Insights and Commentaries

Insights and Commentaries

The critical emissions abatement method Australia can’t afford to ignore

29th August 2019

Topic(s): Australia, CCS, CO2 EOR

Australia, along with many countries around the world, faces an increasingly challenging path towards achieving the carbon dioxide (CO2) emissions reductions required to meet Paris climate change targets, and contribute to a global net-zero emissions future.

Last year’s IPCC SR15 report demonstrated that a diverse range of decarbonisation technologies and solutions will be required for countries to achieve their individual climate change goals, and all need to be deployed if we are to reach global targets.

Australia is no exception. To achieve national climate goals and contribute to the global effort to stem global warming, a variety of emissions reduction solutions are available for consideration. These include energy sector transitions, fuel switching, international carbon crediting mechanisms, reafforestation and carbon capture and storage.

However, there is one emissions abatement solution for Australia that is currently disabled but warrants thoughtful consideration and elevation to the position of other options– the use of CO2 for the enhanced recovery of oil, or CO2-EOR.

For CO2-EOR to be an net-negative emissions abatement method, the IEA states that for every barrel of oil produced, one tonne of CO2 needs to be stored.

The utilisation of CO2 for the enhanced extraction of oil is a mature, safe and routine practice conducted since the early 1970s. Beginning purely as a process to increase oil production and subsequent revenues, it is now understood to deliver important, material emissions abatement.

Today, there are approximately 120 EOR projects globally. All of the 190Mt of anthropogenic CO2 injected and permanently stored via EOR to date ultimately remains in the pore space from which the oil was produced, with about half of the CO2 trapped in the pore space during each cycle. The remainder is produced with the hydrocarbons, separated and then re-injected in a closed loop.

The process of trapping the injected CO2 and delivering permanent emissions abatement then relies on the very same mechanisms and forces that held the hydrocarbons in place, underground, for millions of years.

Currently, there is no specific methodology for CO2EOR under the Australian government’s Emissions Reduction Fund (ERF). The ERF is at the centre of a suite of government programs aimed at reducing Australia’s national greenhouse gas emissions, through providing incentives to a wide range of businesses, organisations and individuals to encourage the adoption of new practices and technologies.

Under the ERF, only eligible emission reduction activities will qualify as abatement and subsequently generate Australian Carbon Credit Units (ACCUs). Eligible emissions reduction activities are included in ‘methodology determinations’, or ‘methods’ for short. These already include bio-sequestration, afforestation, reforestation and carbon soil sequestration.

However, although presenting a significant, permanent and net-negative emissions abatement opportunity, existing ERF methods do not accommodate CO2-EOR activities and therefore, these operations will not be eligible to generate ACCUs under the Fund.

One option to facilitate this would be to seek the development of a CO2-EOR-specific method.

The development of a new, CO2-EOR-specific method would allow operators the opportunity to claim ACCUs for their activities. Nevertheless, the development of a new method would represent a significant undertaking in terms of time and effort. It would have to be prioritised by government and would also be required to satisfy the usual requirements of the offset’s integrity standards.

The absence of a method means that CO2-EOR operations remain ineligible to benefit from the ERF, directly hampering the use of this important emissions abatement opportunity. In addition, CO2 which is permanently stored via CO2-EOR operations is not currently recognised as an emissions reduction in Australia and therefore must be reported as emitted.

The National Greenhouse and Energy Reporting (NGER) scheme, which sets out the rules for emissions measurement and greenhouse gas reporting in Australia, is also significant for CO2-EOR operators. The NGER determination includes a method for calculating emissions from CCS activities and the mass of CO2 ‘captured for permanent storage’, which the facility is then entitled to deduct from the emissions estimated for the facility.

The scheme’s CCS provisions do not, however, apply to CO2-EOR operations and CO2 injected for these purposes is not regarded as abated in any form, not counted as an emission reduction and cannot be considered a deduction for the purposes of NGERs reporting. The NGERs CCS provisions rely upon definitions of storage found within State legislation; a position which is at best unclear and at worst a barrier to the recognition of CO2-EOR activities.

Only a change to the legislation governing the NGER scheme, or to wider State-level legislation, will enable the recognition of CO2 injected for the purposes of EOR.  This would require a significant work program to shift policy, amend legislation and develop supporting guidelines and methodologies.

As Australia continues to develop policy and consider methods to achieve its very challenging emissions reduction ambitions, CO2-EOR offers a clear solution. It can deliver significant emission reductions and deliver increased oil production and should be fully recognised under the ERF as eligible for crediting in the form of ACCUs.

By ignoring this method, Australia will forego a critical opportunity to increase domestic oil production and reduce CO2 emissions that would proceed if the value of those emission reductions was recognised.

The Institute, in collaboration with key stakeholders, will continue to facilitate discussions and work towards achieving full recognition of the emissions abatement achieved through CO2-EOR in Australia, and around the world.

This piece was written by Ian Havercroft, Senior Consultant - Legal & Regulatory and  Lucy Temple-Smith, Senior Advisor - Advocacy and Communications.

Image Source: Photo by Bailey Mahon on Unsplash

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