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• Carbon Capture & Storage

• Petroleum Conference 2008

Background

Carbon capture and storage (CCS) is an engineering system involving the capture of carbon dioxide (CO₂) instead of its release to the atmosphere. Once captured, the CO₂ is then condensed, transported to the injection site (if not co-located with the extraction point) and then injected into a geological formation for indefinite storage. The intention behind developing CCS technology is to make a substantial global decrease in the amount of CO₂ being released into the atmosphere from large point sources (such as thermal power stations or gas and oil production facilities).

Internationally, CCS is considered a useful transition mechanism to more "environmentally friendly" technology for economies which are currently reliant on fossil fuels (primarily coal) for electricity generation. The situation in New Zealand is somewhat different. We are less heavily reliant on coal as a primary feedstock for electricity production. Deployment of CCS in New Zealand could potentially facilitate the development of fossil fuel resources that are currently untapped. For example, the New Zealand Energy Strategy states (at section 4.3.3) that we are unlikely to make extensive use of our extensive lignite deposits until CCS technology is proven and economically viable.

There is no legislation in place in New Zealand that has been designed with CCS in mind. This means that CCS projects under the current regulatory regime would be subject to standard Resource Management Act (RMA) requirements, but that no other existing legislation either specifically enables or prohibits CCS activities. The International Energy Agency (IEA), together with the Carbon Sequestration Leadership Forum (CSLF)¹ recently strongly recommended that governments take action to put in place appropriate regulatory frameworks for CCS.

The Ministry of Economic Development is facilitating a whole-of-government approach to CCS through the New Zealand CCS Policy Group and is coordinating a review of existing legislation of relevance to CCS, as well as monitoring international CCS developments. The policy group will this year set a timeframe for addressing regulatory gaps in the management of potential CCS activities. The Foundation for Research, Science and Technology-led NZ CCS Research Steering Group is a joint government/industry initiative. This group has contracted GNS Science to evaluate storage capacity in Taranaki and Waikato, while private interests are addressing storage capacity in Southland, where the bulk of New Zealand's substantial lignite deposits lie.

Timeframes for deploying CCS as a widespread climate change mitigation option

International timeframes for CCS

Internationally, CCS is viewed as a potentially useful addition to the growing collection of climate change mitigation mechanisms, particularly for economies with substantial reliance on fossil fuels. There are many CCS projects deployed for demonstration and research purposes, but few with immediate commercial applications.

Technology

The core processes of CCS have been practised for some time. CO₂ has been captured, transported and injected as part of enhanced oil and gas recovery projects for more than 20 years. This does not necessarily translate into a basis for widespread deployment of CCS for climate change mitigation purposes.

A recent IEA/CSLF report entitled "Near Term Opportunities for Carbon Capture and Storage" estimated the mitigation potential of CCS would amount to 6.0 cubic giga tonnes of captured CO₂ by 2050. The largest commercial CCS project is Sleipner in Norway, which stores about 1 million tonnes of carbon each year. It would take more than 6,000 Sleipner-sized CCS projects to meet the IEA's suggested 2050 capacity.

To date, the stored CO₂ at the Sleipner project is behaving as predicted, though the operators of the project acknowledge that long-term monitoring and verification of the site will be required.

CCS technology is unproven at the scale and cost that would be required should CCS uptake in the global electricity generation sector meet its potential to significantly mitigate CO₂ emission levels. Some recent developments include that the European Union (EU) has indicated its intention that all new coal-based electricity generation will be required to incorporate CCS by 2020. This policy is conditional on the establishment of at least twelve CCS demonstration plants throughout the EU, to test CCS in different contexts. Meanwhile, last year British Columbia put in place requirements for CCS for all new coal-based electricity plants, and the federal Canadian Government is currently considering following suit.

At a global scale, there are multiple demonstration projects in the planning, construction or operational phases. A significant demonstration project in which New Zealand is involved (through the New Zealand CCS R&D group) is CO2CRC's Otway Basin Project in south-west Victoria, Australia. The injection phase of the research and demonstration project is scheduled to begin in early April 2008.

Current Commercial Applications

Two categories of existing commercial application of CCS exist. The first is where CCS is being used in association with oil or gas extraction, for example at Weyburn in Canada. In these circumstances, the oil/gas extraction process already requires the separation of CO₂. This reduces the overall cost of the CCS process, as the capture component is otherwise considered to be the most expensive phase, while injecting the CO₂ allows for greater recovery of the remaining oil or gas resource. The Algerian In Salah gas production facility includes a demonstration of CCS, but, as the European gas market requires a minimal CO₂ content, the CO₂ must already be stripped from the natural gas stream. There is therefore a strong commercial rationale for separating the CO₂ even without CCS.

The second form of existing commercial application for CCS is where a carbon price is securely in place. There are two noteworthy projects in operation at present, both in Norway (where a carbon tax has been in place since 1991) - the aforementioned Sleipner (1.0 million tonnes CO₂ stored per year) and Snøhvit (0.7 million tonnes CO₂ stored per year). The Norwegian examples, however, are both associated with gas fields, and as such the capture of CO₂ is also a pre-existing component of standard operational models.

In their very recent joint report, the IEA and CSLF estimate that the high cost of CO₂ capture will limit pre-2025 deployment to points which already capture CO₂ for other ends or for whom capture is relatively cheap. At In Salah, for example, the CCS component adds around US$6/CO₂ tonne, whereas the Intergovernmental Panel on Climate Change (IPCC) estimates that retrofitting existing coal fired power plants could add around US$25-50/CO₂ tonne.²

The IEA/CSLF report notes that CCS will only fulfil its potential as a climate change mitigation mechanism if it is technologically and commercially viable for deployment purely as an emission mitigation mechanism. Notwithstanding the effect that an increasing price for carbon internationally could have on CCS, the IEA considers that to precipitate useful CCS deployment, the following four actions need to be pursued:

• a diverse portfolio of at least 20 fully integrated industrial scale demonstration plants (larger than 2 mega tonne/year) by 2010;
• significant international investment in CCS projects, including in developing countries through Kyoto Protocol-sanctioned Clean Development Mechanisms;
• a robust regulatory framework that provides for safe storage, and is clear about liability for fugitive emissions;
• higher public awareness and education, to support CCS deployment.

While some jurisdictions are already beginning consultation on CCS regulatory options, there appear to be no specific regulatory frameworks in place for enabling CCS. The IEA/CSLF report highlights as a priority the need to ensure appropriate regulatory frameworks are in place by 2010: "By 2010 it is essential that governments have established the appropriate legal and regulatory frameworks that are needed for safe, large scale storage of CO₂".³

Work towards this is being advanced in the New Zealand context by the CCS Policy Group.

CCS in New Zealand

CCS development in New Zealand will largely be making use of "off the shelf" technology developed overseas. Large-scale deployment in New Zealand is therefore likely to follow international advances, as well as reflect New Zealand-unique factors. First among these is a need to better understand of our geological capacity to sequester carbon, especially in seismically-challenged areas. A further issue for consideration is whether or not commercial incentives/barriers to undertake CCS exist currently in New Zealand.

Geological Capacity

CCS is dependent upon appropriate geological formations. A porous formation is needed to store the CO₂. A solid capping layer above the porous formation is also required to prevent any CO₂ from escaping. Both government and private investigations into New Zealand's geological storage capacity are currently ongoing; it is expected that final results should be available by mid-2009. Research into our storage capacity is consistent with an IEA suggestion that all states investigate the storage potential of their geological basins.

GNS Science, with government funding, is investigating storage capacity in Taranaki and Waikato. Indications to date suggest that there may be significant offshore Taranaki capacity and some onshore capacity in both Taranaki and Waikato. GNS is also undertaking risk management assessments, considering the implications of seismic activity on CCS.

Some potential issues around deployment of CCS in New Zealand

Under our regulatory status quo, any body sequestering carbon dioxide would need to have ownership of the area into which they were sequestering. They would also hold liability for potential fugitive emissions. Internationally, consultation on liability for CCS suggests that industry are strongly of the view that they will not be willing to undertake CCS activities unless governments indicate a clear willingness to take on the long term liability for stored CO₂.

CCS is not accounted for in New Zealand's emissions trading scheme (ETS). Excepting CCS projects overseas which have been used for enhanced oil or gas recovery, the only notable commercial application of CCS at this time is in Norway, where CCS is used to reduce liabilities that would otherwise be incurred under a carbon tax. Accommodation of CCS in the ETS is currently under consideration by government.

Through the Ministry of Economic Development, the New Zealand government will be considering options for various issues around CCS as part of its 2008 work programme. A web portal will be set up to facilitate open discussion and reporting any progress. Once clearer options have been designed, the Ministry will move to undertake more formal engagement with interested and/or affected parties.

Presentation to the Petroleum Conference 2008
A presentation outlining the government's work programme on carbon capture and storage