Big Spending Plans for CCS May Fall Short of What's Needed for Net Zero

U.S spending on carbon capture and storage is accelerating at quick pace, but much more is needed, particularly in midstream infrastructure, to facilitate the energy transition, industry observers said.

Texas-based carbon sequestration company?Denbury Incorporated?(NYSE:DEN) (Plano) recently said it reached agreements that could see the development of two separate carbon capture and storage (CCS) facilities in Louisiana.

The two facilities could combine for 300 million metric tons of carbon dioxide (CO2) sequestration, with injections expected as soon as 2026. For its project in St. Charles Parish, the company said it would tap into an existing CO2 pipeline network in Louisiana with a 45-mile pipeline connection.

"The potential extension of our pipeline system towards New Orleans would provide significant capacity and flexibility to the Denbury CO2 pipeline network," said Nik Wood, Denbury's senior vice president for carbon capture, utilization and storage (CCUS). Industrial Info is tracking four Denbury projects, worth $300 million. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can?click here?for a list of detailed project reports.

Shaheen Chohan, vice president of global analytics at Industrial Info, said at the firm's mid-year conference that heavy investments are moving into CCS, and much of that is targeting heavy-polluting industries.

"As much as $180 billion in investments could be emerging for CCS developments in the United States and Canada," he said. "Of that, some $80 billion alone is going into the upstream oil and gas sector."

Incentives outlined in the Inflation Reduction Act may be driving some of that revenue stream in the U.S. market. Producers pursuing CCUS can get $85 per ton when permanently storing CO2 and $65 per ton when utilizing the captured carbon for enhanced oil recovery (EOR).

Canada is already something of a global leader in using CCS in conjunction with oil production. The Alberta Carbon Trunk Line is capturing CO2 from fertilizer and oil-sand plants and sending it on to mature oil basins in the province for EOR. Within five years, the provincial government expects the project to remove the equivalent emissions from 339,000 vehicles each year.

Moving carbon for utilization requires midstream infrastructure and Industrial Info finds the U.S. is leading its northern neighbor in terms of expecting capital investments. In January, Industrial Info expected $5.7 billion spending through 2024 in the U.S. market, but by June, that forecast increased to nearly $6.5 billion.

"Currently, 3,700 miles of new CO2 pipeline infrastructure is in active development to transport CO2 to 21 Class VI well locations in permitting," said Gordon Gorrie, vice president of oil and gas research at Industrial Info.

The International Energy Agency (IEA) said it expects to see 200 new CCS facilities in operation by 2030, drawing in millions of tons of CO2 each year. In Canada, the IEA finds 15 projects in various stages of development, though the U.S. market could see the CO2 capture potential increase by a factor of five from the estimated 80 facilities that are expected to start operations by 2030.

While the pace may seem impressive, the IEA said it is concerned because only a dozen or so commercial projects have reached a final investment decision. Industrial Info, meanwhile, finds there might not be enough midstream capacity to meet various decarbonization goals and the $180 billion or so in planned investments may fall short of what's necessary.

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