* CCS counted on for cutting gas producers' emissions
* Depleted reservoirs offer growth opportunity
* Asian LNG buyers with no CO2 storage may tap Australia
By Sonali Paul
BRISBANE, May 18 (Reuters) - Australian oil and gas producers are eyeing future profits from carbon capture and storage (CCS) as the industry globally races to meet net zero emissions targets, even as the world's largest CCS project, in Australia, struggles to hit capacity.
Chevron Corp's A$3 billion ($2 billion) facility linked to the Gorgon liquefied natural gas (LNG) off Western Australia has so far failed to meet its target, still burying only half as much carbon dioxide (CO2) as expected three years after its startup.
But global majors and independents at the Australian petroleum industry's annual gathering this week said CCS is the only proven technology for reducing emissions at the scale needed, while maintaining reliable and affordable supply.
As Chevron and its partners Exxon Mobil Corp and Shell work to get Gorgon CCS up to scale, others are looking to the technology as an opportunity to not just offset their own emissions, but to make money.
Santos Ltd is investing $165 million developing Australia's second major CCS project, Moomba, using depleted outback gas reservoirs to store 1.7 million tonnes a year of CO2.
It also wants to turn the Bayu-Undan oil and gas field in the Timor Sea into a CCS hub, and has booked 100 million tonnes of carbon storage resources in South Australia.
"I think this is really exciting, because I believe that CO2 is about to become the fastest growing commodity in the world," Santos Chief Executive Kevin Gallagher told the Australian Petroleum Production and Exploration Association (APPEA) conference.
The industry wants to store emissions from other industries in Australia and for LNG customers in Japan and South Korea, where there are no carbon sequestration resources or vast tracts of land for nature-based carbon offsets.
Japan's Inpex Corp is considering using the proposed Bayu-Undan hub for CO2 from its Ichthys LNG plant in Darwin and potentially developing its own CCS project in waters 270 km (170 miles) northwest of Darwin, Inpex vice president Bill Townsend told Reuters.
"Not decarbonising is an existential threat to our industry," he said.
The International Energy Agency's net zero scenario says 7.6 billion tonnes of carbon emissions would need to be stored by 2050, or 200 times more than is being stored in 30 CCS projects around the world today.
"Just as our customers in Asia have looked to Australia for energy security over the last half century, they are now looking to us to help them reduce their emissions as they work towards net zero targets," APPEA Chair Ian Davies said.
Still, the technology faces geological, regulatory and commercial barriers, Wood Mackenzie analysts said.
Understanding how a CO2 plume moves through an aquifer or reservoir is essential for each project, requiring a huge amount of geological work, said Wood Mackenzie analyst Angus Rodger.
The Australian government last year allowed CCS projects to generate Australian Carbon Credit Units, helping to make projects commercially viable.
But Rodger cautioned a global rush for new developments could backfire, as costs will rocket as companies compete for skills and resources.
"All these projects are happening at the same time - they want to be up and running by 2030. That can't happen," he said.
($1 = 1.4211 Australian dollars) (Reporting by Sonali Paul; editing by Richard Pullin)