[Report] "Carbon once just released, now captured and stored underground" SK E&S's net-zero initiative launched in Australia

[Carbon for Hydrogen Exchange]
② Darwin LNG Terminal

SK E&S to Invest 1.5 Trillion KRW Over 10 Years
Private Companies Participate from Development
First Domestic Import of 1.3 Million Tons Annually
Convincing Environmental Groups and Indigenous Peoples Key
Agreement on Carbon Border Crossing Also a Challenge

"Until now, carbon dioxide was simply released into the air. There were no limits on atmospheric carbon emissions. But by 2050, companies are required to reduce their carbon levels to 'zero.' From now on, carbon dioxide will be stored underground. The liquefied natural gas (LNG) produced this way is what we call 'low-carbon LNG.'

On the afternoon of the 16th, after a 40-minute drive from the northernmost city of Darwin in Australia, we arrived at the Darwin LNG Terminal. At this site, where massive steel facilities are connected by numerous pipes, land preparation work was underway for the construction of Carbon Capture and Storage (CCS) facilities.

Lee Won-yeop, Manager of the CCS Business Development Team at SK E&S, said, "About 50% of the 2 million square meters (600,000 pyeong) of the Darwin LNG Terminal is idle land. We plan to fill this space with CCS facilities and Barossa gas liquefaction facilities."

Natural gas extracted from gas fields mainly consists of methane. The underground layers where natural gas is stored may also contain fossil fuels like coal. During the process of liquefying methane under high pressure and low temperature, carbon dioxide is generated when methane reacts with oxygen in the air, and impurities such as sulfur dioxide are removed while refining the gas.

On the 16th, two absorption towers, which are part of the carbon capture facilities for the carbon dioxide separation process, were installed at the Darwin LNG terminal in Australia.
[Photo by SK E&S]

Currently, natural gas is extracted from the Bayu-Undan gas field located offshore East Timor in Southeast Asia and brought here for liquefaction processing. Bayu-Undan will cease production by the end of this year due to gas depletion. The carbon dioxide content of Bayu-Undan gas is 6%. Starting in 2025, Barossa gas containing 18% carbon dioxide will be delivered here.

The Barossa gas field is a new natural gas field in which SK E&S, the largest private LNG operator in South Korea, has participated since the development stage. The LNG to be imported to South Korea is expected to average 1.3 million tons annually, accounting for 3% of the country's total consumption. This is the first case where a private company has participated in overseas gas field development and directly extracted and imported gas to South Korea. SK E&S has invested a total of 1.5 trillion KRW over more than ten years.

SK E&S is introducing CCS technology to this project. Natural gas extracted from the Barossa gas field will be sent to the Darwin LNG Terminal through a new 380 km pipeline. The carbon dioxide generated during LNG production there will be transported via a 500 km pipeline to the Bayu-Undan depleted gas field and permanently stored in a sandstone layer 3 km underground. This system can store 10 million tons of carbon dioxide annually. It is essentially a commercial version of the Otway International CCS Demonstration Facility in Australia.

Overview of Darwin LNG Terminal and Barossa Gas Field Project
[Image provided by SK E&S]

SK E&S holds a 37.5% stake in the Barossa gas field, making it the second-largest shareholder. Santos, Australia's second-largest energy company, holds the largest share at 50%, and the remaining 12.5% is owned by the Japanese power company JERA. Santos is also the largest shareholder of the Bayu-Undan gas field with 43.4%, followed by SK E&S (25%), Japan's INPEX (11.4%), Italy's Eni (11%), and Tokyo Timor Sea Resources (9.2%), making five global energy companies shareholders. SK E&S additionally acquired a 25% stake in the Darwin LNG Project for 400 billion KRW to secure usage rights for the liquefaction facilities at the Darwin LNG Terminal.

Richard Hinkley, Santos' Executive Director of Clean Energy and CCS Development, said, "We have captured 600,000 tons of carbon dioxide annually for over 20 years with capture facilities. In other words, carbon capture is already a proven technology." He added, "We plan to install additional capture facilities to capture 2 million tons of carbon and bury it in the Bayu-Undan depleted gas field."

The pipeline used to transport carbon from Darwin to Bayu-Undan is the same pipeline that was used to transport natural gas from Bayu-Undan to Darwin. It has been verified by a third-party technical specialist company that the pipeline can be used for more than 25 additional years. Yoo Young-chan, Santos' Korea representative, said, "The biggest advantage of the Barossa project is cost reduction by utilizing existing infrastructure."

Pipeline connected to the Bayu-Undan gas field within the Darwin LNG Terminal
[Photo by SK E&S]

However, drilling operations at the Barossa gas field have been halted since September last year due to opposition from domestic and international environmental groups and indigenous peoples. The daily loss due to the suspension of construction is 20 billion KRW. Both the first and appellate courts ruled in favor of the indigenous peoples, stating that the company did not properly conduct consultation procedures. This overturned the approval of the Barossa offshore project proposal (OPP) by the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), Australia's federal government agency overseeing gas field development, in 2018. Currently, the Barossa gas field operators are holding indigenous consultation meetings and continuing discussions. SK expects to resume construction by the end of this year.

Environmental groups are concerned about noise pollution caused by drilling operations and floating offshore structures such as Mobile Offshore Drilling Units (MODUs), as well as marine ecosystem disruption caused by artificial lighting used during drilling operations. Santos stated in the '2023 Barossa Gas Project Drilling Data Book' that "the potential impact on marine animals from vessel noise sources is limited to within 12 km and there is no significant impact at the species level." They added, "Light from the tall and large MODU spreads up to 52 km away, but marine animal breeding areas such as those for turtles are located 138 to 700 km away." They also pledged to comply with the Marine Pollution Prevention Convention (MARPOL) and minimize greenhouse gas emissions from vessels.

On the 16th, Richard Hinkley Santos, Head of Clean Energy and CCS Development, explained the CCS business plan.
[Photo by SK E&S]

While environmental groups oppose the project, the Australian government supports it. The Labor government, inaugurated in May last year, passed an amendment to the 'Safeguard Mechanism' in March this year, significantly strengthening reduction obligations for high greenhouse gas emitting facilities. Chris Bowen, Australia's Minister for Climate Change and Energy, said in a written interview, "Carbon Capture, Utilization, and Storage (CCUS) is part of the energy transition and will contribute to reducing carbon emissions in hard-to-abate industrial sectors. This is why the Australian government supports the CCUS-related industry." The Northern Territory, where Darwin is located, also views this project as a necessary intermediate step toward achieving net zero and is actively supporting it.

Agreement on carbon border crossing remains a challenge. Carbon will cross national borders when transported from the Darwin LNG Terminal in Australia to the Bayu-Undan depleted gas field in East Timor. For this, Australia and East Timor must notify the International Maritime Organization (IMO) after concluding a bilateral agreement. Jo Seung-hyun, Team Leader of SK E&S's CCS Business Development Team, said, "The related bill was introduced in the lower house in June and passed on the 3rd of this month. We expect the upper house to pass it quickly when the parliament resumes next month."

SK E&S's ultimate goal is to secure a leading position in the hydrogen market. The low-carbon LNG produced from the Barossa gas field will mostly be used as feedstock for clean hydrogen production in South Korea. SK E&S plans to produce 250,000 tons of blue hydrogen annually starting in 2026 at a blue hydrogen plant to be built near the Boryeong LNG Terminal in Chungnam Province. The carbon dioxide emitted during hydrogen production will also be captured and permanently stored in the Bayu-Undan gas field via dedicated transport vessels. Additionally, by using its own dedicated carbon dioxide transport vessels, SK E&S expects to effectively respond to long-distance maritime freight cost fluctuations such as charter fees in the future.

This content was produced with the assistance of AI translation services.