Harry Houdini, the famous 19th century illusionist, created a sensation when he made an elephant disappear. The Government of the Netherlands in 2017 continued this tradition. It promised to make one-third of CO2 emission reductions, scheduled for 2030, disappear by storing them offshore.
Houdini’s illusion caught the fancy of the world. The illusion of the Netherlands is that the promise of carbon capture and storage of CO2 is still not fully comprehended, understood or simply forgotten. Then, thanks to offshore carbon storage, the Netherlands was to become a leader of the green transition.
There is no doubt that the previous government was overzealous in promising how offshore carbon capture and storage (CCS) could benefit the energy transition. The new Dutch coalition, scheduled to be officially installed early 2022, has been rather mute about offshore CCS and the role it will play in any energy transition.
To date the only CCS project in the Netherlands is the Porthos Project, a joint venture by a consortium of companies which will capture a combined 2.5Million tonnes CO2 annually. A final investment decision is anticipated in the spring of this year.
Can CCS offer the Energy Transition a silver bullet? For Africa? This is highly relevant given the importance that is being placed on CCS by various oil and gas companies.
The basic aspects and experiences to date about CCS have been vividly described in a study authored by Clark Butler, on behalf of IEEFA(Institute for Energy Economics and Financial Analysis, July 2020). CCS basically encompasses the following steps.
- Capture: The separation of CO2 from other gases produced at large industrial process facilities such as coal and natural-gas-fired power plants, steel mills, cement plants and refineries.
- Transport: Once separated, the CO2 is compressed and transported via pipelines, trucks, ships or other methods to a suitable site for geological storage.
- Storage: CO2 is injected into deep underground rock formations, usually at depths of one kilometre or more, depleted oil or gas fields, deep saline aquifer formations or other forms of underground caverns, though it could apply to any form of storage.
CCS was first employed to supply CO2 for enhanced oil recovery (EOR) operations for several natural-gas processing plants in the Val Verde area of Texas in the early 1970s.
Butler’s conclusions about CCS are uncompromising:
- CCS is prohibitively expensive compared to other greenhouse gas emissions mitigation options, such as renewable energy and energy storage technologies.
- CCS offers no financial return for investors.
- CCS has a dubious track-record. Even the Global CCS Institute – a booster organisation for CCS – acknowledges in its 2019 Global Status of CCS report that CCS is at best a minor contributor to decarbonisation, addressing up to 9% of greenhouse gas (GHG) emissions by 2050.
- There isn’t one example of a CCS project anywhere in the world that offers a financial justification for investing in CCS.
- In the absence of a carbon price, CCS will never provide a return on investment.
What have been the experiences to date by the majors? Clark maintains that
“European oil companies—in particular, Equinor, Shell and Total—are investing in CCS, notwithstanding the lack of return, because it is an important part of their decarbonisation narrative and supports their aims to be seen as ‘responsible’ energy companies”.
Shell is involved in two CCS projects: Quest in Alberta, Canada, funded by the Alberta and Federal Canadian governments and operated by Shell; and Gorgon in Western Australia, a project in which the project principals (Shell and Chevron) are financially motivated not to operate the CCS plant.
The Quest project near Edmonton, Alberta captures and stores CO2 emitted at a large oil sands upgrader complex. The cost is $1Billion. Although Shell as operator gains a lot of positive publicity for running this operation which adds to its “green credentials”, in actual fact 65% of the funding came from the Government of Alberta’s Carbon Capture and Storage Fund and the Government of Canada’s Clean Energy Fund. Had government funding not been provided, this project would never have happened.
“The Gorgon plant has failed to meet its targets every year, notwithstanding a $60Million subsidy from the Western Australian government. Shell’s actual outlay in CCS over the years remains to be seen. Its overall investment in renewables is well behind its stated targets. Any progress Shell demonstrates in removing carbon from the atmosphere using CCS (1Million tonnes per annum at Quest and up to 4Million tonnes at Gorgon) should be seen in light of Shell’s total emissions of 656Million tonnes per annum .
The company “has also promised massive investment in CCS to remove up to 5 million tonnes of CO2 per annum (8% of scope 1 and 2 GHG emissions and 1% of scope 1/2/3 emissions).” The company” is an investor in Equinor’s Sleipner CO2 storage as well as, with Shell and Equinor, the larger Nordic project under development, Northern Lights.”
“Equinor, the Norwegian state oil and gas producer, has been investing in CCS since 1996, mainly because Norway has had a carbon price since 1991. Its Sleipner CO2 storage and Snøhvit CO2 storage facilities have cumulatively captured and stored around 22Million tonnes of CO2. Compared to the rest of the fossil fuel industry, this is considerable achievement but this pales into insignificance when one considers that Equinor is responsible for over 330Million tonnes of CO2 emissions every year (scope 1, 2 and 3).”
“With the carbon price, there is a modest economic return on its CCS operations but the impact on emissions is immaterial in the scheme of Equinor’s contribution to global warming. By way of comparison, Equinor’s scope 3 emissions increased by 26Million tonnes per annum from 2014 to 2018.”
Some unsettling truths
According to Butler transportation and storage are key areas of concern. The CO2 must be separated, and transported to the sequestration site.
Transportation and storage are two key areas of concern. ‘Captured’ carbon must be separated, transformed and, in most cases, transported to the sequestration site. The energy used in this process and the leakages that can occur during transportation and handling can materially reduce the net impact of the CCS process.
Butler also points out that “the underground storage into which the carbon is injected is not always secure. Wells have weaknesses and gaps. Fracking causes long-term subterranean instability, and seismic activity could dislodge even the most carefully stored carbon”.
CCS storage must have a purpose other than a symbolic gesture of appearing green to the shareholders, investors and the public. Simply producing hydrocarbons and then using CCS to store CO2 so that a company can continue to produce hydrocarbons unabated has become a non-starter. Investors and shareholders are willing to give companies a pass on blue(methane) or gray(coal) hydrogen as long as it is obvious that green hydrogen is the end game.
For example, key questions still remain surrounding ExxonMobil’s $100Billion CCS project that would be built along the Houston, Texas Shipping Channel. This undoubtedly is being driven by Engine Number One, the small but very influential American investor group, seeking a new direction for the company. Is CCS the end game or is an alternative energy strategy being developed?
Then consider the dilemma of rising CO2 prices and actively supporting a global emissions trading scheme. A sign, one would say, for encouraging the CCS market. Yet the looming threat is that green hydrogen will in the coming decade destroy this potential market. How? Simply because electrolyzer capacity will be dramatically expanded and green hydrogen dramatically reduced in cost. It would then reduce the need for grey and blue hydrogen, and the need for storing CO2. In the European Union the current installed electrolyzer capacity is 4GW and expected to increase to 40 GW of installed electrolyzer capacity by 2030.
Of course, optimism cannot be dismissed. Fortune Business Insights, a market research company, expects the carbon capture and storage (CCS) market to grow to $7 billion annully by 2028. The company expects the market to exhibit a CAGR(compound annual growth rate) of 19.5 per cent from 2021 to 2028, while the global carbon capture and sequestration market size will grow from $2.01Billion in 2021 to $7Billion by 2028.
In Africa, the prime CCS example to date is at BP’s-Equinor’s In Salah oil and gas field in Algeria. More than 3Million tonnes of CO2 have been stored before being stopped in 2011 due to capacity limits in the geological structure.
Does Africa have the ability to store all the extra carbon dioxide that it is expected to generate in the coming decades? Possible areas of interest could be the Zululand basin in South Africa, a well-mapped onshore area, offshore Angola, onshore and offshore Nigeria and offshore Ghana. The Rovuma basin offshore of Northern Mozambique could also be an area of interest.
Can Africa withstand the politics of illusion and see CCS for what it really is? A smoke screen for not addressing the real needs of the energy transition.
Finally, a simple conclusion. A simple substitute for CCS is a tree planting campaign. In Canada the federal government has pledged to plant two billion trees in the ground by 2030. To date deadline targets have come and gone. Yet this is a campaign which requires encouragement and continued public pressure.
Such a scheme should also encourage the oil and gas sector to contribute and participate. A scheme which is practical and easy to understand why it is of such huge benefit to the energy transition. Certainly, it should prove to be of interest to Africa’s new energy players.
Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise. He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe. Kreeft has Dutch and Canadian citizenship and resides in the Netherlands. He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA.