Robin Mills, Dubai-based energy economist and author of Capturing Carbon, on how Carbon Capture and Storage could work in the Middle East, and why it matters.
A single technology can help solve three of the most intractable problems of the Middle East energy industry: high carbon footprint, maturing oil-fields, and shortages of gas. Carbon capture and storage (CCS) can also ensure the long-term sustainability of the region’s hydrocarbons. But MENA countries are still not doing enough to make it a reality.
Carbon dioxide (CO2) is the main gas responsible for human-caused climate change (global warming). Preventing it from entering the atmosphere is therefore an essential part of tackling climate change, along with improved energy efficiency and increased use of nuclear and renewable energy.
CCS takes emissions of carbon dioxide from large, stationary sources – power stations burning gas, oil or coal; petrochemicals; gas processing; oil-refining; cement manufacture – and transports it by pipeline to places where it can be injected deep underground, where it is disposed of safely, essentially forever.
The capture step is the most expensive part of CCS for power plants, and it also requires energy, around 35% of a plant’s output. But some industrial processes, such as ammonia, ethylene oxide, and synthetic fuels (such as those produced at Shell’s Pearl gas-to-liquids plant in Qatar), produce concentrated streams of carbon dioxide which can be captured at low cost.
CO2 can be injected into ‘deep saline formations’ – reservoirs containing undrinkable, salty water, usually thousands of metres below potable aquifers. Due to a century of oil exploration, the geological structure of the Middle East is well-known, and suitable storage formations are abundant – more than 200 years of space for emissions from all sources.
In Europe, CO2 storage has aroused some environmental and safety concerns, centering on possible leakage. Geological studies suggest that leakage from well-chosen sites should be minimal – many hydrocarbon fields have held oil and gas for hundreds of millions of years. CO2 is not flammable, and is toxic only in high concentrations.
In MENA, public opposition should be less of a problem than elsewhere – most storage will be away from population centres, in the desert or offshore, and the population is more familiar with, and accepting of, oil industry activities.
EOR
CO2 can also be injected into oil reservoirs, where, under the right conditions, it is an excellent enhanced oil recovery (EOR) agent. Typically 3-6 tonnes of carbon dioxide can liberate an additional 10 barrels of oil, the extra revenues helping to pay for the cost of capturing CO2.
The Permian Basin in Texas and New Mexico, with carbonate reservoirs comparable to those in the Middle East, has produced more than 1 billion barrels of oil via CO2-EOR since its introduction in the early 1970s. This was done purely for economic, not environmental reasons. In the whole USA, almost 90 billion barrels, comparable to the UAE’s total reserves, are considered technically recoverable with CO2.
EOR potential across MENA could conceivably be on the order of 500 billion barrels, about half current global reserves. Initial target countries would be those with more mature fields – Oman, Bahrain, Tunisia, and perhaps Dubai, Qatar and Egypt.
Over time, a network of CO2 pipelines could develop, as they have in the US, to link sources to injection points in the southern Gulf or between Algeria and Tunisia.
The third component of MENA CCS is its ability to substitute for natural gas used for pressure maintenance in oil-fields. Abu Dhabi re-injects 2 billion cubic feet per day, more than a quarter of total UAE demand; replacing this with CO2 would ease the tight gas supply situation.
Iran has great technical potential for using CO2 instead of natural gas injection in supergiant fields such as Agha Jari, but this seems unlikely under current conditions.
Part of the solution
Globally, CCS is one of the core technologies for tackling climate change. Even by 2050, fossil fuels are expected to supply 50% of electricity generation, and gas- and coal-fuelled plants provide the reliable, dispatchable power needed to complement intermittent sources such as wind and solar power.
The International Energy Agency estimates that CCS could account for one-fifth of the total required mitigation efforts to avoid catastrophic climate change.
Although it is often stated that “CCS is an unproven technology”, in fact all its components are well-known. So far, about 115 megawatts of pilot CCS projects are in operation, enough to show that the technology works at close to commercial scales.
CO2 injection has been going on since 1996 at Statoil’s Sleipner field in the Norwegian North Sea, and since 2000 at EnCana’s Weyburn EOR project in Canada. Newer projects include the Snøhvit LNG facility in Norway’s Arctic, and Chevron’s massive Gorgon LNG project in Australia, due to start in 2014.
We are on the threshold of a long-delayed breakthrough, with significant power-plant CCS projects in the US, Canada, UK, Australia and China. In June, a Chinese group announced a 1 gigawatt (GW) coal gasification project with carbon capture in Inner Mongolia.
In June and July, Shell received approval to fit CCS to two plants in Canada: its Scotford heavy oil upgrader, and a Canadian power plant, the CO2 to be used for EOR. By 2017, Bloomberg New Energy Finance estimates that 3.2 GW of CCS-equipped systems will be running, close to half today’s solar power output.
What is needed now are more commercial-sized, repeatable projects. Various technology approaches have to be tested at scale, and costs have to come down via experience.
Wherefore MENA?
Given its potential, it might be surprising that CCS is not more widespread in MENA. The only major operating CCS project in the region today is the In Salah project in Algeria, where since 2004 BP has re-injected CO2 from natural gas into a saline aquifer.
The Abu Dhabi Company for Onshore Oil Operations (ADCO) has successfully trialled CO2 injection for EOR in the Rumaitha field in Abu Dhabi.Saudi Aramco plans to start CO2 injection in its largest field, Ghawar, next year, and Qatar has studied CO2-EOR in its offshore Al Shaheen field.
Abu Dhabi’s clean energy vehicle, Masdar, is planning to approve capture of CO2 for EOR from the Emirates Steel plant.
However, as revealed in Mubadala’s bond prospectus, Masdar’s flagship CCS project, a $2.5 billion hydrogen power plant joint venture with BP, has been held up by lack of agreement over the pricing of the CO2 to be delivered to ADCO.
There are several reasons why CCS has not yet taken off in MENA. The main one is simply that there is no penalty on CO2 emissions in the region today – nor indeed, anywhere in the world outside the EU and, recently, Australia.
Without a price for emitting carbon dioxide, all forms of clean energy will struggle against polluting alternatives.
Other reasons are institutional. Environmental awareness is rather low, although improving. The large, low-cost oil resources of the big MENA producers mean that EOR has not been a priority, and the region’s national oil companies tend to be technically conservative and risk-averse.
CCS needs to be part of a comprehensive overhaul of climate and energy policies in the region.
The GCC in particular needs to make dramatic improvements to its high carbon and energy intensity. If it does not, it faces the threat of damage to its reputation, an issue for tourism hotspots such as Dubai, and to carbon-based tariffs on its exports of industrial and downstream products such as aluminium and plastics.
Dubai, Ajman and Oman have all proposed coal-fired power plants, which would massively increase emission if not fitted with carbon capture.
More immediately, the region’s runaway energy consumption, fuelled by strong economic growth but also by low, subsidised prices, is wasting resources at home that could be exported profitably, and putting an increasing strain on gas and electricity supplies.
Next steps
Reforming energy pricing so that consumers pay market prices is an essential first step. Only then can carbon pricing be introduced so that polluters pay the full environmental cost of their activities.
This would allow low-carbon energy – CCS, nuclear and renewables – to compete on a level playing field with conventional fossil fuels.
The UN’s Clean Development Mechanism (CDM) recently approved CCS to receive carbon credits. But EU carbon prices around $15 / tonne of CO2 are too low to pay for the first generation of plants, likely to cost $60 / tonne or more. Hence government support is required until the technology improves and carbon prices rise as climate policy becomes more stringent.
MENA countries should forge alliances with international CCS organisations, for instance Australia’s Global CCS Institute, academia, think tanks and consultancies. Building on the region’s skills in hydrocarbon production is one of the easier ways towards the ‘knowledge economy’ much-trumpeted in the Gulf.
The Zero-Emissions Platform, an EU industry alliance, has laid out a plan for systematically testing different CCS options, but funding difficulties in the midst of the economic crisis have shrunk the original programme.
Some of the wealthier GCC countries should band together to build one of the demonstration plants here in collaboration with the EU – ideally capture from a gas-fired power plant with CO2 used for EOR, the most likely and valuable option for the region.
In the long term, CCS is an essential part of preserving MENA’s role as the world’s energy supplier. Without carbon capture, the use of fossil fuels will become increasingly unacceptable. With it, gas in particular can maintain its role, not just as a bridge fuel, but as a mainstay of the world energy system out to the end of this century and beyond.
For Qatar, with 200 years of gas production at current rates, and the UAE, Saudi Arabia, Kuwait, Iran and Iraq with more than 70 years of oil production, carbon capture is part of securing the wellbeing of future generations.
BOOK REVIEW: Capturing Carbon: The New Weapon in the War against Climate Change
Capturing Carbon is one of the first books to summarise the state and potential of Carbon Capture and Storage (CCS) technology and to advocate its adoption.
Mills begins the book with one of the best summaries of the climate change problem available, before evaluating each aspect of CCS in turn, from capture, transportation and storage to policy and economics.
His claim is simple: “Carbon capture and storage is a realistic contender for a leading role in fighting climate change,” and it is supported by a readable, clear and impeccably referenced argument.
Many books about climate change solutions evangelise for one or a few solutions as ‘silver bullets’, whether renewables, efficiency, or nuclear, while ignoring or being actively hostile to other options. Mills rejects this.
Referring to the ‘Socolow wedges’ that show avoiding harmful climate change can only be avoided through a portfolio approach, he offers a frank appraisal of the limited but vital role CCS has to play, and is sensitive to how it can add value to oil projects.
Refreshingly, Mills – an energy economist with particular expertise on the Middle East – makes good on his claim that he is solely interested in “what works” by removing the political, social and philosophical baggage from the issue of climate change.
He makes a persuasive case for CCS as one of several technical solutions to what is ultimately a technical problem: how to achieve what he dubs climate “resilience” in light of an unprecedented and damaging increase in global carbon emissions resulting from the (justified) demands of industrializing and post-industrial societies.
Along the way Mills scorns the ideologues of the climate “skepticism” movement of what he calls “vested interests, certain big businesses, right-wing ideologues, self-appointed ‘experts’ in the media, ignorant or self-interested politicians, and scientists willing to prostitute themselves to the highest bidder,” and the jeremiahs within the green movement who call for the dedition of the benefits of our globalised capital economy on quasi-moral grounds.
There are some parts of the book that lack the detail of others – the early chapter on carbon capture technology contains many ‘mays’ and ‘possiblys’ – but Mills makes it clear that this is due to the state of the art, and he is keen to show where development and investment is needed to build on the obvious promise of CCS. Appropriately, Milsl declines the temptation to fill in the blanks with hot air.
It is clear from Capturing Carbon that the commitment required to implement CCS on the required scale will be large, even daunting. Yet it is also clear that there is no option but to address global carbon emissions urgently, and that in a world where around 40% of total CO2 emissions come from large stationary sources such as power stations and industrial plants, CCS is – while costly – invaluable.
CCS and EOR
Using CCS in enhanced oil recovery (EOR) has immense potential in the Middle East. EOR and reinjection processes using natural gas are literally energy-intensive endeavours, wasting feedstock needed for power generation or export, though reinjected gas is typically eventually recovered. CO2 is often – reservoir conditions depending – a superior injection gas to natural gas.
In order to be adopted at commercial scale, in the absence of any carbon tax or cap and trade regime, the costs of CCS must not outweigh the benefits yielded by EOR. How do the numbers stack up?
In Capturing Carbon, reviewed on page 108, Robin Mills give a cash-flow estimate that could apply to Middle East projects, based on recovery of 90 million barrels of incremental oil at a conservative price of $50 per barrel and 1 mega-tonne per year of carbon capture.
