ACCELERATING CCUS TOGETHER:

– Financing a Key Piece of the Clean Energy Puzzle in the Gulf Region
CEM CCUS Initiative workshop at the World Energy Congress
Tuesday 10 September 2019, Abu Dhabi, United Arab Emirates

On Tuesday 10 September the governments of United Arab Emirates and the Kingdom of Saudi Arabia
hosted a workshop on carbon capture, utilisation and storage, under the framework of the Clean
Energy Ministerial CCUS Initiative. Both countries have been full Members of this CEM Initiative from
its inception in 2018. The event was held during the 24th World Energy Congress in Abu Dhabi. Some
40 participants from government, industry, research and the financial sector attended the meeting.
Regional participation was from United Arab Emirates, Saudi Arabia and Bahrain. In addition, a number
of representatives from expert energy and financial organisations from outside the region were
present.

This day-long event featured presentations by government and industry from the region, their
experience in carbon capture, and their future visions. This note will not attempt to summarise
everything that was said. Instead, the following points are highlighted as key take-away messages
from the event. A number of presentations were given and this note may refer to speakers – however
it does not detail interventions made during discussion but rather presents key salient points.

High-level messages from hosts

Participants heard opening remarks from Mr. Khalid Abuleif, Chief Climate Negotiator or Saudi Arabia
and the Hon. Dan Brouillette, Deputy Energy Secretary of the US. On behalf of Saudi Arabia as a co-

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host of the meeting, Mr. Abuleif welcomed the participants and stressed the need for international
and regional collaboration to drive CCUS forward. The CEM CCUS Initiative can play a key role in
bringing various stakeholders together and Saudi Arabia remains very supportive of its activities.

Dan Brouillette thanked both Saudi Arabia and United Arab Emirates for their important leadership
with CCUS and with the Initiative. The US has a long experience in CCUS technologies and is happy to
be one of the initiators and co-leads of the Initiative. With the 45Q tax credit system the US is also
driving forward the next wave of CCUS projects.

Later in the meeting, Assistant Undersecretary of Energy of UAE, HE Fatima AlFoora AlShamsi also
joined. She recalled the various new scenarios that the World Energy Council had published the day
before and stressed the UAEs lead in the area of CCUS. Developing clean technology to use fossil fuels
is critical for the region.

Introduction and key messages from the CEM CCUS Initiative and the CEM
Secretariat
A brief scene-setting presentation by the CEM CCUS Initiative Co-ordinator highlighted the fact that
the Clean Energy Ministerial process has 26 Member Countries, jointly responsible for 90% of global
clean energy investment and 75% of all energy-related CO2 emissions. The CEM process is based on
voluntary action by its Members in various clean energy technology areas, not on binding targets and
commitments. The CEM has several work streams (“initiatives” or “campaigns”), and the CCUS
Initiative, established in 2018, is one them.

The CEM CCUS Initiative is a government-led process to accelerate CCUS together, as part of a wider
clean energy suite. The Initiative offers a platform for governments, the private sector and the
investment community to create strategic partnerships and accelerate both near and longer-term
investment in CCUS. It also disseminates emerging CCUS policy, regulatory, and investment best
practices. The Initiative has eleven member countries: Canada, China, Japan, Mexico, Netherlands,
Norway, Saudi Arabia, South Africa, United Arab Emirates, United Kingdom and United States.

The Initiative is an inclusive group: it is open for new membership, even for countries outside the full
Clean Energy Ministerial membership. The Initiative also works together with industry and academia.
More about the Initiative: http://www.cleanenergyministerial.org/initiatives-cleanenergyministerial

Key points from the discussions

After welcome and introductory scene-setting, the participants presented and discussed the current
CCUS experience in the Gulf Region, potential future projects and visions, as well as the financial
aspects of CCUS investment. The following summarises the discussions on high-level, around four key
points.

1. CCUS is needed and the Gulf Region is ready

All speakers and participants stressed the fact the CCUS is needed globally, and that it can be
particularly important for the Gulf Region economies and the potential for long-term continued
revenues from fossil fuel production and export. Various presentation and interventions highlighted
that the Gulf Region is ready for CCUS.

Presentations were given by Saudi Aramco, SABIC and ADNOC regarding the importance and the
current experience in CCUS in the region.

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  Aramco stressed that the oil and gas industry is critical for the success of CCUS. Aramco
operates the Uthmanyah CCUS project, with capacity to capture and inject 800 000 tCO2 per
annum for EOR. Aramco is doing the project not because it needs more oil but because it
wants to master the technology.
 In the petrochemicals sector, SABIC is a global leader in CO2 to chemicals, and operates the
world’s largest CO2 purification plant capable of purifying 500 000 tCO2 per year. SABIC
captures the majority of its CO2 from an ethylene oxide production facility. The SABIC
purification process allows for food-grade purity of ~99.99%.
 ADNOC is another CCUS leader in the region, as the owner and operator of the Al Reyadah
CCUS project. At the WEC opening plenary session the ADNOC CEO announced that the
company would multiply its current CCUS investment by six in the 2018-2023 period. ADNOC
estimates that it will need 10 times today’s CO2 demand in the next 10 years for its operations.
This demand will drive several large-scale CO2 capture projects.
 In addition, there are also several smaller CO2 capture installations in Bahrain in the oil, gas
and chemicals sector. Future plans include at least on large-scale (up to 600 000 tpa) capture
project.

Technical expertise and resources exist to drive CCUS in the Gulf Region. However, in general a
conducive incentive framework does not yet exist. Work done e.g. by KAPSARC to look at ways to
incentivise CCUS via a certificate mechanism (“Carbon Storage Units” or “CSUs”) can be important in
this regard, by giving a value to captured CO2, and ensuring that such value can be tradable across
various industries.

2. There is a general need to collaborate to reduce costs and to share experience

While not explicitly embedded in any presentation, many participants expressed the general thought
that collaboration is critical to deploy CCUS. In general carbon capture will be a cost on top of projects
(despite some earning opportunities from CO2 utilisation), and it is vital to reduce the cost of capture.
Sharing knowledge from projects and from policy approaches is therefore very important.
Collaboration needs to be inclusive: both industry and governments benefit from it.

3. Finance needs to be tuned for CCUS

Financing CCUS projects was a key part of the discussions in the meeting. Participants highlighted the
current difficulty of getting climate finance institutions interested in CCUS projects, and for raising
funds for CCUS in general. There was a general consensus that dedicated funding mechanisms would
be needed for CCUS for the coming years to get large projects going.

The meeting heard from several financial institutions and market places: e.g. World Bank, Société
Générale, Japan Bank for International Cooperation, OPEC Fund for International Development,
Islamic Development Bank, Dubai Financial Markets, Saudi Industrial Development Fund and Saudi
Public Investment Fund.

The World Bank presented its experience from the past several years with advancing CCUS. The Bank
has operated a CCS Trust Fund, which has been used to build capacity in several countries and facilitate
pilot projects in two countries (Mexico and South Africa), in two phases, on a grant basis. However,
the Bank does not have any ongoing lending activity in CCUS, and has not received any requests for
loans. The World Bank in fact stressed that both recipient AND donor countries must request the bank
to be active in CCUS – otherwise the bank cannot move. The World Bank could issue both loans and
guarantees. Lending is always initiated at the request of a recipient country. The World Bank can also
use its expertise to encourage other financial institutions to be more active in CCUS. The Bank’s

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experience could also be used to help countries prepare proposals towards e.g. the Green Climate
Fund.

Views from other banks stressed the following points:

 Banks remain in general open to financing CCUS projects, and few would be opposed to it per
se. However banks are not in it for charity: projects need to be financeable;
 Various FEED and pre-investment studies on actual projects have shown that projects can be
bankable, especially coupled with good government policy. A number of examples also show
that banks have been ready to finance CCUS projects (but projects have been cancelled due
to changes in policy);
 While CCUS per se can be within their energy strategy, a number of banks would be very
unlikely to finance coal-based new-build capture facilities, due to increasing pressures from
their owners and from society. Retrofitting CCUS on existing installations may be seen
differently;
 Some banks have dropped their interest in CCUS not because of objections to the technology
per se, but because they have not seen fast enough progress. It is therefore important to
ensure that projects are driven forward by developers, to remain relevant in the competitive
clean energy space where renewable energy projects have a strong advantage;
 Confidence is key: if the key actors in CCUS projects (industry, governments and banks) can
trust each other, projects are much more likely to emerge;
 Sovereign guarantees were also highlighted: governments will have a role in the foreseeable
future in de-risking projects and helping ensure public acceptability;
 A particular aspect of the Gulf Region could be future IPOs that might provide strong financial
opportunities for CCUS investment.

Several points were highlighted in the discussion. Key high-level conclusions on the financing
discussion could be summarised as follows:

1. Financing CCUS is not a question of technology, nor (lack of) industry experience, but is
strongly impacted by the combination of cost and policy.
2. The particularly important role for governments is to urgently define what role CCUS has in
their strategies. An example of offshore wind was cited: offshore wind is not profitable either
without subsidy – hence political decisions to subsidise it make projects bankable (“If offshore
wind can get a 30-40 USD / MWh subsidy, why can CCUS not?”)
3. In (international) climate and clean energy finance space we will probably need dedicated
funding facilities for CCUS projects for the coming several years. The usual metrics used to
select projects will in most cases not suit CCUS projects.

4. Collaboration within the Gulf Region needs to be strengthened

Several participants raised the opportunity of developing a regional approach to deploying CCUS. Now
that the region has proven that the technologies can work, it would be important to go beyond and
join forces to further develop regional strategy and action. The strategic interest would be to reduce
deployment costs by sharing experience.

Virtually all participants highlighted the need for the Gulf Region to organise more structured
collaboration with the clear objective to jointly drive CCUS in the Region. Such more structured
collaboration should involve governments, industry and financial institutions from the Gulf Region
countries. The collaboration should be inclusive and be useful for all relevant sectors of the Gulf Region
economy, not only oil & gas.

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Participants also offered numerous views regarding the substance and themes of such collaboration:

1. Developing a regional strategy for CCUS as a whole, potentially with joint deployment targets;
2. Jointly identifying regional hubs, clusters and key project opportunities for CCUS;
3. Providing a joint regional atlas for permanent CO2 storage (and EOR as much as possible);
4. Developing joint approaches in policy and aligning policy frameworks. This could include
considering a regional “Club” that could exploit joint incentive policy frameworks under the
Paris Agreement Article 6;
5. Jointly planning infrastructure to link capture hubs to storage / injection areas in the region.

It is now critical that key actors from the region get together to discuss how to drive regional
collaboration forward. Saudi Arabia and Bahrain announced the plan to organise an International
CCUS Conference in Riyadh in February 2020, as part of Saudi Arabia’s G20 energy agenda. This could
be a potential opportunity to announce further collaboration in the Region.

***

The CEM CCUS Initiative thanks the governments of United Arab Emirates and Saudi Arabia for co-hosting
this event. We also thank all participants for their very active participation!

This note was drafted by Mr. Juho Lipponen, Co-ordinator of the CEM CCUS Initiative. The interpretations
and conclusions are intended to reflect consensus in the meeting, but are not annotated to any particular
person or organisation.

For any comments or questions, please contact juho.k.lipponen@outlook.com.

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Annex 1: Meeting agenda

“Accelerating CCUS Together – Financing a key piece of the clean energy puzzle in the Gulf Region”

Agenda

09:00 OPENING AND WELCOME SESSION

Welcome by United Arab Emirates
Fatima AlFoora AlShamsi, Assistant Undersecretary, Ministry of Energy and Industry

Welcome by Saudi Arabia

Khalid Abuleif, Chief Climate Negotiator, Ministry of Energy

Welcome by United States

Dan Brouillette, Deputy Secretary of Energy, Department of Energy

“The need for CCUS in the low-carbon energy puzzle, and the opportunity for the CEM CCUS
Initiative to drive deployment”
Juho Lipponen, Coordinator, CEM CCUS Initiative

09:30 CCUS IN THE GULF REGION TODAY: EXPERIENCE AND KEY LESSONS
Experience in Saudi Arabia
Tidjani Niass, Saudi Aramco

Experience in the petrochemical sector

Abdulaziz Al-Jodai, SABIC

Interventions by representatives from other Gulf Region countries

Roundtable discussion with all meeting participants

- What led to the current projects happening?

- What are the key learnings and lessons from the experience so far?
- What are the implications for future government policy?

11:00 COFFEE & TEA BREAK

11:30 CCUS OPTIONS AND CHALLENGES IN THE FUTURE

Saudi Arabia
Wolfgang Heidug, Senior Fellow, KAPSARC

Interventions by representatives from other Gulf Region countries

Roundtable discussion with all meeting participants

- What are the key prerequisites for making new projects happen?
- What are the collaboration opportunities between countries, between sectors and
between industry and government?
- How can this help drive CCUS forward in the region?
- How can the Gulf Region be a leader in CCUS and show the way globally?

13:00 LUNCH

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14:00 Brainstorming roundtable: “FINANCING NEXT CCUS PROJECTS IN THE GULF REGION”
A view by a commercial bank
Allan Baker, Global Head of Power Advisory and Project Finance, Société Générale

A view by a Multilateral Development Bank

Nataliya Kulichenko-Lotz, Lead Energy Specialist, World Bank

Intervention by Islamic Development Bank / OFID / other regional investor organisation

Moderated discussion with all participants, covering the following topics:

- Creating business models in the Gulf Region

- Sharing of risk with CCUS projects
- The role of government policy
- What can the CCUS Initiative do to accelerate CCUS in the Gulf Region?

15:50 WRAP-UP
Conclusions and suggestions for key themes for Riyadh conference February 2020
Juho Lipponen, CEM CCUS Initiative Coordinator

16:00 CLOSE OF MEETING

Coffee / tea and refreshments