From the Editor: Carbon capture gets a boost [Gas in Transition]
US president Joe Biden’s oddly-named Inflation Reduction Act (IRA), which is more about climate than it is about inflation, has fanned the flames of interest in carbon capture, utilisation and storage (CCUS), largely in the US but also globally.
A $370bn spending component of the IRA includes more robust tax incentives for CCUS projects. For projects linked to capture from flue gas streams and geologically sequestered, 45Q increased to $85/mt from $50/mt, while for direct air capture (DAC) with geological sequestration, the incentive was increased to $180/mt from $50/mt. A lesser boost is offered to projects which capture CO2 and use it in enhanced oil recovery operations.
This renewed interest in CCUS shouldn’t come as much of a surprise: last November, in the wake of COP26 and dire warnings from the green left about the evils of relying on carbon capture to solve the world’s climate ills, the International Energy Agency said CCUS was poised for bigger and better things – which wasn’t exactly a stunning revelation given the lukewarm success of early carbon capture experiments.
A rocky start
The last decade, the IEA said, had seen CCUS flounder on the shoals of project cancellations and failed government funding programmes. A mere 3mn mt/yr of capture capacity had been added between 2010 and 2020, a number which needs to increase to 1.6bn mt/yr between now and 2030.
But global conditions supporting CCUS have dramatically improved, and in 2021, more than 100 new projects were announced, and the global facilities pipeline is now on track to nearly quadruple.
“First, there is growing recognition that CCUS is necessary to meet national, regional and even corporate net zero goals,” Samantha McCulloch, the IEA’s CCUS czar, said in the report. “Second, the growing interest in producing low-carbon hydrogen has resulted in almost 50 facilities under development to capture CO2 from hydrogen-related processes.”
Smoothing the way for all of that, she said, is a “substantially improved” investment environment for CCUS supported by new policy incentives, with more than $25bn committed to the cause by governments and industry.
According to global consultancy Wood Mackenzie, most of the CCUS projects now operating or in the development pipeline are in North America – which already hosts 67% of the world’s 67mn mt/yr of carbon capture capacity. That doesn’t look to be changing anytime soon, although the Asia Pacific region has a few things in the works, as does the EU. Russia? Well, we won’t go there.
Gulf Coast epicentre
Energy analytics and intelligence gatherer Enverus suggests much of the activity in the US going forward will be along the Gulf Coast in Texas and Louisiana, where the best conditions exist for geologic sequestration and where dense clusters of emitters can be found. The more robust 45Q credits, it said, will likely kick off a rush of CCUS spending, with majors like ExxonMobil and Shell already mounting major efforts along the Gulf Coast.
In Canada, much of the activity is happening in western Canada, and especially in Alberta, where again, geological conditions are ripe for sequestration and industrial concentration provides a near endless source of emission sources.
A few projects are already operating in Alberta and Saskatchewan, its prairie neighbour, and together, the two jurisdictions host sufficient pore space to geologically sequester as much as 640bn mt of CO2 – nearly 10% of the estimated onshore capacity in North America.
CCS/CCUS in Canada will be helped by a new investment tax credit (ITC) that the federal government hopes will increase capture capacity by 15mn mt/yr, from current levels around 7mn mt/yr. But already, critics are saying the 45Q terms are much more lucrative than the Canadian ITC plan, which will lead to investments flowing south to the Gulf Coast rather than north to the Canadian prairies.
In Europe, CCS and CCUS projects are underway in Norway, the UK, Germany and Belgium, while the Asia Pacific region is seeing interest in Australia, Korea, Malaysia and China – where Sinopec in late August launched its first CCS project and intends to develop two more in the next few years.
Even oil and gas hawks in the Middle East are getting on board: Shell is working with Petroleum Development Oman to study CCUS opportunities in Oman; QatarEnergy is working with GE to develop a carbon capture roadmap for the Qatari energy sector; and Saudi Arabia’s Industrialisation and Energy Services Co – known as TAQA - has formed a strategic alliance with Advance Resources International of the US to develop carbon sequestration and underground storage in the kingdom and elsewhere in the Middle East.
Wherever it is deployed, the IEA says, CCUS and CCS will be critical to achieving global net zero ambitions, and in some hard-to-abate sectors, like cement or iron and steel, capturing carbon post-combustion is really the only technology available for reducing CO2 emissions.
And the same holds true in the natural gas sector: the continued widespread deployment of capture, use and/or storage technologies are the only tools available to ensure natural gas remains a relevant fuel in the global energy evolution.