Scotland’s key carbon capture project faces collapse in new blow to Miliband

Scotland’s flagship carbon capture project is at risk of collapse after its main backer announced plans to exit the scheme.

The Acorn project, based in Peterhead, Aberdeenshire, is being built to capture CO2 from heavy industry and then bury it under the North Sea.

But the driving force behind the project, energy group Storegga, said on Thursday it planned to sell its stake in the scheme, delivering a major blow to the net zero push spearheaded by Ed Miliband, the Energy Secretary.

The project had already secured significant political backing after Rachel Reeves,the Chancellor, offered the scheme £200m in development funding in her June spending review.

Sir Keir Starmer, the Prime Minister, Ms Reeves and Mr Miliband have all visited Peterhead’s St Fergus gas terminal, where Acorn is based, to champion Labour’s green policies.

Storegga said it would sell its Acorn stake following a “strategic review of its business, capital requirements and future structure”.

It said: “As part of this, we are progressing a structured sales process for our portfolio of assets, including the sale of our interest in the Acorn CCS project.

“With Acorn approaching a more capital-intensive phase, and with both the UK and Scottish Governments signalling the importance of its timely delivery, we have concluded that a new long-term owner would be better placed to take the project forward.”

Storegga is owned by group of international investors, including Singapore’s sovereign wealth fund GIC, Macquarie, Adnoc, M&G, Mitsui and Snam.

Acorn is also backed by Shell UK and Harbour Energy – both of which have recently decided to minimise their involvement in UK waters.

Shell this week hived off almost all its UK offshore assets into a new company, Adura, while Harbour announced 100 more job cuts taking the total to 700 in three years.

Storegga’s move also follows Ms Reeves’s refusal in last week’s Budget to reduce the so-called windfall tax, which has raised levies on UK oil and gas profits to 78pc.

The future involvement of Shell and Harbour in the Acorn plan remains uncertain.

Shell said it was awaiting reaction including potential purchasers – if any – for Storegga’s stake. Earlier this week it moved almost all its UK offshore assets into a new company, Adura, but the Acorn project is still part of Shell.

Harbour is also a key partner in the Viking carbon capture project on the Humber as well as Acorn.

It has previously warned it may quit both schemes because the windfall tax has forced it to make such deep cuts in its workforce. Asked if Harbour remained committed to Acorn a company spokesman refused to comment.

The Acorn project’s aim is to build infrastructure to collect CO2 from Scotland’s remaining heavy industry, including power stations and chemical works.

Initially this would involve collecting CO2 from the St Fergus plant which is a gas terminal processing up to half of the UK’s offshore production of gas.

More would come from the Ineos chemical works at Grangemouth, with pipes eventually connecting to more heavy industry across Scotland’s central belt.

The waste gas would then be compressed into a liquid and pumped offshore for burial in rock formations deep beneath the seabed.

However, critics have warned that there may not be enough CO2 needing disposal to justify the investments needed for Acorn to start operations.

Stephen Flynn, the SNP’s Westminster leader, said Mr Miliband should keep Acorn alive by forcing his GB Energy quango to invest in the scheme.

He said: “This is a critical moment for jobs and the economy. We have fought for years for funding for this project because of its local, national and international significance and just as the Labour Party has instructed GB Energy to stick solar panels on school roofs in England, so too must they now instruct it to offer a backstop to prevent this project from collapsing.”

Sir Ian Wood, the Scottish billionaire who made a fortune from the North Sea while running the John Wood Group, called on the UK and Scottish governments to save the project.

“The Acorn project is a cornerstone of Scotland’s energy transition ... It is now incumbent on the PM to act decisively and end the existing windfall tax – especially as [falling oil prices] mean there is no windfall.”

A spokesman for the UK Government said: “This commercial decision by Storegga Ltd has no bearing on the commercial viability of the Acorn CCS project.

“We remain committed to the Acorn CCS project and are working closely with the Scottish Government and industry to secure a buyer and realise the site’s potential to create thousands of jobs and drive industrial renewal in Scotland.”