Sinopec plans to develop capacity to produce blue hydrogen from natural gas, combined with CCUS, as well as green hydrogen, in collaboration with China's renewable energy developers.

Blue hydrogen has its carbon emissions captured and stored, or reused, while green hydrogen is generated by renewable energy sources without producing carbon emissions.

CNPC, the country's largest oil and gas producer as well as supplier, has also been working on capturing CO2 from industrial sources such as plants producing gas-fired power, petrochemicals, coal-based chemicals or iron and steel.

The company has built a plant in Jilin province, with capacity to separate and capture 200,000 tons per annum of CO2.

One of the reasons for the extensive layout of the country's carbon storage sector is that China has significant geological potential for storing carbon－an estimated 2,400 gigatons in storage capacity－second only to the United States, said a report by Shell plc.

China currently has more than 40 CCUS pilot projects with a total capacity of 3 million tons. Many of these projects are small developments linked to enhanced oil recovery. This will need to scale up significantly over the next four decades, it said.

In a net-zero emissions energy system, a little more than 1.3 Gt of carbon dioxide a year will need to be captured and permanently stored by 2060. This means CCUS capacity will need to increase more than 400-fold in the next four decades, said Shell plc in the report.

While this is technically possible as lots of CCUS technologies in China are close to or have reached commercialization, the main challenge lies in creating conditions to support substantial investment in large-scale CCUS, particularly as a solution to industrial decarbonization, it said.

Luo Zuoxian, head of intelligence and research at the Sinopec Economics and Development Research Institute, said the increase in focus on reducing CO2 emissions is driving the CCUS market.

"CCUS offers a way to reduce emissions from sectors that are hard to decarbonize, including iron and steel, chemicals and petrochemicals, and the key to tackling the problem lies in the technological breakthroughs of CCS and CCUS," Luo said.

"Countries across the globe are committed to becoming carbon neutral by as early as 2050 while oil firms, including Shell and Total, have pledged to invest hundreds of millions of US dollars in carbon dioxide storage projects to decrease CO2 emissions."

Luo added that using captured CO2 to enhance oil recovery or to create synthetic fuels and chemicals can play an important role in the transition to net zero, which may also help displace fossil fuels in the short term and provide an additional revenue stream to support the commercialization of carbon capture.

However, Luo said high costs and technologies have long been a hurdle for further expansion of CCUS projects at home and abroad.

"The high cost and relatively less mature technology still hold many projects from being put into operation. For example, major energy players have been working on the offshore carbon storage project for years, but we are still in the middle of exploring and experimenting with no solid project having been put into operation so far due to prohibitive costs," he said.

According to the Shell report, public policy action is also needed now to achieve this scale of CCUS by 2060. Action includes a robust and rising carbon pricing mechanism to make CCUS commercially viable in the long term, it said.

In addition, rewarding CCUS emission reductions will drive greater investment in the technology, and policy action will need to include support for commercializing capture technology for direct air capture and for various end uses in the short term, particularly in power generation and industry.

Policy frameworks that reduce investment risks and capital costs will attract private capital in the near-term. Other measures, such as clarifying long-term liability requirements for permanent carbon storage, will facilitate greater market adoption, it said.