x Abu Dhabi, UAETuesday 20 February 2018

Deep down under the ground, a green idea grows

Carbon capture and storage technology is seen by many as a fantasy. But Abu Dhabi has taken it seriously in an effort to save the environment and help boost its oil production.

Major industries such as Emirates Steel Industries in Musaffah, middle, can be linked by a network of pipelines to the oilfields. Sammy Dallal / The National
Major industries such as Emirates Steel Industries in Musaffah, middle, can be linked by a network of pipelines to the oilfields. Sammy Dallal / The National

It has not been the easiest of roads for proponents of carbon capture and storage (CCS), an exciting but controversial technology that offers the promise of ridding the atmosphere of environmentally dangerous gases by storing them underground.

The scale and depth of the world's economic problems had dealt what some feared was a lethal blow to the concept by rendering it uneconomic. The price of saving the planet, it seemed, was just too high.

That many now have changed. In an announcement that injects new life into CCS, this week saw the Abu Dhabi National Oil Company (Adnoc) and Masdar agree on a plan to take hundreds of thousands of tons of carbon dioxide produced each year during the manufacturing process at Emirates Steel and send it 50 kilometres along a pipeline to the onshore oilfield at Rumaitha.

Instead of rising into the skies and contributing to global warming, the gas will be pumped underground to push out more oil from the Rumaitha field. Since oil companies currently use natural gas to do the same job, the Adnoc and Masdar partnership should not only help boost oil production but allow valuable natural gas to be sold on the market, increasing revenues.

Eventually it is hoped to build a 500km network of pipes connecting major industrial sites to oilfields across the emirate. From six million tonnes of carbon dioxide (CO2) in 2015, it is hoped to eventually capture as much as 30 million tonnes of the gas.

There are still a number of questions to be answered. Parties involved in the deal have yet to confirm when the project, which is still only at the tendering stage, will begin operating. Then there is the question of carbon credits, the mechanism by which industries buy permits to emit carbon or sell them if they clean up their act.

The Emissions Trading Scheme already adopted by 29 countries in the European Economic Areas encouraged companies to reduce emissions by giving them a market value that can be bought and sold. But current dire economic conditions have seen the traded price of a tonne of CO2 on the open market last year fall from more than 15 euros to under eight, with some analysts predicting it could drop to almost zero.

Adnoc and Masdar have not yet publicly addressed the question of carbon credits, but say they were able to close the deal, announced at this week's World Future Energy Summit, by making "sufficient progress on commercial principles".

Certainly the problems of the past have not been technological. Since 2004, for example, BP has operated an industrial-scale US$100 million demonstration plant at In Salah, Algeria. There, three million tonnes of CO2 separated from normal natural-gas production has been successfully stored in three horizontal wells almost two kilometres below the Sahara instead of being released into the atmosphere, which is normal industry procedure. So far, In Salah has kept out of the atmosphere the equivalent of the exhaust gases of 200,000 cars a year.

The problem is that, despite what is now the generally accepted fact that the planet is heading for big trouble if it does not clean up its pollution act, the costs of implementing CCS mean it fails to make short-term economic sense on company spreadsheets.

In this, CCS has come to symbolise the reality that, while the fate of global warming is left in the hands of shareholders, it will be the bottom line that wins out.

The subject was a addressed head-on by the UN secretary general Ban Ki-moon in his opening address to last year's WFES in Abu Dhabi, when he highlighted the challenges facing the planet. Achieving the necessary 40 per cent increase in global energy efficiency would cost $35 billion dollars a year over the next 20 years - but this, he said, represented only three per cent of investment in energy over the same period. "We need," he said, "to get our priorities right."

This week's announcement still leaves unanswered the future of an ambitious $2 billion, carbon-capturing hydrogen power plant BP had been working on in Abu Dhabi with Masdar. The project was "still very much part of our portfolio", Keristofer Seryani, the head of commercial development for Masdar Carbon, told The National in 2009, adding: "We're ready to take it to the next step".

The problem was the bottom line - "The commercial structure has to be finalised" - and for both the hydrogen plant and CCS projects in general that is a problem that has yet to be surmounted.

Last week, a spokesman for BP, which has a 40 per cent stake in the Hydrogen Power Abu Dhabi (HAPD) project with Masdar (another partner, Rio Tinto, pulled out of the scheme in December 2009), confirmed that it was still "effectively on hold awaiting final endorsement by the Abu Dhabi government".

Although BP remained committed to developing the plant "at a pace which is consistent with the wishes of the Abu Dhabi government … [as] it does not appear that a positive decision is imminent, the project has been effectively suspended to avoid ongoing costs and both BP and Masdar have redeployed their HPAD resources onto other activities. The project team has now been fully de-manned."

Still, after a series of setbacks for a number of grandly trumpeted CCS projects around the world, this year's summit saw the concept of CCS back on the centre stage and back on track. At WFES in 2010 Sam Nader, the director of Masdar's carbon management unit, had already made the confident prediction that Abu Dhabi would be capturing CO2 from Emirates Steel Industries, as well as predicting that it would be a forerunner for a wider programme that would help the emirate to cut emissions from power generation by up to 30 per cent by 2020.

Given that Mr Nader had expected the Emirates Steel project to be up and running this year, those estimates may be optimistic, but could eventually free up for sale about 60 million cubic feet per day of natural gas. And if a nationwide pipeline for CO2 storage is built, Abu Dhabi will have succeeded where others have struggled.

"We have seen a series of setbacks with regard to the maturing of the market into full-scale projects," says Liv Monica Stubholt, a former Norwegian energy and petroleum minister and now chief executive of Aker Clean Carbon, founded in 2007 and one of the world's leading developers of carbon-capture technology.

By 2011, she says, the industry had progressed from laboratory to industrial testing and "everybody was fairly certain that the market would be moving into the third stage, of having full-scale projects, by the start of 2012".

But the anticipated investment decisions did not materialise and "it is fair to say that what we have seen is the opposite; a near-collapse of the market".

Aker was heavily involved with two major projects - the UK's first carbon-capture scheme at the Longannet power station in Scotland, and a successful test capture plant at Mongstad in Norway - once described by the country's prime minister as "Norway's Moon landing".

Then it all went wrong. First, plans to turn Mongstad into a full-scale commercial facility were postponed by Norway's Statoil, and then in October, the British government, citing a failure to reach a deal with power companies over the cost of piping the CO2 for storage in offshore oilfields, announced it was scrapping the £1 billion Longannet project.

The immediate trigger, says Stubholt, was "the issue of tough financial times … but this does not take away from the fact that the key problem is that political guidance and leadership is lacking".

Abu Dhabi's ambitious CCS plans, first announced in 2008, will at some point certainly have to address the issue of current commercial viability even as they look to the future.

In 2008, Masdar teamed up with Rio Tinto and BP to develop Hydrogen Power Abu Dhabi, intended to become the world's first commercial-scale hydrogen power plant with CCS technology. But the plan ran into financing difficulties from the outset; Rio Tinto left the project in October 2009 and a final investment decision still has to be made.

Lewis Gillies, the head of carbon management at BP, who was taking part in the 2010 WFES session "Carbon capture technologies", hinted to The National at the time that the delay was because Abu Dhabi had expanded the scope of its CCS vision, planning an unprecedented network capturing emissions from a number of industrial plants and power stations. "It's extremely ambitious," Mr Gillies said. "No other nation has taken such a holistic approach to CCS."

Still to be resolved is the question of whether any CCS scheme can become commercially viable without international funding or changes in legislation. Even the extra revenue from the sale of liberated natural gas would not cover this, Mr Nader warned.

Hopes that carbon-capture projects would be made eligible for financial support under the Clean Development Mechanism (CDM) were dashed at Copenhagen in December 2009. As a result, said Mr Nader: "Commercial viability is still under study and is not clear to us. We need international support because the cost is very high."

A year later, however, the UN's Cancun summit appeared to give countries such as the UAE that very support, proposing that captured CO2 should indeed be able to be used to buy tradable credits for carbon emissions under the CDM - a proposal that was ratified at COP17 in Durban in December.

But there were more "buts". Such credits, commented Keristofer Seryani, the deputy manager of commercial development at Masdar, after Cancun, were likely to cover little more than the cost of capture, and not those of transportation and storage.

That, says Walid Fayad, vice president for Middle East energy, chemicals and utilities with the international consultancy firm Booz & Co, is a key point. The adoption of CCS "depends on the willingness of stakeholders to curb CO2 emissions and in particular on incentives … To kick-start the deployment of CCS, incentives of the order of $30-50 per ton CO2 abated are required". At about four euros - $5 - a tonne, the incentive offered for Certified Emission Reductions under the CDM falls well short.

Yet this week's announcement in Abu Dhabi has demonstrated that the decision to move forward towards the commercial-scale development of CCS in the UAE is not just a question of balancing the books; there is also the role technology has to play in reducing the nation's carbon footprint, as a statement released during a climate change summit in New York in September 2009 made clear. "Masdar," it said, "will play a significant role in meeting this target and reducing the emirate's carbon footprint through its various projects including the carbon capture and storage network."

By showing a practical demonstration of CCS, many now believe that Abu Dhabi can show the rest of the world how this is done - and also reap untold benefits.

Aker Clean Carbon is in the process, says Stubholt, of "reorientating our business model … competing for that part of the market that is still alive".

Sending the gas to the Rumaitha oilfields is exactly what Stubholt is talking about. Enhanced Oil Recovery, in which captured carbon can be used to pressure oil wells, can significantly increase output as well as freeing up for sale the natural gas that is currently used for the job.

The announcement at the energy forum this week is, she says, "very positive news for the industry" with Adnoc, an acknowledged player in the petroleum industry, showing leadership and Masdar focusing attention on "the necessity of realising carbon capture projects to support the sustainable use of hydrocarbons as well as allowing the industrial sector to reduce their substantial and harmful CO2 emissions.

"Part of our strategy is to increase our presence in the Gulf area, because of the eligibility of Enhanced Oil Recovery there, where both the reservoir characteristics and the geology lend themselves to this procedure."

Besides, she remains convinced that "the UAE is going to be an early mover. It's true that there was a time when Masdar had more ambitious timelines, but then again so did everyone else. I follow the Masdar initiative and their CCS interest with keen interest and admiration."

Barry Jones, head of policy for the world-renowned Global CCS Institute in Canberra, Australia, says Abu Dhabi will gain much by taking the initiative in carbon capture. The institute co-ordinates international sharing of CCS information and research, and says there are currently just eight commercial-scale projects working around the world, with another six planned.

"CCS is still at a fairly early demonstration stage right around the world, so it is important that projects do proceed into construction and operation for the demonstration and learning effect that that creates right around the world," he says.

Abu Dhabi's lead, he says, would be "something that would be looked on with great interest and great favour by the rest of the world", but its motivation need not be entirely selfless. "The market estimates for CCS are extremely large so leaving aside the altruistic considerations, there are great benefits to countries from getting in early."

With the vast markets of India and China beginning to explore the benefits of CCS, "it's a potential source of sales and revenue. It also means they would stand to gain from the global mechanisms that are being developed, including the CDM and the Green Climate Fund.

"CCS now has a place at the table, so the more that countries like the UAE can establish their credentials early, the more they stand to gain once the funding does start to flow from those global financing mechanisms."