Equinor (EQNR) Secures First CO2 Storage Permit in Denmark

Zacks Equity Research
·4-min read

Equinor ASA EQNR has secured its first carbon capture and storage (CCS) exploration permit in Denmark. The Norwegian energy giant, in partnership with Orsted and Nordsofonden, will lead the project to explore and potentially develop an onshore CO2 storage facility in North West Zealand.

Project Overview and Potential

The newly named CO2 Storage Kalundborg project is set to explore a reservoir approximately 1,400 meters below ground, with the potential to store up to 12 million tons of CO2 per year. This development aligns with the global efforts to mitigate climate change by reducing industrial carbon emissions.

Grete Tveit, Equinor's senior vice president for Low Carbon Solutions, expressed enthusiasm about receiving the exploration permit with Orsted and Nordsofonden. She highlighted the crucial role of developing large-scale CO2 solutions to help industries reduce emissions while sustaining economic activity.

The partnership's immediate focus will be on meeting environmental requirements before commencing seismic and subsurface data collection. The exploration phase, expected to last several years, will determine if the license area is suitable for safe and permanent CO2 storage. Approval from Danish authorities will be necessary before proceeding to the operational stage, expected to begin by the end of this decade.

Partnership Dynamics and Strategic Location

Equinor, as the operator, holds a 60% share in the project, with Orsted and Nordsofonden holding 20% each. This collaboration leverages Equinor's extensive experience in CO2 storage, notably from nearly 30 years of operations on the Norwegian Continental Shelf, to ensure the project's success.

The awarded license is strategically located near Orsted's established shipping and storage terminal, Orsted Kalundborg CO2 Hub. Orsted is already constructing a CO2 capture facility at the Asnaes Power Plant, set to be operational by early 2026. This facility is expected to capture 430,000 tons of biogenic CO2 annually, which will be transported to the Northern Lights storage facility in Norway. The proximity to Orsted’s infrastructure is expected to facilitate an efficient CO2 capture, transport and storage value chain.

Ole Thomsen, senior vice president and head of Orsted’s Bioenergy business, expressed optimism about the collaboration, noting that it represents a natural progression in developing the Orsted Kalundborg CO2 Hub. He emphasized the synergy between Orsted's existing infrastructure and Equinor's operational expertise.

Economic Prospects

Equinor anticipates a 4-8% real base project return in the early phases of its CO2 storage business, with further value uplift potential as commercial markets develop. The project is aimed at contributing to Equinor's broader ambition of achieving 30-50 million tons of CO2 transport and storage capacity per year by 2035.

This exploration permit marks a crucial step for Equinor and its partners in contributing to Denmark's and the global community's efforts to combat climate change through innovative and scalable CO2 storage solutions.

Zacks Rank & Key Picks

Equinor currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like Archrock Inc. AROC, Sunoco LP SUN, and SM Energy Company SM. While Archrock and Sunoco sport a Zacks Rank #1 (Strong Buy) each, SM Energy carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

The Zacks Consensus Estimate for AROC’s 2024 EPS is pegged at $1.07. The company has a Zacks Style Score of A for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.

Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes over 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value Score of A.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

SM Energy is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments should create long-term value for shareholders.

The Zacks Consensus Estimate for SM’s 2024 EPS is pegged at $6.63. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2024 in the past 30 days.

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