Are UK CCS projects finally poised for take-off? (2)

The Goldeneye rig sits on a depleted North Sea gasfield where CO2 could be buried. Photo courtesy of Royal Dutch Shell.

World Oil: What does the UK government’s decision to press ahead with its CCS competition mean for the sector?

Jeff Chapman: This is very significant. These will be the first offshore storage projects on this scale in Europe, outside of the long-running projects in Norway. It represents a watershed for CCS in the UK, and in Europe.

WO: The final decision on whether to proceed with these projects won’t be made until 2015. Is that disappointing?

Chapman: There’s nothing untoward about that. You can’t make a final investment decision, until you’ve thoroughly engineered and costed the projects. The final contracts with the government may not be signed until 2015, but by then the projects will be ready to go.

WO: Do you think both projects will get the go-ahead?

Chapman: It could be one or both. We, in the industry, will make every endeavor to make sure that it’s both. Other projects that lost out in the competition were also good projects. They could still happen, potentially, if planned incentives, known as contracts for difference, are introduced in the new energy bill being discussed in parliament at the moment. These are long-term contracts, designed to provide steady, predictable incentives to persuade firms to invest in low-carbon power generation. They would be available to renewables, nuclear energy and fossil fuel energy with CCS.

WO: Do the two projects throw up different offshore storage challenges?

Chapman: The Peterhead project is designed to put CO2 into an existing depleted condensate field. The Drax project involves storage in a saline formation in the southern North Sea. Once you have pumped the gas out of a gas field, you are left with a near vacuum, which makes it easier to feed gas into it than is the case with a saline aquifer, where you have to pump in the CO2 against the high pressure at that depth. However, depleted gas fields have another problem, since CO2 cools and becomes solid, when it expands in a depleted oil or gas field. So, it’s a bit more of an engineering challenge, even if it is easier to get the gas in there.

WO: What is the potential of the North Sea as a carbon storage site?

Chapman: Putting depleted oil and gas fields together with aquifers, you’re talking about centuries worth of storage space. Depleted oil and gas fields, alone, have probably got several decades worth of capacity—enough room to store several tens of billion tonnes of CO2, compared to the 600 million tonnes/year of CO2 emissions that the UK produces now.

We know a lot more about the geology of oil and gas fields than we do about aquifers, as we have never had to study them before. We don’t know precisely how much storage capacity there is, as we are reliant on desk studies, but, as with oil and gas exploration, when we look harder we will keep on finding more capacity.

WO: Does the UK have the expertise to carry out this sort of pioneering work?

Chapman: UK companies are in a tremendously good position in the global CCS sector. We have a large resource on our doorstep in the shape of the North Sea, but we also have a major human resource. CCS is a complicated business. You start off at the power station with a process engineering project to capture the CO2—the UK is very well endowed with process engineers. Then you’ve got the pipeline—once again, we have many pipeline specialists. Finally, you’ve got the geotechnics side and, of course, we’re very well equipped with people there. It’s time we got moved on with CCS in the UK, so we can develop our expertise and promote it abroad, because this is going to be an absolutely enormous market in the future.

WO: It’s taking a long time for CCS to take off around the world. What has been holding it back?

Chapman: You have to overcome the hurdle of the huge capital cost, especially for the first projects. The overall cost of CCS using offshore storage in the UK, at the moment, is about £160/MWh of electricity generated. We reckon that will get down to under £100/MWh, once we’ve got some experience under our belts and build a supply chain. Until the supply chain gears itself up and gets competitive, it’s going to be a bespoke and expensive process. You have to make this breakthrough, hence the importance of these first projects and the £1 billion of seed funding from the government.

These competition projects are not as large as the new power stations, where CCS will be installed in a decade’s time, which will probably be 1-2 GW. But the developers do have to spend a great deal of money on infrastructure, such as the pipeline and the store, that can later be utilized by other projects at much lower cost. There is no point in laying a small pipeline. You might as well build one that is double the size you need, and thus able to carry several times the CO2 in the future.

WO: Are you optimistic that the pace of CCS development will quicken when project costs fall, and the cost of carbon emissions rises in coming years?

Chapman: I think that once we get into the early-to-mid 2020s, there will be a cascade of CCS activity. It would have been faster, if we hadn’t had the economic downturn and people had maintained the same enthusiasm they had a year or two ago about fixing climate change.

WO: Will opportunities for enhanced oil recovery (EOR) in the North Sea using CO2 injection stimulate CCS development?

Chapman: They’ve been doing EOR in Texas for 40 years now and probably produced more than one-third more oil than would have been produced without it. It’s a commercial decision, because it’s just about extending the economic life of a field. You can’t simply apply the same logic to the North Sea. Offshore EOR, there is going to be a lot more expensive than onshore EOR in Texas. Also, in most North Sea fields, there is quite a good recovery rate in the first place, so there might not be as much extra oil to be recovered. But, if CO2 becomes available in the North Sea, because people are capturing and storing it anyway, its ready availability will tempt companies working reservoirs with EOR potential to use it. There has been plenty of interest in taking CO2, if it does become available.

It's a “chicken and egg” situation. You have a very cost-effective way of decarbonizing the power sector, but you’ve got to overcome the hurdle of capital cost to install the infrastructure to do it. Once you’ve done that, you get good-value low-carbon electricity at one end of the pipe, and you get the opportunity to make better use of the nation’s oil reserves at the other end of the pipe.