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ACM: Shell and TotalEnergies can collaborate in the storage of CO2 in empty North Sea gas fields

Following an assessment of their plans, the Netherlands Authority for Consumers and Markets (ACM) has decided to allow competitors Shell and TotalEnergies to collaborate in the storage of CO2 in empty natural-gas fields in the North Sea. By transporting CO2 through pipes and storing it in old gas fields, this greenhouse gas will not be released into the atmosphere. This initiative thus helps realize the climate objectives. As cooperation is necessary for getting this initiative off the ground and for realizing the climate benefits, the slight restriction of competition between Shell and TotalEnergies is not that harmful. The benefits for customers of both companies and for society as a whole exceed the negative effects of that restriction.

What is this case about?

Shell and TotalEnergies wish to store CO2 in empty North Sea gas fields on a large scale. This is part of the Aramis project, in which the government, Gasunie and Energie Beheer Nederland work together with Shell and TotalEnergies in order to build a high-capacity trunkline that connects to empty gas fields, among other activities.

Carbon capture and storage helps reduce CO2 emissions of businesses located in the Netherlands that, at the moment, still have few alternatives. Major investments are needed since it concerns a high-capacity trunkline and a new, innovative method. In order to get the project off the ground, Shell and TotalEnergies need to offer the CO2 storage together, and therefore jointly set the price with an eye to putting the first ±20% of the trunkline’s capacity into operation. For the remaining 80%, no collective agreements will be made.

Shell and TotalEnergies compete with one another. Collaborations between two competitors may negatively affect price, quality, and innovation, but that effect can be offset by certain benefits that a collaboration has for the customers of those businesses and for society as a whole. That is why the parties have asked ACM for informal guidance about whether their collaboration is compatible with the competition rules that offer an exemption to the prohibition to restrict competition if, in short, the benefits outweigh the costs.

What is ACM’s opinion?

ACM sees that a new market is created through this project: the market for CO2 storage in empty gas fields. The launch phase where Shell and TotalEnergies collectively offer their storage facilities is followed by a large-scale and commercial phase, in the form of the Aramis project, where other companies that operate empty gas fields can also connect to the trunkline. Companies will have to invest considerably in order to be able to do so.

ACM has assessed whether the initiative falls under the exemptions that the competition rules offer. In that assessment, ACM examined whether these two companies would have been able to reach the same result individually. ACM specifically looked at the benefits for customers of these companies, and at the contribution that this project makes to the reduction of CO2 emissions, and, by extension, to the realization of the Paris climate agreement. ACM has come to the conclusion that this collaboration is necessary for making this project a success. The benefits for customers and society as a whole exceed the costs of the restriction of competition. In that context, it is important that competition is not restricted for the remaining 80% of transport and storage capacity. That is why, according to ACM, these companies are allowed, under both Dutch and European competition rules, to restrict their mutual competition when selling the first 20% of the transport and storage of CO2 in their empty gas fields.

ACM and sustainability

In its assessment, ACM has applied the second draft version of its ‘Guidelines on Sustainability Agreements’, among other documents. These guidelines stipulate, among other things, that, if a project helps realize the objectives of the Paris climate agreement, the benefits for society as a whole can be taken into account if an exemption is made to the competition rules. In that way, collaborations between businesses can help realize the climate objectives.

ACM wishes to create the right conditions for promoting sustainability and the energy transition. ACM takes away impediments, and offers latitude where possible, not only for making sustainability agreements, but also, for example, by giving system operators permission to experiment with alternative energy sources. In addition, ACM warns businesses if they put false sustainability claims on their products.

ACM offers certainty regarding the question in what situations competitors can work together in order to realize sustainability objectives. Do you still have any questions or do you and/or your advisor seek more information about the draft version of the guidelines on sustainability agreements? If so, please send an email to info [at] acm [punt] nl.

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