Defining opportunity – how OGCI is trying to enable a commercial CCUS industry

Jul 04 2018


Collaborating with a wide range of stakeholders, and supported by ten major oil and gas companies, the Oil and Gas Climate Initiative (OGCI) aims to be a catalyst for a commercial CCUS industry.

When the ten CEOs behind the Oil and Gas Climate Initiative1 (OGCI) announced in 2016 that they were setting up the billion-dollar Climate Investments fund and prioritising investments to support carbon capture, utilization and storage (CCUS), many were surprised. True, critics had said for years that CCUS was a “get out of jail free card” for the fossil fuel industry, but in reality oil and gas companies had struggled to align around the technology. Stop-and-go government policies, high capture costs and the fear that their support might serve only to prop up the coal industry kept many companies on the sidelines.

This report explores why OGCI member companies are now putting their weight behind CCUS and how the organisation aims to be a catalyst for a commercial CCUS industry.

OGCI’s commitment to the development of CCUS is part of a growing recognition among governments and industry that it could facilitate a simpler, smoother and less damaging transition to a zero carbon economy in the second half of this century. That insight is not new. Scenarios from the IPCC and IEA have consistently shown lower costs for energy transition pathways that include CCUS. What has changed is a sense of urgency and focus as governments develop mid-century climate strategies that go beyond power and focus on how to best decarbonise heavy industry and other hard to abate sectors.

In particular, there is a growing awareness of the need to ensure that measures designed to drive decarbonisation in one country don’t backfire by pushing companies to close down or relocate to laxer jurisdictions. CCUS could be a way to preserve value and jobs alongside decarbonisation, by encouraging a regeneration of industrial areas as they embrace clean technologies enabled by capture and storage infrastructure.

For oil and gas companies, the value and urgency of CCUS is even clearer. It could contribute substantially to their own decarbonisation and that of their customers and consumers. It could also help the industry to develop new zero carbon business models – from providing carbon transport and storage services, to developing a comprehensive hydrogen business or negative emission technologies.

Realising that vision requires a functioning CCUS industry – something that OGCI is actively trying to enable and underpin. Over the past two years, OGCI has focused on tackling key obstacles to deploying CCUS at scale. One of its first initiatives was to work with the Society of Petroleum Engineers to develop a consistent methodology to report and classify available carbon storage capacity on a global basis. Global deployment of CCUS will require high levels of confidence in the availability of suitable storage resources in the locations needed. OGCI has deployed the reporting methodology – the Storage Resource Management System (SRMS)2 – to assess existing storage resource estimates and is exploring what work is needed to support large-scale CCUS development in key regions.

Other work has focused on promoting clarity around potential policy mechanisms that governments can use to make CCUS investable.3 Leveraging OGCI’s global reach, smaller teams have now started engaging with governments, industry and other stakeholders in a number of countries to accelerate progress on the ground. OGCI is also participating in an innovative multi-stakeholder project to rethink the narrative around CCUS and activate support at many levels.

Getting a commercial CCUS industry going, however, will ultimately require many more projects to get off the ground. There are currently only 17 large-scale projects under operation. There are five more in construction and four in an advanced stage of development, but around 100 CCUS projects need to be in operation by 2030 to stay on track, according to the International Energy Agency.

Developing potential projects, to catalyse the development of CCUS on a material scale, is one of the priorities of OGCI Climate Investments. CCUS projects tend to be large and complex. They usually involve multi-billion dollars of investments, multiple different parties and sets of expertise along their value chains. Development and build schedules can be as long as a decade.

Even the early-stage development of these projects is resource-intensive, requiring the deployment of teams with expertise across multiple commercial and technical disciplines, early interaction with stakeholders and sophisticated engineering design. It is often challenging for such complex and large scale projects to find the capital and resources to complete their initial development. As a result, investments at this stage tend to be too risky and speculative for any one company to undertake alone.

OGCI Climate Investments has the advantage of being able to draw on significant experience and resources among the member companies, while keeping the agility to move rapidly. It is building on the experience of its first early-stage CCUS project, a UK concept that aims to build the world’s first commercial gas power plant using CCUS and provide carbon transport and storage infrastructure for a surrounding industrial hub. The fund’s role has been to work with the project team to develop a commercially viable concept and basic engineering design. This would demonstrate the project’s technical and commercial viability, helping the government to support it and the private sector to invest with confidence.

OGCI Climate Investments is now scanning dozens of early-stage CCUS projects globally. Its aim is to invest risk capital and deploy resources into a handful of projects that have the potential to reduce costs, create shared infrastructure and enable future progress globally and in specific regions. As with the UK project, once the viability of these projects has been demonstrated, OGCI will seek co-investment for the FEED and build phase from third parties.

Alongside these project investments, OGCI Climate Investments is investing in a broad range of novel carbon capture technologies for applicability on power and industrial flue gas sectors, as well as technologies that demonstrate the value of carbon utilisation in a range of industry sectors. Utilisation is unlikely to be able to absorb the enormous amounts of carbon that must be captured, but it helps to develop an understanding of the value of carbon dioxide as a molecule, and may play an important role in helping to unlock business models for a commercial CCUS industry.

At present, however, the utilisation industry is in its infancy and therefore faces many of the challenges that other emerging technologies and markets face. These include the limited availability of investment capital, and more specifically, the high cost and volatility of carbon dioxide supply. These problems will only be resolved as more and more innovators demonstrate the potential of their technologies.

Two of OGCI’s first investments have been in companies which utilise carbon dioxide. Solidia Technologies is a US-based cement and concrete technology company which has developed patented systems for producing lower-emissions cement and concrete cured with carbon dioxide rather than water. Together, Solidia’s systems lower the carbon footprint of cement and concrete by 70% and water usage by 80% throughout the concrete production process. Econic Technologies is a UK-based company that has developed pioneering catalyst technologies that create value from carbon dioxide by incorporating it as a raw material into the manufacture of polyols, the base of all polyurethanes.

In the two years since OGCI announced it would be making CCUS a priority focus, it has stepped into several interlinked areas – early-stage projects, utilisation technologies, storage availability, policy mechanisms – where progress is needed to build the foundations of a commercial industry. Building on this experience, OGCI is starting to collaborate with a wide range of stakeholders to help get commercial-scale CCUS moving.

 

1 OGCI is a CEO-led initiative which aims to lead the oil and gas industry response to climate change, focusing on CCUS, reduction of methane emissions, energy and transport efficiency and low emission opportunities. Launched in 2014, OGCI is currently made up of ten oil and gas companies that collaborate to increase the ambition, speed and scale of initiatives they can undertake to reduce greenhouse gas emissions. Its billion-dollar fund, OGCI Climate Investments, supports the development, deployment and scale-up of low emissions technology and business models. It has the ambitious target of delivering one gigatonne of greenhouse reduction on an annual basis within ten years. OGCI’s members are BP, CNPC, ENI, Equinor, PEMEX, Petrobras, Repsol, Saudi Aramco, Shell and Total.

 

 

Oil and Gas Climate Initiative


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