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Carbon capture: Silver bullet or blank? Alberta government report estimates up to C$3 billion in public money might be needed each year to develop CSS technology By Gary Park For Petroleum News
The debate is just warming up in Canada over the use of carbon capture and storage, widely touted as a climate-change strategy and the answer to Canada’s reputation as a source of “dirty oil” from the oil sands.
The Canadian and Alberta governments are set to pump C$3 billion into researching the science and developing the technology, a sure sign that they are either very confident about the outcome, or desperate to succeed.
The pressure on oil sands producers to find answers has spread over the last year from sideline sniping to a global campaign.
Royal Dutch Shell, Europe’s largest oil company and destined to become an oil sands producer on a grand scale, is under attack by environmental groups.
“In the age of carbon reduction, Shell is fast heading in the opposite direction, massively increasing the carbon intensity of its production of oil and gas,” said a report earlier this year commissioned by Oil Change International, Friends of the Earth and Greenpeace U.K.
Shell looking at CCS The super major says it has lowered greenhouse gas emissions by 14 percent in the past decade. But it’s not resting on those claims.
At its huge refinery complex near Edmonton, Shell has a vacant site that could be turned into a carbon capture and storage project dubbed Quest that targets a 25 percent reduction in the carbon footprint of its oil sands mining and upgrading operation.
Working in partnership with Chevron Canada and Marathon Oil, Shell is one of the finalists in a competition to qualify for a share of C$2 billion in Alberta government money to stage a demonstration project.
The trio sees Quest as a pioneering venture to separate about 1.1 million metric tons a year of carbon dioxide from other gases and compress the CO2 into a liquid for pipeline delivery to a saline aquifer where it would be pumped about 7,500 feet below the surface and sequestered.
While such CCS technology is still unproven and no one has yet provided any detailed cost estimates, few, if any other methods are being tested or financially supported.
Some qualified backing But CCS has gathered some qualified backing.
Murray Edwards, vice chairman of Canadian Natural Resources and a wealthy entrepreneur, endorsed CCS, while cautioning it will carry a heavy price tag.
He said the process being proposed for injecting CO2 from Canadian Natural’s Horizon oil sands project is “not economically viable in today’s world.”
But he argues the commitment to tackling climate change and carbon emissions has no hope of succeeding without government investment in technology.
Much the same view was espoused in May by James Brown, vice president of climate change at Petro-Canada before it was taken over by Suncor Energy.
“Technology has to be the answer,” he said. “One of the challenges we have is any time you employ new technology like CCS or new in-situ technology there is a risk it won’t work.”
Bruce March, chairman of Imperial Oil, said his company decided to proceed with its C$8 billion Kearl oil sands project despite uncertainty over climate-change regulations.
He said Imperial is concerned the emissions reduction targets may be onerous and could reduce economic output.
Referring specifically to CCS, March said the technology will require “tremendous energy to capture and tremendous energy to store it in the ground.”
Simon Dyer, the oil sands program director at the Pembina Institute, an Alberta-based environmental think tank, cautions against viewing CCS as a “silver bullet,” given the public money that might be required, suggesting there might be “cheaper and more effective options.”
Even Canadian Environment Minister Jim Prentice said CCS technology would have limited application in the oil sands region.
Report says investment required Some industry leaders advocate using government money to develop technologies that actually reduce the creation of greenhouse gas emissions, or advance cleaner feedstocks for electricity generation.
While the debate continues, a wake-up call was issued in July in a 71-page report commissioned by the Alberta government and entitled Accelerating Carbon Capture and Storage Implementation in Alberta.
What it did capture was the possible cost of Alberta’s goal of injecting 140 million metric tons of CO2 a year by 2050, compared with the C$2 billion the Alberta government plans to spend over 12 years on its three selected pilot projects, starting with a mere 5 million metric tons of CO2 a year by 2015.
Written by the government-appointed Alberta Carbon Capture and Storage Development Council, the report estimated that the Canadian and Alberta governments will have to invest from C$1 billion to C$3 billion a year to promote further CCS projects “after the first wave of demonstration projects.”
That cost to taxpayers would sequester 30 million metric tons a year, still a fraction of the Alberta goal, although the cost per metric ton would drop as the technology improves.
And, just in case the public at large was missing the point, council chairman Jim Carter, former president of oil sands giant Syncrude Canada, said “energy consumers will ultimately bear a large share of the burden of the costs of CCs,” predicting that electricity rates “will at least double.”
Sustained effort required In a summary, the council said: “CCS development will require an effort sustained over many decades. It will demand long-term thinking from our leaders.
“Government and industry will need to stay the course irrespective of economic uncertainties — including those brought about by the current downturn. Ultimately, CCS will enable our province and our country to play a substantial role in addressing the environmental and economic challenges we face globally.”
The report pegged the cost of developing CCS technology at C$70 to C$150 per metric ton. Even allowing for financial credits to reduce carbon, the technology’s “financial gap” is estimated at up to C$100 per metric ton.
On the plus side, the council said CCS is “about investing in an economy capable of sustaining itself. The council has found that a very solid long-term business case exists for financial support for CCS.”
At the center of that argument is the possibility of using carbon emissions to rebuild reservoir pressure for enhanced oil recovery schemes.
450 million metric tons of CO2 It estimates that, based on a reference oil price of US$75 per barrel, there is sufficient EOR capacity in Alberta to potentially store 450 million metric tons of CO2 and produce an additional 1.4 billion barrels of oil from conventional pools, doubling Alberta’s conventional oil recovery in the process.
“This incremental production would translate into C$105 billion of revenue over the life of the development, potentially generating from C$11 billion to C$25 billion in additional provincial royalties and taxes.”
The council also concedes CCS is not a “silver bullet,” but believes the technology could enable Alberta to continue producing coal-fired electricity and heavy crude oil from the oil sands.
Carter said the impact of climate change measures will have an impact, whether it is the price of gasoline at the pumps or electricity, or home heating.
Brian Mason, leader of the Alberta New Democratic Party, said directing public money to the energy industry is a “boondoggle” when the money would be better invested on renewable energy.
Energy Minister Mel Knight acknowledged the “financial gap exists, but we’ll find ways as we move forward to close the gap.”
He said the council’s recommendations will get consideration as the province advances its CCS strategy.
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