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Providing coverage of Alaska and northern Canada's oil and gas industry
August 2009

Vol. 14, No. 33 Week of August 16, 2009

Report: Carbon capture won’t come cheap

Gary Park

For Petroleum News

The Alberta Carbon Capture and Storage Development Council has issued a bottom-line report on the costs of advancing CCS to a technically and financially viable level on a large scale.

In a final report by the council, appointed in April 2008 by the Alberta government to develop a blueprint for implementing CCS, the Canadian and provincial governments were advised they might have to pump C$1 billion to C$3 billion a year over eight years into the undertaking.

Council Chairman Jim Carter, former president of Syncrude Canada, said in a statement that Alberta, which is contributing C$2 billion for the CCS program, has “again tapped its pioneering roots and has assumed a globally leading role in the development of CCS technology. The projects that will result from this program will create important momentum.”

He said the council report endorses the potential of CCS to have an impact on greenhouse gas emissions and establishes a path forward, but the process will be costly and needs governments, industry and consumers to shoulder the burden.

Carter said the council has been able to provide a better guide to capital and operating costs than was available before.

Expertise will reduce costs

The report said those costs will decline as expertise is gained and improved commodity prices “could deliver manageable costs to industry” that are comparable with other alternatives to reduce greenhouse gases.

For Alberta to achieve its CCS goal of removing 25 million to 30 million metric tons from the atmosphere by 2020 it will be necessary to “remove the financial disadvantage created by CCS” until costs can be improved and/or higher compliance costs level the field for the industry worldwide, the report said.

The council estimated an additional C$1 billion to C$3 billion a year will be needed from the Canadian and Alberta governments to further promote CCS projects after the first wave of demonstration projects.

“Industry will likewise need to shoulder significant additional investment,” the report said.

“Energy consumers will ultimately bear a large share of the burden of the costs of CCS.”

Council: Expenses justified

Regardless of those obstacles, the council insists the expenses are justified if the result is cleaner energy production.

Enhanced oil recovery could find itself at the center of the CCS efforts, the council said, estimating that based on an oil price of US$75 per barrel there is sufficient EOR capacity in Alberta to store 450 million metric tons of carbon dioxide and produce 1.4 billion barrels from conventional sources, or double the province’s conventional oil recovery.

That incremental production would translate into C$105 billion of revenue over the development life, potentially generating C$11 billion to C$25 billion in extra provincial royalties and taxes.

But the council cautioned that rather than being a silver bullet, CCS is just a large piece of the puzzle.

It said CCS will take time to develop — the council last year estimated commercial CCS might be 15 years away — and costs could range from C$76 to C$150 per metric ton. “Over and above any potential compensation available to industry, deploying CCS currently carries a financial disadvantage of up to C$100 (per metric ton),” the report said.

Energy Minister Mel Knight said the findings will be “considered carefully” as the government moves forward with CCS technology development.






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