Carbon Capture and Storage: ‘Net Zero’ fad or necessity for the future

The 2015 Paris Agreement sets out stringent climate targets for the 190+ signatory countries, more than a dozen of which, including the European Union, have already set their own ‘net-zero’ emissions targets with dates ranging between 2030 and 2050.

A growing number of companies and organisations across a range of industry sectors are also adopting ‘net-zero’ emissions targets.

Burning fossil fuels releases carbon dioxide (CO2) into the atmosphere which many scientists believe is one of the main contributors to global warming. The 2015 Paris Agreement sets out stringent climate targets for the 190+ signatory countries, more than a dozen of which, including the European Union, have already set their own ‘net-zero’ emissions targets with dates ranging between 2030 and 2050. A growing number of companies and organisations across a range of industry sectors are also adopting ‘net-zero’ emissions targets.

Achieving ‘net zero’ is going to be essential if we are to secure the long-term future of the planet. A rapid transition from traditional fossil fuels such as oil and coal, to 100% renewable power generation, however, is unlikely to happen in time. Without alternate emissions strategies, attaining ‘net-zero’ by 2030-2050 may be little more than a pipe dream.

One such emission strategy is Carbon Capture and Storage (CCS). In the short term, man-made CO2 storage would accelerate the reduction of CO2 emissions already being achieved through improvements in renewable energy sources such as solar, wind and geothermal.

The Technology

CCS is not a new technology or concept. In fact, the technology is readily available and has been widely used in the oil and gas industry for decades. The CCS process is not dissimilar to natural gas projection, just in reverse. However, CCS does present specific technical challenges in subsurface containment, well construction, and blowout prevention, not to mention costly.

CCS was initially developed as a process to facilitate Enhanced Oil Recovery (EOR): CO2 is injected into reservoirs to maintain the reservoir pressure, and, in acting as a miscible fluid (reducing interfacial tension between oil and water), increase oil recovery. Most of the existing CCS facilities use CO2 for EOR purposes. The remainder are generally ‘proof of concepts’ pilot projects to help combat climate change.

The ultimate goal of CCS is to capture and transport CO2 to areas where it can be safely injected into the pore space within rocks deep in the earth’s sub-surface. The first stage in the process is the capture of CO2 from industrial plants via either (1) chemical absorption, which is a reaction between CO2 and a chemical solvent, or (2) physical separation of the CO2 via either absorption, cryogenic separation, or dehydration and compression.

The captured CO2 is then liquified and transported by ship or pipeline to a receiving terminal for export offshore via (subsea) pipeline, before being permanently injected into a suitable geological storage complex (reservoir) via several dedicated injection wells. The most suitable storage sites are saline reservoirs, depleted oil & gas reservoirs, and coalbed reservoirs.

During the injection and storage phases, the sites and wells are monitored to ensure that the cap rock is providing a natural physical barrier and that the well integrity is maintained. In reality geological and wellbore leakage mechanisms remain a major challenge and require in-depth subsurface modelling, engineering, and risk management.

Once the reservoir is at maximum storage capacity the regulators may continue to monitor and observe the wells and facilities before these are permanently sealed and any infrastructure removed.

Reusing Existing Infrastructure

The cost of scaling up CCS has been one of the major factors in its relatively slow adoption, but there are opportunities to reduce the initial capital outlay.

As oil and gas fields mature, companies are faced with decommissioning their offshore assets. Where suitable, delaying decommissioning and re-purposing these assets for CCS represents an excellent means to derive additional value from existing assets and should provide a low-cost option for a CCS project.

Additionally, assets that could be repurposed as part of a CO2 transport and storage network include depleted oil and gas reservoirs, wells, platforms and other infrastructure such as subsea manifolds. Obsolete pipelines may be an even more viable option given that in many cases, once decommissioned, these will be simply left in situ. We anticipate insurers receiving pipeline CCS proposals in the next few years

So, is CCS the future?

Environmentalists cite the fact that almost all carbon dioxide captured today is used for EOR purposes and is therefore not considered to bolster the operator’s green credentials. Furthermore, it is also argued that the high cost of deploying further CCS projects would be better spent on the transition from fossil fuels to renewable energy.

That said a healthy interest in CCS remains. With most countries unlikely to achieve their ‘net-zero’ targets using renewable technology alone, CCS could have a valuable role to play. Indeed, such is the need and appetite for a commercially viable CCS solution that in January this year Tesla founder Elon Musk offered a $100 million prize for the “best” carbon capture technology.

- In January Tesla founder Elon Musk offered a $100 million prize for the “best” carbon capture technology. -

Longer term, the ultimate aim of those driving CCS projects is to create an open network of infrastructure enabling the transport of CO2 from industry capture sites such as coal and gas power plants, heavy oil production, refineries, and heavy industry, to storage facilities.

What does this mean for the Insurance market?

Most new CCS projects are in the United States and Europe, with several others planned in Australia, China, New Zealand and the Middle East. Of these, the projects close to Final Investment Decision (FID) represent a total estimated investment of more than US$27 billion. CCS therefore represents a significant opportunity for new premium in the market.

The oil & gas industry, well known to Insurers, originally developed much of the technology integral to CCS and have used it for decades. The recently announced Northern Lights CCS Project, for example, is a partnership between Equinor, Shell and Total. https://northernlightsccs.com/en

The companies and technologies involved will be largely familiar to those already writing traditional oil & gas risks. However, existing policy wordings such as Construction All Risks wording for the capture and injection facilities, and EED 8/86, especially Sections A (Control of Well) and C (Seepage and Pollution), may require wording changes to cover the unique physical and legal risks involved in these types of projects.

By participating in the future development and scaling-up of CCS, insurers can have a positive impact on the environment and their own ‘net-zero’ ambitions.

Final Thoughts

With various governments committing to CCS as part of their climate change roadmaps to ‘net-zero’, the implementation of further CCS projects seems no longer to be part of a fad, but rather a necessity for the future. CCS may or may not be a longer-term solution, but it will certainly play a significant role in the short to medium term whilst we continue to make the transition to 100% renewable energy sources.

James Buckwell

Director
james.buckwell@charlestaylor.com

Expertise:
Loss Adjuster, Mechanical Engineer, Design of Oil and Gas Facilities, Construction of Oil and Gas Facilities, North Sea Platforms, Gulf of Mexico Platforms, Subsea Oil and Gas Developments, Gas Turbines, Steam Turbines, Natural Resources

Location:
London