Outlook for Early Market Opportunities & Challenges: Results of an IEA WPFF Assessment

Transcription

1 Outlook for Early Market Opportunities & Challenges: Results of an IEA WPFF Assessment Pamela Tomski, EnTech Strategies, LLC G8-IEA-CSLF Workshop: Near Term Opportunities for CCS San Francisco, CA August 22-23, 2006

2 Outline Key Messages Opportunities & Drivers Challenges & Considerations Conclusions

3 Key Messages Momentum for CCS is building: market dynamics and events are driving emerging global carbon market and improving CCS economics

4 A Big Year for CCS EU ETS launched - emissions trading explodes - US$8.2 b (40 times 322 MtCO2 Kyoto Protocol in effect - legally binding emissions reductions Canada cap and trade program development includes CCS IEA Secretariat endorses CCS G8 Plan of Action - inclusion of CCS, call for IEA/CSLF to accelerate deployment IPPC Special Report on CCS CSLF grows to 22 members and 18 projects DOE Phase II regional partnership awards - 25 geologic field validation tests Crude oil prices escalate to just under $60.00/bbl Worldwide basin studies on potential for CO2 EOR CO2 EOR projects jump from 70 to 80 in the U.S. - CO2 demand exceeds supply CO2 EOR incentive proposals - Alberta extends tax credit, North Sea Task Force New industry alliances (e.g. Shell/Mitsubishi) Studies and development of protocols to account for geologic storage credits begin Entergy -2 nd 1 million ton CO2-EOR-Storage offset transaction CCS on COMOP-1P agenda in Montreal CCS in the main stream media broadening Gorgon, Snovit and other projects announced Souce: Michael Moore s Playbook (Falcon Gas Storage)

5 Momentum Continues Oil futures hit all time high in US$75 bbl; remain in the $70s range Permian Basin pumps billionth bbl of CO2 EOR oil CO2 demand continues to outstrip supply in the Permian EU ETS: price volitility with steady volumes - linkages to RGGI, MI, etc. Q1 EU ETS transacted US$7.5 billion; predictions for US$25-30 b Coalition for CO2 EOR and CCS Association formed North Sea Task Force in action on incentives CDM review of CCS continues WRI working on CCS emission trading protocols/regulatory frameworks IPCC GHG inventory guidelines updated with CCS China initiaties CCS regional partnerships Miller-Peterhead (DF1), Carson (DF2) and Draugen projects announced New industry alliances continue e.g. BP/GE G8-IEA-CSLF take action: Workshop on Near Term Opportunities for CCS

6 Key Messages, cont. Communicate large-scale, long-term nature of climate challenge and role of technology solutions Demonstrate common ground - CCS is firmly established on worldwide policy agenda Highlight industry experience with emphasis on field demonstrations and industrial projects Examine emerging CCS opportunities and drivers Emphasize lack of integrated, comprehensive framework for necessary investments Help drive policy action to improve investment climate

7 The Stabilization Challenge and CMI Wedges Framework Coal to Gas Natural Sinks CCS Efficiency Nuclear Renewables Princeton University CMI

8 One CCS wedge for 1 GtC reduction could be 800 GW coal plants (75% existing fleet) 1600 GW natural gas plants MtCO2/year Coal/synfuels plants producing 34 m bbd/day 250 MtH2 production/year from coal(today 40 MtH2/year from all sources) 100 x U.S. CO2 injection rate for EOR output (1 GtC = injecting ~ 3.5 GtCO2) Flow of CO2 into earth = flow of worldwide oil Scale important to inform regulatory frameworks

9 Importance of Early Opportunities Establish a foothold in the market Provide opportunity to learn by doing Enhance technical and operational expertise Reduce uncertainties and costs Increase public awareness and acceptance Inform regulatory frameworks Create momentum for technology diffusion

10 Opportunities CO2 Value Chain Concept established in oil industry Expanding to include: Commodity CO2 CO2 transport CO2 utilization Trading and ancillary businesses

11 Opportunities Early opportunities linked to CO2 EOR or where there is incidental CO2 storage Capture from natural gas processing, H2 production or refineries Sources linked to sites w/ infrastructure CO2 EOR is limited but can provide a bridge to large-scale storage

12 Opportunities US 10-basin study (ARI) CO2 market 20 b tonnes Based on $73/bbl CO2 ~ $51 ton No bid capacity - no transactions Shortage until 2008 Source: Denbury Resources

13 Opportunities More CO2 EOR plays Shell - MHI alliance in the Middle East Alberta, Canada - incentives and evolving CO2 network Australia, Far East, etc.

14 Opportunties North Sea fields extensively studied Many fields planning decommissions Bellona helped shift the debate Incentives proposals under development and review: North Sea Task Force

15 Industrial Projects > 1 MtCO2/year Sleipner Weyburn In Salah Total = 3 MtCO2/year = 500 MW coal plant CO2 emission/year vs. ~ MtCO2/year CO2 EOR vs. ~ 70 MtCO2 SACROC accumulated

16 Snovhit (2006) Statoil LNG facility near Hammerfest, Norway Subsea development completed in 2005 Gas piped to onshore facility where CO2 is removed and transported for reinjection in the Tabasen formation 700,000 tonnes will be stored anually

17 Gorgon (2008/10) Barrow Island, Australia LNG proceessing facility operated by Chevron - CO2 capture Injection into the Deputy Formation Would be world s largest industrial CCS project

18 Miller - Peterhead (2009) Decarbonized Fuels Project (DF1) BP, Shell, ConocoPhillips, Scottish & Sourthern Energy H2 from natural gas reforming Largest H2 power plant (350 MW) CO2 EOR in Miller field 240 km offshore (production cease in 2007) Existing pipeline w/ multiple EOR opportunities Inject 1.3 MtCO2/year - 4 km to reservior; 3,500 below seabed 250,000 homes powered w/ clean electricity Avoid as much CO2 as all UK onshore wind (475 MW) Source: BP

19 He s betting on CCS - Miller Investment The firm [Generation Investment Management] put money into BP, betting on its new owner plant in Scotland that injects carbon emissions back into the ground. It s the kind of technology Generation sees as having a competitive advantage in a carbonconstrained economy. - Wired. May 2006

20 Carson (2009) (DF2) BP s refinery in Carson, CA Petcoke conversion to H2 / CO2 Largest hydrogen power plant CO2 EOR in CA with Oxy Petroleum

21 Draugen - Tjeldbergodden (2010) Statoil and Shell CO2 capture from 860 MW gas-fired power plant 2.5 m/tco2 for EOR and storage in Draugen and Heidran oil fields

22 Market Drivers

23 Market Drivers EU ETS price volitility largely because of post 2012 uncertainty Robust volumes Price transparency Fragmented but linkages emerging CCS inclusion underway Market still evolving

24 Challenges Technical, Environmental and Economic No large coal-based demonstrations Significant energy penalties Costs Scientific uncertaintly associated with long-term CO2 storage Institutional Need for regulatory structures Liability issues unresolved Accounting/inventory guidelines needed No requirement to reduce CO2 emissions - regulatory uncertainty Public perception and acceptance - NIMBY/NUMBY?

25 Consider: $100/tC = $27/tCO2 can induce CCS deployment at an IGCC plant CCS Wholesale w/o CCS Transmission and distribution COAL 2 6 U.S. cents/kwh 12 Incremental cost of electricity w/ CCS 100 km from plant = $0.019/kwh - 40% premium for IGCC that vets CO2 Source: Rob Socolow and Bob Williams, Princeton CMI

26 $100/tC = $27/tCO2 equivalent to the U.S. production credit for renewable and nuclear energy relative to coal, half current U.S. subsidy of ethanol relative to gasoline, within the range of CO2 prices on the EU ETS for most of 2005/06, less than currint pricing on commodity CO2 in ~ $50/ton Transparent, reliable price for CO2 emissions will jump start CCS into the market place Subsidy for CCS on par with renewables will also incentivise deployment

27 Consider: CCS in Existing Frameworkks Regulatory frameworks in infancy as climate mitigation UNFCC recognizes CCS in Kyoto but not in compliance mechanisms; however: - IPCC National Inventory Guidelines (2006) - CDM Executive Board review - JI Supervisory Committee review - EU ETS Directive - provision for future CCS OSPAR initiated guidelines/risk framwork for CO2 storage CO2 tax (Norway) CO2 EOR incentives Common vision on CCS in national R&D roadmaps Pilots/field validation tests driving regulatory/legal issues Level support for green electricity?

28 We used to just talk with ourselves

29 now we re talking to others. CCS is a compelling story.

30 Conclusions Momemtum for CS is growing Common ground - CCS is firmly established on the worldwide policy agenda Tremendous foundation of technology, industry experience, and RD&D activity w/ established networks Near-term deployment opportunities promising but barriers remain Companies must make the business case but cannot without clear policy measures Investment mechanisms and comprehensive, integrated frameworks (legal, regulatory, financial) are essential Workshop inputs will contribute to IEA report Policy action for comprehensive, integrated frameworks needed

31 Thank You & Contact Pamela Tomski Managing Partner EnTech Strategies, LLC th Street, NW Suite 314 Washington, DC Tel: x 11 ptomski@erols.com