CO2 Transport for CCS: Global Potential & Local Challenges · Transport for CCS: Global Potential &...
Transcript of CO2 Transport for CCS: Global Potential & Local Challenges · Transport for CCS: Global Potential &...
CO2 Transport for CCS:
Global Potential &
Local Challenges
UKCCSC Winter School
10th January 2012
Harsh Pershad
Element Energy Limited
www.element-energy.co.uk
2
Independent, impartial, UK-based low carbon energy technology consultancy.
Mission is to help our clients make a successful transition to the low carbon
economy.
Clients include oil and gas majors, power companies, technology developers,
national Governments, IEA, regional/local government, regulators, trade
associations and NGOs.
Use our expertise in appraising low carbon technologies, markets, business
models, and regulations, to developing strategies for successful technology
deployment.
Majority (>75%) of work is repeat business from satisfied customers.
Technologies covered include CCS, hydrogen, fuel cells, low carbon transport, low
carbon buildings, energy masterplanning, energy efficiency, CHP, small scale
renewables, microgeneration.
Introducing Element Energy
3
Element Energy is a leading low carbon energy
consultancy offering services spanning from strategy
development to high end engineering solutions
• CFD
• Software tools
• Prototyping
• Installations
We offer three main
services to our clients Engineering
Solutions
Engineering
Solutions
• Technology assessments
• Market assessments
• Financial modelling
• Commercialisation advice
Due
diligence
Due
diligence
• Scenario planning
• Techno-economic modelling
• Business planning
• Stakeholder engagement
Strategy
& Policy
Strategy
& Policy
• Carbon capture
and storage
• Renewables
• Microgeneration
• Techno-economics
• Feasibility studies
• Geographic data
We operate in three
main sectors
• EV scoping
• H2 vehicles
• Infrastructure modelling
• Business planning
Low carbon transport
• Master planning
• Building design
• Policy advice
• Regional strategy
Low carbon buildings
Low carbon
power
generation
4
Element Energy helps organisations and consortia to develop and implement their CCS
strategies based on:
Quantitative asset-wide assessment of CCS potential.
Understanding of technology requirements, cost and performance, policy and
regulatory frameworks, and business models for capture, transport, and storage.
Projects include:
Asset-wide analysis and CCS strategy (Multinational oil and gas company)
Financial Analysis of a CCS Network (Public/private)
The Economics of CO2 Storage (Public/private)
CO2 pipelines: An analysis of global opportunities and challenges (IEA)
CCS in the gas-fired power and industrial sectors (CCC)
Global economic potential for CCS in depleted gasfields (IEA)
Regional infrastructure roadmap development
Element Energy’s CCS expertise
5
• Global CO2 pipeline potential
• North Sea CO2 transport scenarios
• Case study – developing a network in the Tees Valley
Outline
6
6
Review of engineering challenges,
legal and regulatory issues.
Experience from investment and
regulation in the oil and gas pipeline
industries.
Quantitative modelling of global
pipeline potential in 2030 and 2050,
based on global databases of
sources, sinks and CCS demand
Funded by IEA Greenhouse Gas
R&D Programme.
Study on CO2 pipeline infrastructure: analysis of
global challenges and opportunities
7
7
Inputs
Global sinks database
Global sources
database
Global CCS demand
database
Global terrain
database
Existing pipeline maps
Pipeline cost database
Sizing database
Modelling
Terrain
weighting
Source-sink
matching and
scoring
algorithms
Integrated
network
models
Cost and
sizing
algorithms
Outputs
Maps of
source sink
matches
Costs and
capacities of
point-to-point
and integrated
pipelines
Sensitivity
analysis
How well are emitters and storage matched
globally?
8
8
Starting point was generating databases of sources
and storage sites.
9
9
For aquifers, there are no consistent global datasets,
therefore need to work with published data.
10
10
Also need estimates of CCS demand from global
economic, energy system, CO2 and climate
modelling.
N.B. These
models change
every year!
11
Pipeline costs depend primarily on diameters,
lengths, terrain, boosting requirements, location and
overall engineering cost indices.
12
12
It is possible to meet IEA’s
projection of US total CCS
demand of 500 Mt CO2/year
in 2030 using short pipelines
crossing straightforward
terrains.
The scores for emitters store combinatins can then be calculated,
and for each country the highest scoring projects (based on
transport considerations) can be depicted.
13
13
Towards 2050, it will
become increasingly
challenging to meet the
IEA’s projection of US total
CCS demand of 770 Mt
CO2/year.
Longer or integrated
pipelines crossing difficult
terrains would be
increasingly required.
14
Africa High Low Low Low Low High
Australasia High Low Moderate Low High High
Central +
South AmericaHigh Low Moderate Low Low Moderate
China Moderate Low High Moderate High Very High
Eastern
Europe Low Very Low Moderate Low High Very High
CIS High Moderate Moderate Moderate Very Low Very Low
India High Very Low High Low High Very High
Japan Moderate Very Low Moderate Low Very High Very High
Middle East Very High Low Moderate Moderate Very Low Low
Other Dev
Asia Very High Very Low Moderate Low Low Moderate
USA Very High Moderate Very High Very High High Very High
Western
Europe Very High Low Very High Moderate Low Very High
Importance of
aquifer storage in
2030 wrt baseline
scenario
Importance of
aquifer storage in
2050 wrt baseline
scenarioRegion
Ability to meet Blue
Map Demand in
2030 under baseline
scenario
Ability to meet Blue
Map Demand in
2050 under baseline
scenario
Cost effectiveness of
new pipelines
required for 2030
Cost effectiveness of
new pipelines
required for 2050
Source-sink matching can check projections for CCS and
highlight where capture readiness policy and storage
appraisal should be prioritised.
15
15
Worldwide regions differ substantially in the cost
effectiveness of CO2 pipeline networks.
16
16
Where there are multiple sources (and/or sinks)
options for integrated infrastructure may provide
multiple benefits.
17
Comparison of point-to-point and shared pipelines
18
Comparison of shared rights-of-way and shipping
19
Permitting transport links is high risk and timescales
can last more than a decade, so integrated pipelines
minimise the need to for multiple large projects.
Also, 1000 km gas
pipelines (e.g.
Nordstream) have taken
14 years from concept
to commissioning).
20
If CCS is well planned, phased investment over two
decades can support rapid growth later when
conditions favour large CCS uptake.
21
• Global CO2 pipeline potential
• North Sea CO2 transport scenarios
• Case study – developing a network in the Tees Valley
Outline
22
22
Industry and countries around the North Sea have
made efforts to develop CCS, providing a useful
case study of issues for basin-scale networks.
Element Energy led a quantitative analysis of
capture, transport and storage scenarios
Included engagement with more than 60
stakeholders.
Started in September 2009, completed
March 2010.
‘One North Sea’ Report available at
www.element-energy.co.uk
Funded by UK Foreign and Commonwealth
Office and Norwegian Ministry of Petroleum
and Energy, on behalf of the North Sea Basin
Task Force.
23
Numerous transport networks have been proposed
CO2 networks for the North Sea region to take
advantage of the clustering of sources and sinks.
Different countries and industries
have different priorities (and time
horizons) which influence the level to
which they optimise by ‘future-
proofing’ investments – there is no
‘unique’ answer as to what is the
‘right’ network.
24
24
Many alternative scenarios for CCS deployment
(examined through quantitative modelling
supplemented with lit. and stakeholder review)
Large uncertainties in the locations, timing,
capacity, designs and economics of CCS projects
challenge both policymakers and industry.
Capture uncertainties Transport uncertainties Storage uncertainties
CO2 caps?
Renewables/nuclear
contribution?
Commodity prices?
CCS cost reduction?
Industrial sources (carbon
leakage)?
Power demand?
Efficiency improvements?
Site-specific issues?
Point-to-point or integrated
infrastructure?
Cross-border projects?
Pipeline reuse?
Shipping?
Site-specific issues?
Aquifer viability?
Hydrocarbon field
storage?
Onshore storage?
Enhanced oil recovery?
Site-specific issues?
25
25
To understand the requirements for North Sea CCS
infrastructure in 2030, we developed a number of
CCS scenarios.
Scenario CCS demand drivers Transport drivers Storage drivers
Very High
Tight CO2 caps
Substantial CCS cost reductions
CCS efficiency improvements
High power demand
CCS mandatory for new build
Moderate renewables
Limited new nuclear
Low gas prices
CCS from industrial sources
Integrated
infrastructure
Cross-border pipelines
allowed
Unrestricted – all sinks
available for storage
Medium
Moderate CO2 caps
Moderate CCS cost reductions and
efficiency improvements
No increase in power demand
High renewables and nuclear
No industrial sources
Point-to point (up to
2030).
No cross-border
transport before 2050.
No onshore storage
permitted.
Aquifer storage limited
Low
Unfavourable e.g. Combination of weak
CO2 caps, CCS cost increases, no CCS
policies.
Transport investment
restricted Very low availability
26
Three scenarios encapsulate extremes and most likely
CCS development scenarios for the North Sea region.
Opportunity?
Leadership, co-operation and
investment by Governments,
EU, industry and others, to
stimulate CCS demonstration
and deployment.
2020 2030 2050 2040
Very
High
Medium
2010
Mt CO2
stored/year in the
North Sea region
Year
Low
More likely?
Fragmented CCS activity.
Limited support beyond
demonstration (except CO2
price).
Restricted transport and
storage.
Possible worst case?
Unsuccessful demonstration.
Failure to support
deployment.
Poor economic conditions
and regulations
Higher costs for CCS.
273 Mt/yr in
2030
ca. 46 Mt/yr
in 2030
450 Mt/yr in
2050
30 Mt/yr in
2020
27
With optimistic developments in technology,
policies, organisation, social acceptance, CCS could
provide ca. 10% of European abatement in 2030.
27
273 Mt CO2/yr
28
However, with limited support and technology
development, CCS deployment in 2030 could be
limited to only a few simple projects.
28
46 Mt CO2/yr
29
29
0
20
40
Number of sinks in 2030
0
50
100
Number of new sources in 2030
0
2500
5000
New pipeline km required in 2030
0
100
200
300
Total Mt CO2/year
required in 2030
Decisions on investment must be made in the context
of very large uncertainty as to eventual use.
30
Very high CCS deployment could bring significant
economies of scale in transport costs.
30
0
1
2
3
4
5
6
0 100 200 300
Pip
eli
ne
ne
t p
res
en
t c
os
t
€/t
CO
2
Mt CO2/year transported in 2030
Marginal transport cost curve for 'Medium' and 'Very High' scenarios
Very High (integrated)
Medium scenario
Cost represent the capital cost and operating costs (discounted at 10% over 30 years) for new pipelines constructed in 2030.
Costs exclude financing, capture, compression, boosting or storage.
31
A combination of favourable drivers are required
to meet the highest demands (e.g. IEA roadmap
CCS demands).
32
Major investment in low carbon energy technologies (e.g. renewables) has been
achieved through a combination of :
Robust, substantial and long term economic incentives
Successful demonstration at intermediate scale
Confirmation on (large) resource availability and locations
Solving interdependencies within the value chain
Clarity on regulations
Some degree of standardisation to reduce transaction costs
Political and public support.
Overcoming the barriers to large scale CCS
deployment by 2030 requires leadership and co-
operation.
32
33
Actions at global level
Worldwide agreement on CO2 emissions limits
Operational experience with capture and storage at scale, through safe and
timely demonstration projects.
Reducing the costs of CCS through improving technologies, standardising, and
efficient designs.
Improved guidelines on capacity and suitability of storage.
Engagement with the public and NGOs.
Additional actions at European level
Improve the quality of information on storage available.
Introduce measures that promote CCS beyond first wave of demonstration.
Set up supportive national regulatory structures for storage developers.
Delivering large scale CCS infrastructure
requires action at global and European levels.
33
34
Actions for North Sea stakeholders
A shared, transparent and independent storage assessment involving
stakeholders to improve confidence in storage estimates.
Reduce uncertainties through sharing information on technologies, policies,
infrastructure, regulations, costs and challenges.
Take advantages of ‘no-regrets’ opportunities, such as capture readiness and re-
use of existing data and infrastructure where possible.
Improve stakeholder organisation to ensure infrastructure is efficiently designed,
located and delivered.
Develop frameworks for cross-border transport and storage to reduce the risks
for individual countries.
Determine how site stewardship should be transferred between hydrocarbon
extraction, Government and CO2 storage operators.
Delivering large scale transport and storage
infrastructure in the North Sea requires the co-
operation of regional stakeholders.
34
35
• Global CO2 pipeline potential
• North Sea CO2 transport scenarios
• Case study – developing a network in the Tees Valley
Outline
36
Case study of a CO2 transport network
37
The North East is the most carbon intensive region
of the UK economy.
767
63%54%
51%
31%
43%
44%
38%34% 46%
35%44%
35%
45%
0
100
200
300
400
500
600
700
800
900
0
10
20
30
40
50
60
70
North East
Wales Yorkshire &
Humber
N. Ireland
East Mids North West
West Mids
South West
Scotland East England
UK Average
South East
Greater London
Emis
sio
n p
er
GV
A (t
CO
2/£
mil
lio
n G
VA
)
CO
2Em
issi
on
s (M
tCO
2, 2
00
8)
UK Region
Other Emissions
Industry and power sector emissions
tCO2 per £M Gross Value Added (GVA)
Percent emissions from industry and power
X%
38
Industry is partly insulated against the carbon price,
until at least 2020, but competitiveness will be
increasingly eroded.
0
2
4
6
8
10
12
14
Power Iron & Steel Chemicals Others Biomass/Biofuels
Ann
ual e
mis
sion
s (M
tCO
2/yr
)
Sectors
Purchase - auction or market
Free allocation
Outside scope of EU ETS
£12 M/yr2 Installations
£7 M/yr13 Installations
£285 M/yr7 Installations
£0 M/yr6 Installations
£2 M/yr6 Installations
(1 Food & drink)(5 petroleum)
Total Annual Exposure to EU ETS: £306 M/yr
Total value at risk, EU ETS Phase III: (2012-20): £2.5 Bn
39
Vision of Tees Valley stakeholders – onshore cluster
connected by a transmission pipeline to an offshore
storage site.
40
Economic modelling of regional CCS network
41
Cashflow for pipeline developer
-£300
-£250
-£200
-£150
-£100
-£50
£-
£50
£100
£150
£200
£250
2010 2015 2020 2025 2030 2035 2040 2045 2050
Val
ue
/£m
illio
n
Year
NPV Expenditure Revenue
Undiscounted cashflow profile for
a large network
42
Tees Valley possesses a number of sources closely clustered.
An onshore network is relatively straightforward to
finance (<US$100m) but how should the offshore
transmission pipeline be sized?
43
Because of economies of scale in pipelines, a single large
offshore pipeline provides the least cost if all users
connect, but requires upfront cost for over-sizing.
44
Pipeline transport shows excellent economies
of scale.
45
The costs can be put in the context of the value of
businesses to the UK economy.
0
50
100
150
200
250
300
350
400
450
500
Power Iron & Steel Chemicals Others Biomass/Biofuels
Gro
ss v
alue
add
ed (
£M/y
r)
Sectors
Total Annual GVA at risk: £672 M/yr
Total GVA at risk, EU ETS Phase III (2012-20): £5.4 Bn
£21 M/yr170 Jobs
£121 M/yr2,000 Jobs
£433 M/yr3,885 Jobs
£38 M/yr535 Jobs
£59 M/yr330 Jobs
46
CO2 pipeline network designs can be compared on
multiple key performance indicators.
Need to make
assumptions as to
growth in utilisation
over time.
47
Illustrative dependence of project net present value
on the average charge to users of a network.
-£500
-£300
-£100
£100
£300
£500
£2.00 £4.00 £6.00 £8.00 £10.00 £12.00 £14.00
NP
V a
fte
r 2
0 y
ea
rs o
pe
rati
on
Cost of service (£/tCO2)
Large
Medium
Small
Anchor
48
Pipeline economics are sensitive to multiple factors.
Best and worse case can drive pipeline tariffs from £0/t to
>£100/t CO2. (N.B. current CO2 prices in the ETS are 7
Eur/t)
49
Through discounted cashflow analysis it is possible
to quantify the impacts of underutilisation over
network or pipeline profitability.
Government is well
placed to determine
policy certainty, which
impacts relevance of
different finance options.
50
Certainty on CCS adoption depends on source of
finance.
0%
2%
4%
6%
8%
10%
12%
14%
16%
0 5 10 15
Dis
co
un
t ra
te (
%)
Maximum years for other emitters to join after anchor
15% less than one
year acceptable
10% 4 years time possible
5% 11 years lag
possible
51
Additional KPIs for network planning are flexibility
and complexity.
52
Risk profile for future-proofed transport network
Co
mm
erc
ial ri
sk p
rofile
Project timeline
Design Construction Operation & Maintenance DecommissioningDevelopment
Regulatory and policy risks
Technical and operating risks
Economic and market risks
Permitting &
planning
Anchor closes out
financing
Contract negotiations
between parties
EOR revenues
FEED studies
Storage site assessments
Pipeline routes
Anchor project capture
plant
Offshore (over-sized)
pipeline
tariff revenues
Project returns
Investment in non-anchor
capture plant
Build onshore network
Liability transfer
Storage site monitoring
Storage site integrity
demonstrated
Selection for support
FID for anchor & oversized pipeline
Operational start-up from anchor project(s)
Site closure
Non-anchor sources connect
CCS chain demonstrated
Capture technology demonstrated
53
Possible organisation to deliver a future-proofed
transport network
EU support (NER 300)
UK Government support
Anchor project(s)
Offshore pipeline SPV
Lenders
Contractors
Equipment suppliers
Insurers
Additional capture sources
EOR operator(s) CO2 storage operator(s)
Lenders
Contractors
Equipment suppliers
Insurers
CCS demo support CCS Levy, CO2 price floors
CCS Levy CO2 price floors
CO2 supply and off-take agreements
Project selection and fund
disbursement
Loan agreements
Turnkey contract
agreements
REGULATORY ISSUES
Capture permits; pipeline RoW; storage & EOR
permits; long-term liability
Initial MoU agreements
Performance guarantees
Insurance policy
Equipment procurement
agreements
Equity & cost recovery
arrangements
Tariff arrangements
Technical entry specifications
Onshore network owner/operator
CO2 off-take agreements
Equity & cost recovery arrangements
Equipment procurement
agreements
Turnkey contract
agreements
Performance
guarantees
Insurance policy
Loan agreements
54
Limited operational experience and significant interdependencies for large scale
CCS systems create significant uncertainties in the potential capacities,
locations, timings and costs.
Therefore policymakers and wider stakeholders are reluctant to provide now the
support that would underpin large scale CCS deployment in 2030.
But, optimised transport and storage infrastructure has long lead times and
requires investment and the support and organisation of diverse stakeholders.
Currently, insufficient economic or regulatory incentives to justify the additional
costs of CCS, and uncertain legal and regulatory frameworks (particularly for
storage) further limit commercial interest from potential first movers.
Efficient and timely investment in transport infrastructure requires :
much more certainty in the locations, capacities, timing and regulations for
storage, and
robust and sufficient economic and regulatory frameworks for capture.
Conclusions: A vicious circle of limited investment
and uncertainty could restrict the development of
CCS transport systems.
55
Thank you for your attention.
Feedback welcome to
01223 852 496