in offshore operations, positions OneDyas as a player to watch in the developing CCS landscape.
New offshore players
While the focus so far has been on established German players, the potential for Germany's offshore CCS market extends beyond its borders. The reality of geology is that it doesn't respect political boundaries. This opens doors for experienced offshore CCS players from neighboring countries like the UK, Netherlands, and Denmark to potentially enter the German market. However, domestic expertise including language barriers, bureaucratic hurdles and digitalization gaps (you better look to get a Telefax) will create challenges to enter the German market. On the Dutch side, companies like Petrogas (it held once some acreage in the duck’s bill) or larger players could be new entrants.
Other onshore players
While the focus has shifted to offshore CCS possibilities, Germany's onshore E&P industry shouldn't be overlooked. A significant portion of Germany's E&P activity is onshore, with companies like Vermillion Energy and Beacon Energy representing some of the players in this space. These companies possess experience in the German geological landscape and regulatory environment.
Given their local presence, these smaller players could potentially become wildcards in the onshore CCS game. They might lobby state governments, particularly in major E&P states like Lower Saxony and Schleswig-Holstein or Southern Germany, which boast a well-developed oil service industry, to push for permitting onshore CCS projects. Other states with a heavy industries could potentially consider local CCS projects, near to emitters to avoid the construction of expansive CO2 transporation infrastructure (pipelines or shipping requiring compression/liquifaction).
Shell is present in Germany through its BEB Joint Venture with XOM, unlikely to expand its German subsurface activities. However, Shell is also active in the mid- and downstream sector. Being a significant carbon emitter implies a focus on carbon abatement and also entering Germany’s CCS sector shouldn’t be fully off the table.
Last but not least, given the late-life assets with high decommissioning liabilities further consolidation of Germany’s E&P market through M&A actitivities shouldn’t be dismissed.
New CCS entrants
Equinor: https://www.equinor.com/
Equinor, a name synonymous with CCS in Europe, brings a wealth of experience to the table. Having honed its expertise on the Norwegian Continental Shelf, Equinor has recently secured new licenses and is actively expanding its CCS business across Europe, including the UK, Netherlands, France, and Denmark18 1920.
While Equinor's current activities in Germany focus primarily on the midstream sector, with decarbonization deals secured with companies like RWE, Wintershall Dea, SEFE, and VNG21222324, their past involvement in unconventional onshore licenses suggests an openness to broader participation.
Equinor's focus on expanding its European CCS footprint, coupled with its existing experience and presence in Germany, makes them a natural player to become more active in the German CCS market. Here's how they might contribute:
Technology and Expertise: Equinor can offer proven CCS technologies developed through their extensive experience in Norway.
Collaboration: By partnering with established German players like Wintershall Dea, Equinor can facilitate knowledge transfer and accelerate project development.
Cross-Border Infrastructure: Equinor's involvement in the development of large-scale CCS projects like the North Sea CCS value chain, co-designed with Wintershall Dea, demonstrates their ability to create cross-border infrastructure solutions, potentially benefiting Germany's CCS ambitions.
Overall, Equinor's presence in Germany, existing partnerships, and focus on European CCS development position them as a key player to watch in the German CCS space. Their expertise and collaborative approach could significantly contribute to the success of Germany's efforts to achieve its carbon emission reduction goals.
Probably Europe’s most experienced player in the CCS has domain. Most of its expertise was gained on the Norwegian Continental Shelf. Lately, it was new licenses awarded though it’s expanding its CCS business into Europe, e.g. UK, Netherlands, France, Denmark. In Germany it is fairly active securing deals in around decarbonisation with RWE, Wintershall Dea, SEFE (legacy Gazprom Germania), and VNG.
Thus, it is mostly active in the midstream business in Germany. However, it had also stakes in unconventional licenses onshore Germany. Given its expertise and focus in expanding its European CCS business, it seems a natural player to get active in Germany.
Other Industries
Heavy industries:
Germany's robust industrial sector, encompassing industries like cement, coal, steel, and chemicals, faces a significant challenge – curbing its carbon footprint. CCS presents a potential solution, but a key hurdle exists: the lack of in-house subsurface expertise within these industries.
Gas storage operators:
While the focus has been on established players in the oil and gas exploration and production (E&P) sector, Germany's gas storage operators present another interesting wildcard opportunity for the developing CCS market. These companies possess a workforce with expertise in subsurface geology, well management, and the critical aspects of gas compression and injection – skills directly applicable to CO2 storage operations within CCS projects. This existing skillset positions gas storage operators as potential players in the German onshore CCS space. In some cases, existing gas storage facilities might be suitable for conversion into CO2 storage sites, leveraging existing infrastructure and streamlining development timelines. Possible players:
VNG
Uniper
Storenergy
VNG:
VNG, a leading name in Germany's midstream gas sector and a utility provider, emerges as another potential player in the growing CCS market. Here's how their expertise positions them for involvement:
Midstream Expertise: VNG's core business lies in midstream operations, encompassing gas transportation and storage. This experience translates well to managing the transportation and storage of captured CO2 through pipelines and storage facilities – a critical aspect of CCS projects.
Subsurface Knowledge: Their involvement in gas storage operations suggests an in-house team of subsurface specialists with expertise in geological formations and storage management. This knowledge base can be directly applied to CO2 storage for CCS initiatives.
Collaboration with Equinor: VNG's past collaboration with Equinor on a memorandum of understanding (MoU) regarding hydrogen, ammonia, and carbon capture demonstrates their forward-thinking approach and potential interest in developing CCS solutions25. This partnership signifies a strategic move towards a low-carbon future.
Utilities/Energy players with expertise in offshore wind farms
Germany's utilities with expertise in offshore wind farms present a strategic opportunity for the developing CCS market. Power producers are under increasing pressure to reduce their carbon footprint. CCS offers a potential solution for gas-fired power plants, allowing them to continue operating while significantly lowering emissions. This aligns perfectly with the phase-out of lignite and brown coal plants.
The potential for co-locating offshore wind farms with CCS infrastructure is an attractive proposition. This could streamline development, reduce congestion on the seabed, and provide a readily available power source for operating compression and injection facilities. Utilities with experience in both sectors are ideally positioned to explore and implement such co-location strategies.
RWE
Vattenfall
EnBW
TotalEnergies: This French multinational, with a significant power generation portfolio and experience in midstream/downstream operations (Leuna), presents an interesting case. Their E&P activities in the Netherlands and Denmark further strengthen their potential role in the German CCS market, potentially fostering cross-border collaboration
The Rise of CCS-Focused Startups
The recent acquisition of Wintershall Dea by Harbor Energy presents an interesting possibility for the emergence of new players in the German CCS market: startups founded by former Wintershall Dea employees. The acquisition likely resulted in a surplus of talented subsurface specialists with expertise in geological formations, reservoir engineering, and well management. These individuals, potentially former colleagues, could leverage their combined knowledge and experience to form innovative CCS ventures. In the case of Harbour’s Wintershall Dea acquisition, some management changes are already on-going: Senior Vice President for Carbon Management & Hydrogen Klaus Langemann left the boat in January 2024 and was succeeded by Kathrin Dufour26
Summary
Germany's burgeoning CCS market is attracting a diverse spectrum of players. Established oil and gas companies, utilities with offshore wind expertise, gas storage operators, and even potential new startups formed by former industry talent are all showing interest. In particular, the E&P players are early movers. Team are in place to do exploration of potential saline acquifers and other reservoirs to permanently store CO2. Objective is to scout and finally license most suitable areas, once the carbon storage act is updated.
Subsurface expertise in geology and storage management is crucial for successful CCS development. This knowledge base is essential for identifying suitable CO2 storage sites and ensuring safe and efficient operations.
However, navigating this new landscape requires clear and stable regulatory conditions. Investors need confidence in the long-term viability of CCS projects, and this hinges on a well-defined regulatory framework. Additionally, access to comprehensive data on geological formations and existing infrastructure is vital for optimizing CCS project development. By fostering a collaborative environment, attracting a diverse range of players, and establishing clear regulatory guidelines, Germany can unlock the full potential of CCS as a key tool in achieving its carbon emission reduction goals.
Written with support through Gemini27
Images generated through Leonardo.ai28
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