x Abu Dhabi, UAEFriday 21 July 2017

Backers dig into details of carbon plan

ADNOC and Masdar schedule 18 months to draft regulations

The Abu Dhabi Government has big plans to bury a significant portion of its greenhouse gas emissions, and is working to craft the rules to make the multibillion-dollar project commercially feasible. Government officials and executives from partner companies, including the Abu Dhabi National Oil Company (ADNOC) and Masdar, the clean energy group, have begun an 18-month process to draft regulations that provide a revenue stream for investors and regulate the safety of a project that will last centuries.

"These projects are very costly. The capital expenditure is extremely high and the technology is at a very early stage," said Sam Nader, the director of Masdar Carbon. "First stage is we need to put the right policy in place that will create the commercial incentive and put a value on the [captured carbon dioxide]." Abu Dhabi plans to begin burying 6 million tonnes of carbon dioxide underground every year in ADNOC's oil reservoirs starting in 2015.

Besides decreasing the size of Abu Dhabi's heavily criticised carbon footprint, the projects would boost oil production and free up natural gas. The question is whether the increased output of hydrocarbons as a result of the carbon injection would by itself pay for the huge investment in carbon capture technology. "We are blessed in Abu Dhabi because it brings enhanced oil recovery value," said Mr Nader. But he said he did not know whether the increased oil and gas output would cover the investment costs.

"Every project is different," he said. "It depends very much on the investment, it depends on the sort of [carbon dioxide], it depends on whether they are low-cost sources or very costly sources." Masdar and ADNOC have been negotiating for at least a year on the price for the carbon. ADNOC fears that too high a price for the gas would make it less attractive than natural gas and nitrogen, the existing gas options for boosting reservoir pressure.

On average, it appears the return from higher output could fund investments in carbon capture, said a senior government official who declined to be named. "It looks like the target is big enough that you could fund it, but are the rates of return high enough to justify the investment?" he said. The Government sees the revenue from oil extraction as a catalyst for the projects, but the regulation would eventually need to provide additional support, said the official, who is involved in the carbon policy talks.

"We can use enhanced oil recovery as a way to significantly build up the front end, but eventually we're going to need to make some decisions about the back end as well," he said. Masdar's ultimate goal is for the authorities to place a monetary value on reducing carbon pollution, Mr Nader said. Having this value could help determine the economic viability of the carbon-capture plans. Government officials had hoped their carbon-capture project would receive additional funding through a UN-led carbon credit scheme called the Clean Development Mechanism, but a rule change to allow that was blocked last week by Brazil.