Business case innovation can only take you so far

Organisation: Chevron, Shell

As set out in the Business Case chapter of the Global Status of CCS: 2012 report, building the case to make a significant investment in a CCS project is a difficult and complex undertaking. This is regardless of whether a project is for technology demonstration, risk mitigation, achievement of a commercial return, protection of portfolio value or furthering some other corporate objective. Projects need to deal with the early stage of the technology, market prices that are too low to drive investment in CCS, a lack of incentives for CO2 abatement, the need to integrate the elements of the CCS chain (CO2 capture, compression, transport, injection and storage) and the current financial market situation which makes finance hard to come by.

On the financial market situation and its impact on CCS demonstration projects keep an eye out for a paper titled The Global Financial Crisis and CCS which I will be presenting as part of GHGT11 later this year. Despite the difficulties faced, 16 large-scale projects around the world have been able to make the decision to invest in large-scale CCS projects. These projects are predominantly in gas processing, synfuels, ethanol and fertiliser production where capture costs are lower and integrating capture technology is better understood. Indeed, one of these projects, Quest, made the announcement that its proponents (Shell, Chevron and Marathon Oil) had made the decision to invest in the project while I was writing the business case chapter – a very welcome development for the CCS sector. From late 2015, Quest will capture and store deep underground in saline formations more than one million tonnes a year of CO2 produced from processing Athabasca oil sands into a range of synthetic oil products. 

In contrast, carbon capture projects in sectors such as power, steel and cement production face significantly higher costs and a harder time in getting the business case to stack up. However, even these projects are showing innovative approaches to try to get across the line. In particular, there is a growing trend to enter into strategic partnerships with technology providers from places like China and Korea where those partnerships can make it easier to access export credit agency funding from those countries. And a number of projects are seeking additional revenue from sales of products including COfor enhanced oil recovery, urea, sulphuric acid, argon gas and slag to improve financial performance. However, at the end of the day to get the number of CCS projects required to make a difference will need to be underpinned by climate policy, CCS-specific policy and an effective regulatory environment.