The UK government announced on 25 November 2015 that it had withdrawn the £1 billion ring-fenced capital budget for carbon capture and storage  (CSS). The UK's CCS competition was therefore ended.

This caused some surprise in the CCS industry, not least because the two projects remaining in the UK CCS competition, Peterhead and White Rose, are at advanced stages. Spokespersons for those projects issued statements pessimistic about the future of their respective initiatives.

It remains to be seen whether this is the end of CCS in the UK for the foreseeable future. Four FEED programmes for UK CCS projects are already complete and another two have been under way. The Caledonian Clean Energy project and Teesside Collective project had been gathering momentum recently. Indeed, earlier this year, the UK and Scottish governments committed £4.2m to the former project to allow the Summit Power Group to conduct some key research.

The UK CCS industry has been having a troubled birth. BP pulled out of the Peterhead initiative in 2007, the Kingsnorth project was cancelled in 2010, the Longannet scheme was scrapped in 2011 and South Yorkshire's Hatfield project was stopped in 2012. Even more recently, in September 2015, Drax withdrew from the White Rose project complaining about ambiguity in the UK's low carbon policy.

In a related development, opposition amendments to the Energy Bill in the House of Lords last month proposed extending the scope of the "Principal Objective" of maximising the economic recovery of UK petroleum to providing for carbon capture and storage. Most commentators consider that this amendment will not survive through the House of Commons.

Where next for the UK CCS industry? The road ahead is not clear but there are certain waypoints to look out for:

  1. Contracts for difference – will UK CCS projects in the future receive support via the Contracts for Difference regime? And will that support be sufficient?;
  2. Pathfinders - will the current pathfinder projects, Peterhead and White Rose, find a way of continuing notwithstanding the termination of the £1billion competition?;
  3. Investor confidence – has investor confidence in respect of UK CCS projects been knocked irretrievably or is there still underlying appetite?;
  4. Maximising economic recovery – what role might CCS play in the MER UK mission? Enhanced oil recovery has long been talked about in the same breath as CCS and, as UKCS operators look to maximise returns from offshore assets, the re-use of infrastructure for other purposes continues to attract more attention; and
  5. Government policy – clarity and certainty of government policy in respect of UK CCS policy is an obvious and important pre-requisite.