Chapter 2
Science and economics of offshore CO2
storage
2.1
Geological sequestration (geosequestration), or carbon capture
and storage (CCS), involves capturing the carbon dioxide (CO2) that
would otherwise be emitted into the atmosphere, compressing it, transporting it
to a suitable site, and injecting it into deep geological formations, where it
will be trapped for thousands or millions of years.[1]
2.2
Typically, carbon capture and storage has three stages:
- capturing CO2 from fuel and industrial
processing and electricity generation plants and compressing into a fluid or
supercritical state;
- transporting the CO2 by pipeline or tanker;
and,
- injecting the CO2 into a suitable geological
formation for long-term isolation from the atmosphere.
2.3
CO2 can be stored underground in geological formations
(onshore and under seabeds) such as deep saline aquifers, depleted oil and gas
reservoirs or unminable coal seams. 85 per cent of the world's storage
potential is said to be in deep saline aquifers.[2]
However, in Australia, oil and gas basins are also considered to have
substantial potential for geological storage.
2.4
For most applications, the CO2 has to be captured and
separated, then transported from its source to a compression plant in preparation
for injection and storage. The CO2 is then injected as a dense, liquid-like,
supercritical fluid into reservoirs. The CO2 sits in the microscopic
spaces between grains in the sandstone and is trapped by the impermeable rock, or
mudstone, which acts as a seal or 'lid'. Generally, the storage needs to be at
least one kilometre below the surface so that the pressure, and temperature, is
sufficient to maintain the CO2 as a supercritical fluid.
2.5
Woodside Energy explained to the committee its CCS process differed
for liquid natural gas (LNG). The LNG is taken from offshore gas fields and brought
onshore by pipeline; the CO2 is then separated, before being prepared
for injection back offshore, several kilometres below sea level:
Before we can make the LNG, we have to remove (the) CO2
from the gas stream. When we make LNG, we largely take methane and cool it down
to about minus 160 degrees Celsius. In cooling the methane down, the CO2
will freeze before getting to that level, so we have to take it out of the
system before we freeze the methane or it plugs up the system. We do that using
what are called acid gas removal units. What happens when we remove this gas is
that we are left with a relatively pure stream of reservoir related CO2
potentially available for geosequestration.[3]
Viability of CCS technology
2.6
While the concept of geosequestration of CO2, as a
means of reducing greenhouse gas emissions, has arisen in the past decade,
geosequestration utilises technologies that have been widely practiced in
different industries for many years.
2.7
The committee heard evidence suggesting that every element of the
technology required for CCS is already in operation: capture, separation, transportation,
injection and storage. While the large-scale integrated performance of these
components in CCS application is yet to be fully demonstrated, a number of
local companies have technological experience with each of the component
technologies.[4]
2.8
Dr Geoffrey Ingram, Schlumberger Carbon Services, offered the
following assessment of where he believed the industry was at:
...technologically we believe carbon capture and storage is ready
to go. What the industry is waiting on is for the legislation and economic
drivers to materialise. We believe the federal government’s commitment to a
price on carbon in the amended legislation going through Parliament House at
the moment is the start of this process.[5]
2.9
Internationally, the Sleipner Project is the longest running commercial
application of carbon dioxide storage in the world.[6]
It has been operating since 1996 when CO2 separated from natural gas
produced from the Sleipner West gas field has been injected into a large, deep
saline formation some 800 metres below the bed of the North Sea in Norway. The
project is expected to store a total of 20 million tonnes of CO2
over its lifetime. ExxonMobil explained to the committee that through the
project, over 1 million metric tonnes of CO2 have been stored each
year since 1998.[7]
There has been no escape of CO2 in that time.
2.10
The Norwegian government has not created separate legislation for
CCS projects and the Sleipner project operates purely under Norway's existing
petroleum law. While there are no requirements within this legislation relating
to monitoring, remediation or site closure provisions, the Norwegian government
considers that regulation is now required in regard to safety issues, risk
analysis and long term monitoring.[8]
2.11
The committee received submissions from a number of companies
currently involved in the development of CCS technologies in Australia. These submissions
suggested that while CCS technology is well advanced, it is at an early stage
of commercialisation.
2.12
ExxonMobil Australia, with partner Chevron, is currently involved
in the largest commercial scale CCS project in Australia. Located off the
northwest coast of Western Australia, the Gorgon Project involves a CCS project
on Barrow Island. The Greater Gorgon gas fields contain resources of about 40
trillion cubic feet of gas, Australia's largest-known gas resource. The project
includes research into greenhouse gas management via injection of CO2
into deep formations beneath Barrow Island. ExxonMobil describes it as 'the
biggest single investment contemplated solely for the management of greenhouse
gas emissions'. The Gorgon Project has the potential to be the first project in
Australia to reduce significantly greenhouse gas emissions by the injection
of carbon dioxide underground.[9]
2.13
Monash Energy, a joint development of Anglo American and Shell
Gas and Power, is involved in developing CCS in the Latrobe Valley (Gippsland),
through a 'coal-to-liquid' project and through investigating the storage
potential of the Offshore Gippsland Basin.[10]
2.14
Schlumberger Carbon Services, who has been involved in providing
services for subsurface characterisation and monitoring since the mid 1990s, is
currently involved in the large scale CCS demonstration Callide Oxyfuel Project
in Queensland and has contributed to a pilot project in the Otway Basin.[11]
2.15
For a full list of Australian carbon capture projects with
storage, and with potential storage, see tables at the end of this chapter.
2.16
In its submission to the committee, the Victorian government
argued that Victoria also has world-class greenhouse gas storage facilities in
the Latrobe Valley/ Gippsland Basin, 160 km west of Melbourne:
The offshore Gippsland Basin in Commonwealth waters is estimated
to have the state’s largest potential greenhouse gas storage capacity: roughly
35,000 million tonnes or approximately 285 years of Victorian emissions at
current emission rates. The Gippsland Basin is also estimated to be the lowest
cost storage site, as it is geographically proximate to Victoria’s main
emissions source, the coal-powered electricity sector in Gippsland’s Latrobe Valley.[12]
2.17
Victoria is also home to the CO2CRC (Cooperative Research Centre
for Greenhouse Gas Technologies) project in the Otway Basin. CO2CRC is Australia's
premier collaborative research organisation focusing on the development and
application of technologies for the mitigation of greenhouse gases.[13]
The CO2CRC Otway Project is the world's most advanced demonstration project
based solely on storage without associated CO2 production. The
project 'aims to demonstrate that up to 100 000 tonnes of CO2,
extracted from a nearby natural accumulation, can be safely transported via
pipeline and injected and stored while trialling a significant number of
potential monitoring and verification techniques'.[14]
CO2CRC has also assessed the storage potential of a number of sedimentary
basins including the offshore Gippsland, Otway Perth, Browse and Canarvon basins
and a number of offshore basins in Victoria, Western Australia, New South Wales
and Queensland.[15]
2.18
CCS technology is likely to be of particular relevance to Victoria
because the state is heavily dependent upon brown coal for electricity generation.
As the above quotation suggests, Victoria has the benefit of having its large
emitters located near a geologically suitable storage site. This is frequently
not the case and, in its evidence to the committee, Greenpeace suggested that
there was no identified suitable site within 500 kilometres of coal-fired power
stations in the Newcastle, Sydney and Wollongong area of New South Wales, nor
at Port Augusta in South Australia. These regions alone produce 39 per cent of Australia's
current net CO2 emissions.[16]
Possible environmental risks associated with CCS
2.19
While Greenpeace proposed that CCS is a dangerous gamble and
therefore 'that the legislation in fact should not proceed and that the
proposed activity of burying carbon dioxide underground, either offshore or
onshore, should be curtailed', the committee heard little evidence from other
environmental groups suggesting that there were serious environmental risks
associated with CCS.[17]
2.20
With respect to the environmental risks of CCS, the House of
Representatives Standing Committee on Science and Innovation concluded last
year that:
...the desire to employ CCS in combating climate change must not
overshadow the need to ensure that environmental risks are
avoided...demonstration projects will provide an ideal opportunity to subject CCS
to rigorous environmental, health and safety regulations before any future
long-term commercial operations are put in place.[18]
2.21
While the report suggests that the benefits of CCS need to
outweigh the potential environmental risks, the 'potential benefits need also
to be measured against the level of risk to the environment through CCS,
compared to the risks if CCS is not used'.[19]
2.22
The Cooperative Research Centre for
Greenhouse Gas Technologies similarly argued that the 'low risk of leakage from
a storage site should be compared to the fact that 100% of all CO2
emitted at the present day enters the atmosphere!'.[20]
2.23
The greatest environmental risk associated with CCS appears to
relate to the long term storage of captured CO2. However, at this point
in time, the long term consequences of subterranean and submarine storage of CO2
are not known, and are unlikely to be known until the process has been tested
in actual operation, over a considerable period of time.
2.24
Some submitters to the inquiry suggested that an independent
committee of experts be established to advise the minister on a range of issues
including environmental protection. This is given further consideration in
Chapter 3 which considers provisions for regulating the market.
Provisions contained within the bill for the long‑term monitoring
2.25
Section 249CZGAA sets out conditions relating to arrangements for
long‑term monitoring which are required before a closing certificate can
be issued. These arrangements include the programme of long-term monitoring and
other operations proposed to be carried out by the Commonwealth following
closure and an estimate of the costs.
2.26
Prior to the issuing of a closure certificate, the security
commensurate with the finalised program of monitoring activities must be paid
to the Commonwealth. Once the closure certificate is issued it is intended that
the Commonwealth takes over the agreed work programme of monitoring and other
activities, funded through the lodged security.[21]
Environment Protection and
Biodiversity Conservation Act
2.27
The World Wildlife Fund suggested that the proposed bill be
amended to provide an environmental impact assessment to be undertaken prior to
the issuing of any approval for exploration, injection and storage operations. Further,
it suggested that the bill be amended to include 'no-go zones' around sensitive
natural and heritage areas and provide large environmental buffers around
protected or vulnerable marine and offshore areas.
2.28
However, evidence from the Department of Resources, Energy and
Tourism suggested that the Environment Protection and Biodiversity
Conservation Act provides a legal framework to protect and manage important
flora, fauna, ecological communities and heritage places—defined in the Act as
matters of national environmental significance. The Act provides that any
activity needs to be referred under the Act if the proponent is of the view
that the activity will significantly affect any matter of national
environmental significance. This includes Commonwealth marine areas and would
apply to CCS projects.[22]
Amounts of energy used for CCS
2.29
Evidence was received suggesting that CCS technology uses large
amounts of energy and that the wide scale adoption of CCS would increase
resource consumption by 30 per cent. The World Wildlife Fund claimed:
It is believed that CCS operating in that whole system will
reduce the efficiency of power stations by about 30 per cent. But that takes
them down to about the level of efficiency of a nuclear power station, without
the hundreds of thousands of years of toxic waste. Coal is cheap. This
technology may in fact not be as expensive as people are saying, but we will
not know until we find out, and that is the stage that we would argue should be
accelerated [23]
2.30
Evidence from Greenpeace claimed the technology itself uses
between 10 and 40 per cent of the energy produced by a power station, and further
that, 'wide scale adoption of CCS is expected to erase the efficiency gains of
the last 50 years and increase resource consumption by one-third'.[24]
CCS versus alternatives
2.31
The committee received several submissions in which it was
claimed that CCS storage is a 'distraction from undertaking real action on
reducing greenhouse gas emissions' or that CCS is an 'end of pipe' response
that attempts to manage the effects of a system reliant on fossil fuel
consumption.[25]
That is, that CCS allows for nations to continue their reliance upon fossil
fuels.
2.32
This notion of CCS being a distraction from undertaking real
action on climate change raises the question of opportunity cost. Environmental
groups suggest that, 'Money spent on CCS will divert investments from
sustainable solutions to climate change'.[26]
In turn, they argue that if the substantial investment in CCS projects was
diverted to renewables then Australia could achieve its necessary emission
reductions without developing CCS.[27]
2.33
This would involve Australia shifting its energy base away from
coal and oil to a diverse portfolio of renewable energy technologies.
The economics of carbon capture and storage
2.34
Under an emissions trading scheme, or a carbon tax, polluters
must pay for the damage done to the environment by their activities. A company
will therefore be willing to pay for CCS if the cost of storing CO2
in this way is less than the cost of purchasing a permit to emit CO2
into the atmosphere.
2.35
The committee heard a wide range of estimates of the carbon price
necessary for CCS to be commercially viable, from $20 to $100 per tonne.
However, the majority view seems to be that a price of around $40–$50 would
represent a breakeven point:
...[the International Energy Agency's] figures were in the order
of US$45 a tonne to US$70 to US$80 a tonne, depending on the technology.[28]
For the offshore injection of CO2, which is very
expensive in terms of the technology around the special steel pipelines and the
injection wells and the special corrosion-resistant alloys required for that,
some estimates have been made that a carbon price between $50 and $100 will be
needed to make that economically viable.[29]
It would be above $20 a tonne.[30]
...but it has got to be over $40 or $50 a tonne to get people to
start thinking about this sort of technology, or any of the other technologies.
At the moment, the renewables are being given the incentive of the MRETS (Midwest
Renewable Energy Tracking System) and a potential extension to that scheme. But
if you remove that sort of thing you are looking at a carbon price up at about
$50 or $60.[31]
2.36
The breakeven price will vary for different kinds of CCS
projects. A large proportion of the cost of CCS projects for coal-fired power
stations will comprise building and operating the plants to capture and liquify
the carbon, and building pipes to transport it to the coast, even before the
process of storing it offshore begins. Storage of CO2 generated by
offshore oil drilling will therefore be viable at much lower carbon prices than
would CCS of CO2 generated by coal-fired power stations. It will
also be considerably more expensive to retrofit carbon capture facilities to
existing power stations than to build it into new power stations.
2.37
Both sides of the debate agreed that CCS would be a costly
process:
The technology itself uses between 10 and 40 per cent of the
energy produced by a power station...CCS is expensive. It could lead to a
doubling of plant costs and an electricity price increase of 21 to 91 per cent.[32]
...the storage cost is not the big part...The big cost is at the
power station, building a massive plant on the front end for oxyfuel or on the
back end for post-combustion capture...and also the enormous amount of energy you
need to drive that. You are looking at between 20 and 30 per cent of the power
station’s output to drive the capture. It is costly.[33]
2.38
However, the Cooperative Research Centre for Greenhouse Gas
Technologies claimed that while the cost of deploying the technology is likely
to be high:
...the economies of scale that could be achieved through
deployment will probably make the technology cheaper than some renewable energy
generation resources currently being deployed.[34]
2.39
A high (expected) carbon price does not necessarily mean the
widespread adoption of CCS. A high price will reduce the overall demand for
energy and encourage greater efficiency. It will also make renewable energy
producers, which do not need to purchase permits or pay for CCS, more
competitive in selling energy.
2.40
Commercial CCS projects will operate on a very large scale and
cost hundreds of millions if not billions of dollars. Only very large
companies, or consortia, will be in a position to undertake them, and they will
need to be confident before starting them. Having clear rules in place, and
preferably with bipartisan support, will be important in creating an investment
climate conducive to undertaking CCS projects.
2.41
The Victorian Government wants a competitive market:
...greenhouse gas storage formations are a new resource and should
be treated as separate and distinct from petroleum resources, which are
commonly co‑located. An equitable and competitive market for access to CCS
resources is therefore essential. The rights of CCS proponents should not be
treated as subordinate to those of existing petroleum titleholders or of the
petroleum industry generally...Areas should not be excluded solely because
there are existing petroleum titles over them.[35]
2.42
A challenge for CCS is what one witness termed 'reputational
risk':
These projects are so reliant on public confidence that they
really have to be done properly...It would only take one CCS project going wrong,
leaking or having someone cut corners somewhere for CCS to be off the public agenda
and going the same way as genetically modified crops. The science may be good
but, if public confidence turns against it, we will lose out.[36]
Current public expenditure on CCS projects
2.43
Under the Low Emissions Technology Demonstration Fund (LETDF), a
total of $410 million has been offered to applicants involved in developing low
emissions technologies.[37]
2.44
CSS projects currently receiving funding under this scheme
include:
- Chervon Gorgon carbon dioxide (CO2)
Injection Project—the project is part of the Gorgon development off the
northwest coast of Western Australia. It includes the injection of carbon
dioxide into the Dupuy Formation saline aquifer underneath Barrow Island. Total
cost of the project: $841 million; Australian government contribution: $60
million.
- CS Energy: Oxy-firing demonstration and carbon sequestration
project—the project will be implemented using the Callide A power station at
Biloela in central Queensland. The total cost of project: $188 million; Australian
government contribution: $50 million.
- HRL Limited: Clean Coal Demonstration Project—the
project demonstration will be implemented at the Loy Yang Bench in the Latrobe
Valley, Victoria. The total cost of the project: $750 million; Australian government
contribution: $100 million; Victorian government contribution: $50 million.
- International Power: Hazelwood 2030—the demonstration
project will occur at the Hazelwood power station in the Latrobe Valley,
Victoria. Total project cost: $369 million; Australian government contribution:
$50 million; Victorian government: $30 million.
Australian Capture
Projects with Storage
|
Name, state
|
Lead
|
Description
|
CO2 Source
|
Injection Rate
|
Start-up
|
|
Otway Project VIC
|
CO2CRC
|
Storage demonstration
project
|
Natural Gas / CO2
well
|
100 kt total
|
April 2008
|
|
Moomba CO2 Storage Project SA
|
Santos
|
Regional CO2
Storage Hub. Initial demonstration through EOR
|
Natural Gas
|
1mt total
|
2010
|
|
Gorgon LNG Project WA
|
Chevron
|
15mtpa Gas field
development with CO2 Capture and Storage
|
Natural Gas
|
Up to 4mtpa
|
2012–2013
|
|
Callide Oxyfuel Project QLD
|
CS Energy Ltd
|
30MW Coal fired boiler
Oxyfuel retrofitting Capture and CO2 Storage
|
Black coal
|
Up to 50 kt
|
2010–2011
|
|
ZeroGen Project QLD
|
Stanwell Corp.
|
100MW IGCC and CO2
Capture and Storage
|
Black Coal
|
Up to 400 ktpa
|
2011–2012
|
|
Monash CTL Project VIC
|
Monash Energy
|
Coal to liquids CO2
Capture and Storage
|
Brown Coal
|
Up to 15 mtpa over 40 years
|
2015
|
|
Fairview Project QLD
|
GE Santos
|
100MW CSM post combustion
capture and CO2 re-injection
|
Enhanced CSM
|
100 ktpa
|
TBD
|
|
Browse Project
|
Woodside
|
18tcf Gas field development
with possible CO2 Capture and Storage
|
Natural Gas
|
ytbd
|
2013–2015
|
Australian Capture
Projects with Potential Storage
|
Name
|
Lead
|
Description
|
CO2 Source
|
Injection Rate
|
Start-up
|
|
HRL Project VIC
|
HRL
|
400MW IDHCC Pilot Scale CO2
Capture
|
Brown Coal
|
Future potential storage
|
Post 2009
|
|
Hazelwood 2030 PCC Project VIC
|
International Power
|
200MW Boiler re-fit.
10-20ktpa solvent based capture
|
Brown Coal
|
Future potential storage
|
Late 2008
|
|
Loy Yang PCC Project VIC
|
Loy Yang Power
|
5,000 tpa mobile PCC facility
trials
|
Brown Coal
|
Future potential storage
|
2008–2009
|
|
Munmorah PCC Project NSW
|
Delta Electricity
|
5,000 tpa mobile PCC facility
trials
|
|
Future potential storage
|
Mid 2008
|
|
FutureGas Project SA
|
Hybrid Energy
|
150–300MW Lignite CFB
Combustion and Gasification CO2 Capture and Storage
|
Brown Coal
|
ytbd
|
2015
|
|
Collimbah Power Project WA
|
Aviva Corp.
|
2x200MW Oxyfuel with
conversion for CO2 capture and storage
|
Black Coal
|
ytbd
|
2012
|
Source: Department of
Resources, Energy and Tourism
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