Final report for One North East And NEPIC 21/12/10 - The Carbon ...

The case for a Tees CCS networkFinal Reportunmanageable and therefore unacceptable to the private sector. In doing so it is essentialthat public sector actions taken to reduce project risks to acceptable levels are balancedwith potential rewards - whether these are project returns for shareholders and privateinvestors or value to taxpayers. The optimal balance between public and private sectorroles is a key factor determining the structure and ownership model of the project and isexplored further in the next section of this report (Section 6).Despite the organisational challenges involved in developing the „contractual web‟ requiredto de-risk the network to a point where sensible investment decision-making can occur, itis important to note that the creation of multi-disciplinary teams and the coordination ofmultiple parties with appropriate contractual arrangements between them is not new tolarge-scale infrastructure, and in particular to Teesside. For example, the Tees Valley hasa long history of shared infrastructure and common carriage of various commoditiesthrough pipelines, and such activities currently take place in the area (e.g. for ethylene,hydrogen or steam). The „complexity of the web‟ is therefore not the main challenge togetting the project off the ground; where there is a commercial business case andsufficient financial backing, large infrastructure projects can progress through thenecessary contractual stages, based on e.g. initial memoranda of understanding andletters of intent ahead of more detailed and binding legal agreements (including supplycontracts). Instead, what is new is the demonstration of a commercial scale CCS network,and therefore whether the policy framework and economic fundamentals of the project aresufficient to attract finance.47