Carbon capture and storage

Jun 23, 2023

This material is for historical purposes only and is not indicative of current sustainability definitions. Readers should not rely on this information as a basis for making investment decisions or for evaluating the sustainability status of any products or services. Please reach out to the Marketing and Client Relations Department for updated sustainability related definitions.

 

It’s early days in the development of CCS technologies, but we’re optimistic about its role in the road to net zero.

With the climate crisis continuing to dominate the global agenda, and global CO2 emissions from fossil fuels hitting record highs in 2022, it’s evident that speeding up the shift to renewable energy solutions has become more urgent than ever.

However, the question must be asked….is this enough?

Indeed, renewable energy may not be sufficient by itself to reduce global net emissions to zero by 2050. And this is where carbon dioxide removal technologies can play a key role.

Different ways to try to reduce overall CO2 emissions are being investigated, including removing CO2 emissions from large industrial sources via a process called Carbon Capture and Storage (CCS), by capturing and sequestering them underground in geological formations.

In our full report below, we discuss two companies playing an important role in the development of CSS technologies:

Equinor: as one of Europe’s largest energy companies with strong geological knowledge and regional infrastructure, the company is well placed to play an important part in the development of CCS technologies. We look at the ‘Northern Lights’ project, the world’s first cross border transport and storage network[1], of which Equinor is a key investor.

EOG Resources: the company already has ambitions to become the lowest emissions producer of natural gas and crude oil, and to reach net zero by 2040 – 10 years ahead of the Paris target. As a traditional energy company, EOG has made very encouraging progress in its reduction efforts, with an aim to pilot its first CCS project in 2023.

The approach of each company takes advantage of the synergies between CCS technology and the exploitation of fossil fuels in terms of geology, fluid technology and project management. However, as explored in our report, the visions behind the development of CCS are strikingly different.

As investors, we are encouraged that such companies are actively pursuing the opportunity CCS presents but also appreciate that in these early days of the industry’s development, the exact profile of competitive advantage has yet to become apparent.

From an investment point of view, therefore, we believe in considering more than one approach and we continue to encourage and actively engage with both companies on this development, which is important for the industry and, hopefully, for the climate.

Seeking out companies with winning business models is how we seek to add value. Ultimately, investing in these great businesses should generate long-term value for shareholders that significantly exceeds the return on the average company or the market.

1 Northern Lights – CCUS around the world – Analysis - IEA.

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