CCUS Opportunities & Implications for AIEN

This is an excerpt of the White Paper produced by the AIEN CCUS Taskforce, which sets out the key commercial, policy and regulatory features which influence the investment case governing CCUS, as well as a high level discussion on risks and risk allocation along the CCUS value chain. Download the full white paper here.

Introduction

In the 1700’s Voltaire famously coined the phrase “Perfect is the enemy of the Good”, which reflects the sentiments that go back centuries, such as "Better a diamond with a flaw than a pebble without one."? Whatever the provenance of the saying, carbon capture, use and storage, or CCUS, has sparked debate, most recently at the COP 28 gathering in the UAE, about whether carbon capture and storage technology, in association with fossil fuel development, is an appropriate means to achieving “net zero”.

While carbon removal, or “net negative” technologies that rely on CCUS, such as Direct Air Capture (DAC) are also under development, at the moment these are at an earlier stage in their evolution, and at much higher cost compared to the abatement of CO2 allied to fossil fuel usage.? However, they remain a potentially important future development as costs reduce and carbon pricing mechanisms evolve.

The Association of International Energy Negotiators, AIEN, is no stranger to the trade offs and compromises that have to be made in seeking ways to provide the global economy with energy sources that address today’s trilemma of sustainability, security and affordability.? As the nascent CCUS industry emerges from the world of academic research and pilot scale testing and embarks on a process of growth and industrialization, AIEN can apply its decades long experience in commercialization of energy concepts to good effect.

Some of the most notable advantages of CCUS as a carbon mitigation technology rely on the century or more of developments in oil and gas.? Expertise in engineering and technology, understanding of complex geological structures and well completion techniques, safe and reliable operation of complex and potentially hazardous processes, and cost-effective supply chain management are all essential elements of successful CCUS deployment.?

Furthermore, as the world counts the cost of zero carbon energy solutions, and the implications for developing economies, affordability plays a significant part in determining a suitable compromise between expensive but fully sustainable energy sources, and those that are cost effective and deliverable with today’s technology.? CCUS is one of the few avenues along the path to net zero that can claim to be both cost effective, at least for certain industrial and power generation applications, and without significant technology risk.

Aside from the more philosophical arguments for and against CCUS as a climate solution, its significance in CO2 management in the medium term appears assured.? In fact, most of the models cited in the Intergovernmental Panel on Climate Change’s Fifth Assessment Report required CCUS for the goal of staying within 2 degrees Celsius of warming from pre-industrial days.? As time progresses and developments on carbon free energy alternatives appears to be slower than planned, the role of CCUS as a mitigation tool appears likely to grow.

In fact, with 32 Mtpa CO2 in construction, 280 Mtpa CO2 in development and a total project pipeline capacity of 361 Mtpa CO2 (November 2023), it is clear that pragmatism and need are driving the CCUS industry forward.? There is an immediate need for commercial and contractual mechanisms, regulatory and policy approaches and mechanisms for financing and enabling.? This is where the AIEN’s decades of experience can pay dividends for this emerging industry.

What is CCUS?

Carbon Capture, Use and Storage (CCUS) covers a host of technologies which together create a pathway to capture CO2, for example from an industrial process or power generation plant, and either use it in a way that keeps the CO2 from being emitted into the atmosphere, or enables it to be sequestered in geological formations deep underground, where it will be permanently stored.

While uses of CO2 in the food industry and other non-energy sectors are growing, the main use of captured CO2 to date is for enhanced oil recovery (EOR).? This is where the CO2 is used as a way to flood an oil-bearing reservoir both to pressurize and improve flow characteristics and has been an established way to improve the economics of oil production for many decades.? While the vast majority of the CO2 remains trapped underground, CO2 for EOR technology has been criticized due to the oil production increases that it can facilitate, and the carbon emissions associated with them.? The counter argument is that geological permanent sequestration of CO2, typically in a deep saline aquifer or in a depleted gas reservoir, provides for carbon removal, thereby reducing the carbon intensity of energy production using fossil fuels such as coal, oil or natural gas.

Permanent sequestration of CO2 also plays a role in other technologies unrelated to fossil fuels, such as those involving Direct Air Capture, where air is processed using complex solvents and heat exchangers such that CO2 is removed and then injected into storage.? Another emerging technology which, like DAC, is a “carbon negative” solution that removes the amount of CO2 in the atmosphere, as opposed to simply neutralizing it, is the use of biofuels for power generation.? Bioenergy with Carbon Capture and Storage, or BECCS, is similar to the use of CCUS alongside coal or gas fired power generation, but since the fuel is carbon neutral, the overall effect is one of net carbon removal.

In addition to carbon capture alongside a conventional power generation cycle, such as the use of steam or gas turbines with carbon removal process plants treating the exhaust gases, there are other ways to decarbonize the use of natural gas.? These include pre-combustion CO2 separation, whereby an air separation plant carries out CO2 removal, and oxygen is combined with natural gas to produce pure water and high-pressure CO2 which can be more easily and cost effectively stored.? Furthermore, gas reforming plants, such as Steam Methane Reforming (SMR) or Auto-Thermal Reforming (ATR) can be used to manufacture hydrogen, which can further be processed into ammonia for easier long-distance transportation.

Keep reading to see additional sections:

• Why CCUS?
• CCUS Funding Models
• CCUS Business Model
• The CCUS Value Chain
• CO2 Value Chain – Alternative Concepts (including Point to Point; National CO2 T&S Cluster (Government Sponsor); Open Market CO2 T&S Utility)
• Risks And Opportunities Along the CCUS Value Chain
• Systematic Project Risks and Opportunities Allocation (Example)

Download the full white paper here.

Acknowledgements This was a collaborative effort by members of the AIEN Taskforce on CCUS, established to review industry needs, and guide the Taskforce to a recommendation of contractual term development under the ongoing AIEN Model Contract brief. The team primarily responsible for this paper includes:

Nick Fulford Senior Director, Energy Transition at Gaffney Cline, and also Chair of the AIEN Taskforce, with major contributions from Daein Cha Managing Director deepC Store Pty Ltd, Greg Hammond Partner, Pillsbury Winthrop Shaw Pittman LLP, Raeid Jewad Principal Consultant, Gaffney Cline, and Stephen Highfield Principal Commercial Negotiator, Neptune Energy with additional help and support from Gabrielle Finger Commercial Advisor, Chevron New Energies, CCUS and also VP of New Energies at the AIEN.

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