Oil producers have most to gain from investment in CCS technology
Gulf states can lead the way with carbon capture
As Opec’s latest meeting in Vienna concludes, another event opens in Abu Dhabi on Monday, one that will perhaps prove to be more important for the energy industry’s long-term future. Ministers and experts are gathering under the auspices of the Carbon Sequestration Leadership Forum (CSLF). With progress in carbon capture moving too slowly to prevent dangerous climate change, can such a forum kick-start it?
Arabian Gulf states and other major oil-exporters have a key role to play in the global governance of carbon capture and storage (CCS). Organisations such as the CSLF could be crucial, if the big petroleum states can build the right alliances.
CCS is the process of removing carbon dioxide (CO2), the main pollutant responsible for climate change, from the smokestacks of industry and power stations burning coal, natural gas and oil, and disposing of it safely underground or converting it into useful materials.
The world’s first commercial-scale industrial CCS project operates in Abu Dhabi, taking carbon dioxide from the Emirates Steel plant in Musaffah, and using it to enhance oil recovery from the Bab and Rumaitha oil-fields south-east of the capital. The project is operated Al Reyadah, a joint venture of Abu Dhabi oil firm Adnoc and Masdar, the capital’s renewable energy firm.
Successful deployment of CCS is vital for the world’s leading oil and gas producers. Their massive resources will be useless if they cannot be burnt without adding to the atmosphere’s excess CO2 levels. And using CCS elsewhere creates space for the use of oil in essential sectors where there is currently no easy replacement, particularly aviation and shipping.
The International Energy Agency has estimated that, as part of essential reductions in greenhouse gas emissions, the world will need to capture 6 billion tonnes of CO2 per year by 2050, equal to 7,500 projects the size of the Emirates Steel facility. At the moment, 22 plants worldwide are capturing 40 million tonnes annually. There have been a number of successful projects in Norway, Canada, Texas, Saudi Arabia and the UAE. But others have misfired; the Kemper County plant in Mississippi has run badly over-budget, and other facilities in the US, UK and Netherlands have suffered repeated cancellations and government indecision.
The basic CCS technology is well-understood and safe, but needs to become much cheaper to run commercially. That requires large-scale deployment, as has been the case with low-cost solar and wind power. Currently, unless there is a nearby oil-field that requires a CO2 injection, there is no financial incentive to capture carbon in most areas.
So the CCS industry needs, firstly, some large-scale, focussed government funds, and secondly, a consistent price for emitting CO2, that would compel coal- and gas-fired power stations and industries to begin installing it.
Given how important it is for their hydrocarbon future, most of the world’s major oil producers have been oddly lackadaisical on CCS. The CSLF may be the right instrument to advance their legitimate climate interests.
Founded in 2003, it brings together nearly all the world’s leading energy producers and consumers: the UAE and Saudi Arabia, the EU, Norway, US, China, India, Japan, South Korea, Russia, Brazil, Mexico, Canada, Australia, New Zealand and South Africa. These countries account for 80 per cent of global CO2 emissions from fuel combustion – more than twice as dominant as Opec is in oil.
Three energy ministers, all heavyweights, will address Monday’s meeting: the UAE’s Suhail Al Mazrouei, US’s Rick Perry, and Saudi Arabia’s Khalid Al Falih. Along with them will be the chief executive of the Australia-based Global CCS Institute (GCCSI).
Opec has been in the headlines repeatedly since 2014 for its attempts at short-term market management, while largely losing sight of the impact of carbon emissions, the greatest threat to its members’ long-term prosperity. The producers’ organisation has written little on carbon capture, and has not been a clear advocate for it.
Yet in coalition with other key CSLF energy producers - the US, Australia, China, India, Russia, Norway and Canada - the collective would represent countries that control 93 per cent of the world’s oil reserves, 80 per cent of its gas, and 79 per cent of its coal, making them determinants of the climate future. The addition of the GCCSI , meanwhile, brings policy and implementation expertise to the table
Such a coalition could be the basis for a club that would instil binding commitments on its members to implement CCS. A vanguard of environmentally-minded hydrocarbon exporters with a strong interest in carbon capture – the UAE, Saudi Arabia, Canada, Australia and Norway are the obvious leaders – could be the catalyst for such a wider club.
This leading group would have to find the right diplomatic trade-offs to bring in other countries: for instance, supporting reforestation, renewable energy, binding limits on carbon-intensive industries, and joint funding of some CCS projects. Opec’s African members may assist in avoiding this being seen simply as a club of wealthy polluters. The US’s climate policy is currently in a fog, though attempts to save the coal industry give an opening to gain its cooperation.
The difficulty of organising collective action has always been the bane of climate policy. The major fossil-fuel producers have a strong interest in such cooperation to boost CCS to the level they and the environment require. With some smart diplomacy and bold coalition-building, they may finally be able to make some real progress.
Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis and Capturing Carbon