The role of risk in CO2 shipping’s commercial future

Carbon capture and storage has momentum behind it that would have seemed improbable just a few years ago. Government funding programmes are active, project pipelines are growing, and the engineering community has, by and large, demonstrated that CO₂ shipping is technically feasible. Yet a striking number of projects remain marooned between concept and final investment decision. Jon Barnes, operations director at Pace CCS, has a clear diagnosis of why.

“The central challenge now is risk allocation. What risks are truly insurable, which are currently unfinanceable, and are we allocating them to the right parties to close those gaps?” He emphasised that these are solvable issues, but they require coordinated action across government, finance and industry.

The bankability puzzle

Mr Barnes is moderating a roundtable at the conference titled ‘Despite strong momentum behind CCS, many CO2 shipping projects remain stuck between concept and FID,’ and he is direct about where the blockage lies. In the UK, where the Government’s NPT Pathfinder process and ongoing DESNZ consultations have raised the profile of CCS financing, the core issue is not the availability of public funding in principle but the question of who takes ownership of specific risks, particularly during operational phases.

The lenders and investors who would need to finance these projects are not absent from the conversation; they are present but unconvinced. “There are obviously still risks there,” Mr Barnes noted, “otherwise these projects would be going ahead a lot quicker.” The question is whether government needs to move further towards industry, or whether industry must reach further towards government and, in practice, both are likely required, alongside innovation from insurance and project finance markets. Encouragingly, he noted that the level of engagement from financiers is increasing, a sign that solutions are beginning to take shape.

The sequencing dilemma: who moves first?

Layered on top of the financing challenge is a structural coordination problem that runs the length of the CCS value chain. Emitters, storage operators, ports, terminals and shipping companies each face a version of the same dilemma: committing before adjacent parts of the chain have done so is commercially exposed, yet waiting for others produces collective inaction. Breaking this cycle is widely seen as one of the key opportunities for early projects to unlock momentum across the sector.

Mr Barnes frames the port and logistics hub question particularly sharply. Does a port commit to CO2 handling infrastructure on the expectation that shippers and storage operators will follow (a build-it-and-they-will-come logic), or does it require binding commitments before sanctioning capital? The same tension applies at the emitter end, where offtake certainty is often a prerequisite for project finance but depends in turn on the readiness of downstream infrastructure.

“I think everyone is sat waiting for someone else to do something,” he said. “The interesting question is how we have the discussions that actually move it forward together.” He added that these conversations are now happening with increasing urgency.

Contract models: the search for workable frameworks

The question of commercial structure is intimately tied to both the financing and sequencing challenges. There is no settled model for CO₂ shipping, and opinion is divided on whether the sector should seek standardised contract frameworks or accept project-by-project, bespoke arrangements.

Mr Barnes looks to the LNG industry for relevant precedent, albeit an imperfect one. The long-term charters and take-or-pay structures that underpinned LNG’s commercialisation were hard-won over years of negotiation and required sustained government involvement in several key markets. Whether the same template transfers cleanly to CO2, where cargo volumes, purity specifications and infrastructure readiness vary considerably, remains an open question. Some operators favour long-term charters for specific projects; others see merit in a more flexible model. “It’s really interesting to see that dilemma,” he said, “and how different people approach it.”

Whichever structure prevails, government underwriting of demand or utilisation guarantees is likely to be decisive in the early years. The appetite of private entities to bridge remaining gaps without some form of public backstop is, by most accounts, limited.

Vessel investment timing and shipyard capacity

The investment decision for CO2 carriers has its own specific dynamics. Shipowners considering orders face questions around charter duration, guaranteed utilisation rates and the technical specifications, particularly operating pressure and temperature regime, that determine both vessel design and compatibility with shore-side infrastructure.

Mr Barnes is direct on shipyard capacity and project timelines. “I’ve seen a number of projects that assume they can be operational by 2030,” he said, “and if they wanted to do that, they should have ordered their ship two years ago.” Korean yards, which dominate the orderbook for specialised gas carriers, are already constrained for certain pressure configurations, and the knock-on effect extends to all associated port and terminal infrastructure. The lead times are not discretionary. However, this also highlights the opportunity for early movers to secure capacity and strengthen their strategic position.

There is also a broader question about market leadership. Mr Barnes questioned whether shipowners should act as demand catalysts, ordering ahead of confirmed charters to demonstrate commercial confidence and accelerate development, or whether that is an unrealistic expectation, absent stronger contractual or regulatory foundations?

Government versus private risk: the cross-border dimension

Among the risks that continue to give lenders pause, cross-border regulatory exposure ranks highly. The London Protocol’s restrictions on the transboundary export of CO2 for sub-seabed storage have been subject to ongoing international negotiation, and while progress has been made, the framework is not yet fully resolved. Within Europe, bilateral agreements between the UK and EU member states have advanced specific projects, but the broader legal architecture remains incomplete. Nevertheless, the steady pace of bilateral agreements suggests growing political recognition of the need to enable cross-border transportation.

Outside Europe, the picture is considerably more complex. CCS projects in Asia, particularly those involving long-distance CO2 shipping from industrial clusters to offshore storage, frequently assume that cross-border regulatory frameworks will be in place by the time they reach FID. Whether governments in the region are taking sufficiently proactive steps to validate that assumption is, Mr Barnes suggests, a legitimate concern. “A lot of the projects over there are assuming these issues will be resolved,” he said, “but are they actually making the proactive movements?”

For projects dependent on cross-border arrangements, governmental risk becomes an additional layer that private capital is poorly positioned to absorb unaided. Which governments are prepared to provide commitments and what conditions will materially shape the early geography of the industry.

Pressure, purity and the cost of getting it wrong

Mr Barnes is also joining a panel at the conference examining the sector’s most technically contentious argument: whether the industry should standardise around low-pressure systems (6 to 7 bar) or medium-pressure systems (15 to 20 bar), and how pure CO2 needs to be for shared hubs to function safely and economically.

His position on standardisation is measured. “Committing to just one standardisation at this stage still feels a bit early,” he said, noting that premature convergence carries its own risks. Attempts to design vessels and infrastructure compatible with both pressure regimes simultaneously tend to produce systems that are, as he put it, “very expensive; they take the worst of all the systems.”

On CO2 purity, Mr Barnes is clear about where the cost burden falls in the current chain structure: “The emitter is the one that bears the biggest brunt.” Anything that can reduce cost at the emitter end is beneficial to the full-chain economics, even if it increases unit costs elsewhere in the system. But the optimum varies significantly by geography and project configuration. In Europe, with shorter distances and smaller vessels, the trade-offs look different than in Asia, where distance and volume make density and low-pressure economics more attractive.

Handling impurities, including NOx, SOx and water content, is a particularly live topic, with several projects currently conducting laboratory testing to understand how impurities behave under cross-contamination scenarios and where they migrate within the system. “None of these challenges are insurmountable,” Mr Barnes said, “but it is very much still a case-by-case basis.” He stressed that the level of technical collaboration underway gives confidence that workable standards will emerge.

What the first 10 projects must get right

Mr Barnes is clear-eyed about the stakes attached to the first wave of operational CO2 shipping projects. In a nascent industry, early failures carry reputational and confidence costs that reverberate across the entire sector. “If one person fails, we all fail,” he said. “If one succeeds, then we’ve all got the opportunity to succeed.”

Northern Lights, the Equinor, Shell and TotalEnergies joint venture that is among the first commercial-scale CCS projects to reach operation, is widely regarded as a bellwether. What it and others in the first cohort demonstrate, in terms of technical performance, commercial model and regulatory compliance, will set the parameters for how risk is assessed and priced in subsequent projects.

The risk profile of CO2shipping is not static. As operational experience accumulates, as technology matures and as regulatory frameworks solidify, the balance of risk between government and private sector is expected to shift.  The critical question, Mr Barnes suggests, is whether the early movers can demonstrate enough, quickly enough, to make that transition happen at a pace consistent with net-zero timelines. If they do, CO2 shipping will play a pivotal role in enabling large-scale CCS deployment.

He will explore that question and the others outlined above at the CO2 Shipping and Terminals Conference at The Tower Hotel, London, on 16 June 2026. His roundtable, ‘Stuck between concept and FID,’ runs from 15:05 to 15:45, and the standardisation panel, ‘Making Multi-User Hubs Work,’ takes place from 12:30 to 13:05, alongside William Bjorn, VP commercial (Energy Transition) at Capital Gas Ship Management Corp., and Constantinos Chaelis, Global Gas Segment director at Lloyd’s Register.