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Carbon Capture and Storage (CCS)Carbon Capture and Storage (CCS) in the United States: The Challenges Ahead in the United States: The Challenges Ahead

Presentation toNorth American Energy Standards Board

Houston, TexasJune 23, 2010

Robert W. Gee, PresidentGee Strategies Group, LLC

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What is Carbon Capture and Storage (CCS)What is Carbon Capture and Storage (CCS)a.k.a. “Carbon Sequestration”a.k.a. “Carbon Sequestration”

CO2 Capture(Separation & pressurization)

CO2 Capture(Separation & pressurization)

CO2 Transport(If necessary)

CO2 Transport(If necessary)

CO2 StorageCO2 Storage

Purpose: Reduce COPurpose: Reduce CO22 emissions to avoid climate change. emissions to avoid climate change.

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CaptureCapture

Source: CO2CRC

Natural Gas Separation Capture From Industrial Processes

Post-Combustion Capture Oxyfiring Pre-combustion Capture

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TransportTransport

Source: United States Department of Transportation

Current U.S. Carbon Dioxide Pipelines

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StorageStorage

EOREOR Source: CO2CRC

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Can CCS become commercial in the United States?Can CCS become commercial in the United States?

Yes, provided that challenges can be overcome:

Well-Recognized Challenges CO2 emissions reductions have value with reasonable certainty Costs are below the value of the reductions Storage is proven in a range of geologies An adequate legal-regulatory framework is in place The public supports CCS

A Less-Understood Challenge

Viable business models must be implemented for the full value chain

CaptureCapture TransportTransport StorageStorage

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Who are the players?Who are the players?

PowerCompanies

FinancialInstitutions

Equipment Vendors

Oil and GasIndustry

Pipeline Companies

ProcessIndustries

Challenge: Integrating Diverse Industries

OilfieldServices

Engineering/Service

CoalIndustry

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First commercial scale demos are being planned in First commercial scale demos are being planned in the United States and elsewhere. the United States and elsewhere.

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Source: Global Carbon Capture and Storage Institute

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How can the CCS value chain be assembled?How can the CCS value chain be assembled?

CaptureCaptureCaptureCapture TransportTransportTransportTransport StorageStorageStorageStorage

- Oxygen

- Gasification- Power Generation- Industrial Process

- Separation

- Compression

- Point-to-Point

- Network

- Site Selection- Site Characterization- Injection Operation- MVA- Remediation- Closure

Value ofEmissionsReduction

Financial Incentives

How are value, cost and risk allocated?How are value, cost and risk allocated?

What should be the role, if any, of economicWhat should be the role, if any, of economic regulation across the value chain?regulation across the value chain?

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Bluewave Resources/ Gee Strategies Group Bluewave Resources/ Gee Strategies Group Current Project Objectives and ProcessCurrent Project Objectives and Process

ObjectivesObjectives

Create a roadmap that points to opportunities and solutions.

Consider how CCS-related business models mesh or clash; and

Identify critical business issues that cut across the industries.

Ongoing ProcessOngoing Process Individual Interviews Facilitated Group Discussions Supporting Analyses

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ParticipantsParticipants

Trade Associations

Electric Power

Process Industry

Oil and Gas Majors

Independent Oil and Gas

Pipeline Companies

Equipment/Engineering/Service

Coal Producers

Financial Services

Utility Regulators

SponsorsSponsors

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Priority Issues for CCS BusinessesPriority Issues for CCS Businesses

Rank Question

1 How do we move from RD&D incentives to commercial investment? 

2 Would a commercial entity be willing to do storage?  

2 How do we address public acceptance?

4 What should be the role, if any, of economic regulation across value chain?

5 Can we learn from similar experiences in other industries or countries?

6 Should we move from individual projects to networks?

7 EOR or saline formations: Where should the emphasis be?

8 Would a commercial entity be willing to do transportation?

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Various industry structures have been proposed.Various industry structures have been proposed.

These include several types of stand-alone project and network structures.

Companies along value chain are evaluating business models for prospective industry structures.

– How do these mesh or clash?

Much is as yet uncertain.– Timing and value of CO2 reduction requirements– Evolution of the technology– Role of economic regulation

Industry structure will vary by region and change over time.

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From RD&D incentives to commercial investment… From RD&D incentives to commercial investment…

The TheoryThe Theory

Source: Bluewave Resources, LLC and CO2CRC

Commercial Investment

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From RD&D incentives to commercial investment… From RD&D incentives to commercial investment…

Today’s State of Play Today’s State of Play

TransitionalIncentives

EOR

Commercial InvestmentFirst mover advantageor disadvantage?

?

?

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Would a commercial entity be Would a commercial entity be willing to do storage?willing to do storage?

With apologies to Thomas Nast.

Can a viable business model be created?Can a viable business model be created?

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How do we address public acceptance?How do we address public acceptance?Cover of Dutch

Magazine NWT, April 2009

http://www.natutech.nl/00/nt/nl/47_58/artikel/order/200904/4_2009.html

CCS projects cancelledor in trouble due topublic opposition:

Barechdrecht, Netherlands Carson, California Greenville, Ohio Neutrebbin, Germany Stadum/Hörup, Germany

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Locational Differences in Storage OpportunitiesLocational Differences in Storage Opportunities

DistantStorage

AbundantLocalStorage

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Should we move from individual projects to Should we move from individual projects to networks?networks?

Initial CCS projects will have:- One source, - One storage reservoir - A dedicated pipeline.

As CCS expands, there may be advantages to sharing resources to develop regional networks.

Fleet AFleet B

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Regional CCS Networks Under DevelopmentRegional CCS Networks Under Development

Source: ICO2N

Source: Rotterdam Climate Initiative Source: SenterNovem

Rotterdam, Netherlands Northern Netherlands Alberta, Canada

Yorkshire and Humber, England

Source: Yorkshire Forward

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Would a commercial entity be willing to transport Would a commercial entity be willing to transport COCO22??

Is there a viable business model to incentivize capital formation?

- How will this be financed?

Who should perform this service?

How will it be regulated?

- By Whom?

New infrastructure is required for CO2 transport:

How real is this as a near-termHow real is this as a near-termbusiness opportunity?business opportunity?

Source: NETL

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EOR or saline formations:EOR or saline formations:Where should the emphasis be?Where should the emphasis be?

Enhanced Oil Recovery vs. Saline Formations

Revenues offset costs

LimitedCapacity

AbundantCapacity

JustCosts

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Two types of industry structures are viable today.Two types of industry structures are viable today.

Low-Hanging FruitLow-Hanging FruitPublic-Private Partnership (PPP)Public-Private Partnership (PPP) Government/industry share costs & risks Produces information, not profits Government sets the rules Information is shared Benefit: Early access to technology

High-Concentration CO2 Source

Short DistanceTransport

EOR

FutureGen Model Co-Investment ModelFutureGen Model Co-Investment Model

Best withexistingassets

Profits, but a small niche. Profits, but a small niche.

Participant Consortium Host Facility Projects

Not sustainable long termNot sustainable long term

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CCS will need to meet many standards for…CCS will need to meet many standards for…

Safe operation of capture, transport and storage facilities.

Storage capacity estimates

Risk assessment

Site selection and permitting

Monitoring, Verification and Accounting (MVA).– Monitoring of the injection and storage – Verification of performance– Accounting for CO2 emissions reduction incentives (e.g., cap-and-trade)

CO2 quality for pipeline transport and injection into storage

Site closure and post-closure stewardship

These standards and who will set them has mostly yet to be decided. . . These standards and who will set them has mostly yet to be decided. . . Could it be NAESB? Could it be NAESB?

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Needed: business & technical interface standards .Needed: business & technical interface standards .

CaptureCaptureCaptureCapture TransportTransportTransportTransport StorageStorageStorageStorage

- Oxygen

- Gasification- Power Generation- Industrial Process

- Separation

- Compression

- Point-to-Point

- Network

- Site Selection- Site Characterization- Injection Operation- MVA- Remediation- Closure

Value ofValue ofEmissionsEmissionsReductionReduction

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Questions?Questions?

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Robert W. Gee

President

Gee Strategies Group LLC

7609 Brittany Parc Court

Falls Church, VA 22304

U.S.A.

703.593.0116

703.698.2033 (fax)

rwgee@geestrategies.com

www.geestrategies.com