Examination of Witnesses (Questions 140
- 159)
WEDNESDAY 7 DECEMBER 2005
MR COLIN
SCOINS, MR
RODNEY ALLAM,
MR NICK
OTTER AND
MR GARDINER
HILL
Q140 Chairman: Are you saying, Gardiner,
that unless the Government—the British Government in this
case—actually makes a commitment to take, if you like, ownership
of the problem once the licence is completed, it is not worth
your while investing in this technology?
Mr Hill: I think that is right.
Q141 Chairman: Could you answer yes
or no?
Mr Hill: Yes.
Q142 Dr Harris: Could I ask how concerned
you all are about public attitudes to carbon storage?
Mr Hill: Perhaps I could continue,
as I am speaking. I am concerned about that. I think that is a
really important point. We need to start a process to communicate,
educate and inform the public over what the risks are and what
is being done to manage these risks.
Q143 Dr Harris: That implies you
have not started yet.
Mr Hill: We are doing what we
can in BP in the projects we are involved in. I think a lot more
needs to be done. I think the level of awareness is quite low.
I think that is a potential show-stopper. If it is not deemed
to be acceptable by the public then they may say: we do not want
the technology.
Mr Scoins: It is absolutely vital.
The environmental and technical risks seem entirely manageable
but every society has to be convinced that that is the case, otherwise
there would be a risk going forward to the process.
Mr Otter: I agree that it is a
major issue. I think there are exemplars already in the world
where you can have this consultation and involvement of the public.
I cite the Gorgon Field in Western Australia where they are putting
CO2 into a very sensitive area. I have seen the environmental
study that they did for that and the major consultation action
that they had to do. So there are some very good exemplars, not
only for public perception issues but also for putting these things
into very sensitive areas because the Gorgon Island is a class
`A' nature reserve; it is a very sensitive area.
Mr Allam: Most of the public do
not even know what carbon capture and storage is. They do know
what a nuclear power station is and they can see a wind turbine
but they do not have the slightest idea what carbon capture and
storage is. It is very important to show the basic information
that there is an alternative in carbon capture and mechanism.
Q144 Dr Harris: Do you think the
problem has started already with NGOs and newspapers?
Mr Allam: Yes. We have had more
exposure in the last seven days than we have had in the last seven
years.
Chairman: That is entirely as a result
of this committee's work!
Q145 Dr Harris: Would you describe
what we are considering now as carbon dumping?
Mr Allam: No, absolutely not.
Q146 Dr Harris: The Guardian
did on 15 June: "Ministers back carbon dumping." The
Guardian is a paper of repute.
Mr Allam: I think it is not carbon
dumping. It is the use of carbon in a form for the UK which would
be very valuable as a gas with a value for enhanced oil recovery.
It is very far from being a dumping issue.
Q147 Dr Harris: If that is the language
in the newspapers now, even in the serious newspapers, then there
is a problem, is there not?
Mr Allam: Certainly there is.
Mr Hill: I think there is a problem.
If you want to choose to use that language, you could say, "What
are we doing today?" and today we are dumping the CO2 in
the atmosphere. That is having a severe impact on our climate,
which will impact on all of us, so we could offer you a choice.
Q148 Dr Harris: That article referred
to something stated by Doug Parr of Greenpeace, who said: ".
. . this technology is a distraction from the real priorities
of implementing renewable energy and energy efficiency technologies
which are available right now. We've given tax breaks to companies
for getting oil and gas out of the ground; we shouldn't subsidise
them to put the subsequent pollution back underground." Did
they say that to you? They are coming later.
Mr Hill: Absolutely, and they
clearly have a view on that and I think that is terrific and we
would respond to it.
Q149 Dr Harris: You are happy to
be labelled the new Monsanto? You are ready for that?
Mr Hill: Not at all. All I am
saying is that it is terrific they have a view and we would respond
to that by saying, "Look at the actions our company in particular
has taken".
Dr Harris: I think Monsanto did that
as well, yet still the majority of British people still think
GM has an effect on the food we eat.
Chairman: We are not going down that
road.
Q150 Dr Harris: Are you suggesting
that some people might consider it complacent for you to say it
is great that there is going to be an NGO campaign, come on, we
can take it?
Mr Hill: No, I did not mean that.
If that is the impression I gave, I did not mean that at all.
All I am saying is that clearly they will have a view and we have
to respond to that. We have a very large renewables investment
in the company. We have recently announced an alternative energy
offer that we are trying to make to promote the development and
deployment of low carbon technologies and CCS is part of that.
We are not complacent. I think we have a leading programme in
this area and we want to make these offers available to the public.
Mr Scoins: There should be a grown-up
debate about these issues that affect us all as members of society.
It should not be an argument.
Mr Hill: If we really want to
tackle climate change, we are trying to be very proactive and
offer solutions.
Q151 Dr Harris: The Greenpeace European
Unit website states that there are critical risks associated with
carbon capture and storage and that CO2 leakage poses a risk unqualified
to human health, the environment and the climate. What do you
think you can do as a company or as an industry to start being
proactive? Do you have a media strategy?
Mr Hill: We have a general approach
on how we communicate the offers that BP makes to the customers.
One of the things we have been doing over the last five years
is participating in a very deep way in a programme called the
CO2 Capture Project. That has been a project developing technology
to reduce the cost of capture but also to show that the storage
of CO2 can be done safely in geological structures and deep saline
aquifers. This is an inter-government public/private partnership
with eight oil and gas companies and three different governments
working together. There is also quite a large communications part
of the project. We produce materials, videos and brochures. We
have held engagement sessions with NGOs and other stakeholders
to try to communicate and educate on the issues. Indeed we went
further and we asked them to participate with us and raise their
concerns on the issues of CCS so we can address these as part
of the project and come up with solutions that are acceptable
to both the NGO and other stakeholder communities. We have engaged
Greenpeace who have been coming to our meetings and are familiar
with the technology. We are responding to their concerns and incorporating
those into our programmes.
Q152 Mr Flello: From a commercial
perspective, what do you feel are the advantages and disadvantages
of using oil and gas fields and saline aquifers in the North Sea
for storage?
Mr Hill: I think the advantage
of using oil and gas reservoirs is that there is the real potential
for additional oil recovery as you store the CO2 in the reservoir.
That has been well proven by the 72 CO2 EOR projects. In fact
today there is actually a shortage of CO2 in the US to be used
for enhanced oil recovery because there is such great demand,
so I think that would be a good place to start. The value derived
from the enhanced oil production in some way starts to offset
some of the costs of deploying CCS technology. There may be some
similar benefit if applied to gas reservoirs, although it is less
clear that you will get very much enhanced gas recovery. You may
get some. So if you can deploy the enhanced oil recovery will
offset some costs. The next place probably is that with gas reservoirs
we may get some benefit and gas reservoirs happen to be very good
places to store CO2. When you move to the third storage group,
deep saline aquifers, I think the financial hurdles are more difficult
because there is no obvious additional value.
Q153 Mr Flello: You mentioned the
US shortage of CO2. Do you see an industry developing where the
likes of China, if they are producing and capturing, their CO2
shipping that in tankers across to the UK to unload at terminals
here to pump into the North Sea?
Mr Hill: I think that is possible
but most unlikely. I know people are looking at transporting CO2
by ship. The economics today suggest that you can only do that
over moderate distances where there is no pipeline available.
I think there is enough CO2 in the European basin that could be
used to store in the North Sea and it would be more cost-effective
taking that from local sites in Europe than shipping from China.
China has particularly large challenges facing it today. They
are not particularly focused on the issues of climate change;
they are much more focused on providing the energy they need to
develop their country, but also to tackle the air quality issues.
I think when we get to the air quality issues conversation, there
is an opportunity for us also to adopt CCS type technologies which
will address air quality and start to address climate change.
If we can make these links, we can perhaps make inroads to a country
like China quicker than we would otherwise if we just went in
on the climate change plan.
Mr Scoins: In general, we can
expect to see transport of certificates for emissions not the
transport of CO2.
Mr Allam: CO2 has to be transported
at pressure rather than at atmospheric pressure as the oil is
transported, so it tends to be very expensive compared with using
normal tankers.
Mr Hill: They are converted tankers.
The design work has been done to convert LPG tankers which require
pressure, so it is possible.
Q154 Mr Flello: Do you feel there
is any mismatch then between the location of possible storage
sites where CO2 is being produced?
Mr Hill: That is a piece of work
that is being done right now. It has been done in Europe; it has
been done in the US. Currently it is being done in China actually.
It is really trying to link together and take a view on where
are the sources (it includes the big point sources we could capture)
and where are the good reservoirs for storage. It turns out in
Europe that in fact the juxtaposition is quite good. So most of
the power generation is actually on the east coast adjacent to
the North Sea and also on the north coast or near the north coast
of Europe. So there is enough storage in the North Sea to store
about 50 years of all emissions from power generation in Europe.
There is a good juxtaposition between source and sink. In the
US there is quite a good juxtaposition of sources and sinks, mainly
because the oil fields in the permean basin area. There is not
such a good fit in the North East (USA) but there are some very
large, deep saline aquifers which are very extensive and run underneath
two or three different states, which turn out to be good potential
storage sites. Where initially there are not good oil and gas
reservoirs, there tend, as a rule of thumb, to be good deep saline
aquifers.
Mr Otter: I think mapping sources
and sink is quite an important issue. Clearly there are a lot
of initiatives world-wide to do it at the present time, particularly
in China. Gardiner mentioned that. The Carbon Sequestration Leadership
Forum that I personally am involved in is trying to set standards
for the way that you assess the potential of such sites because
they tend to be done in different ways. People map sources and
sinks differently at the present time to coincide. Something that
I think is particularly important is the capture-ready route in
preparing the way forward, and then of course you will site new
power stations in such places as China if you know that you can
put them close to a storage site that will minimise the transportation
costs, and that is part of that process. Therefore, you have to
understand where the storage sites are and what the potential
is in a way that you can justify. If you go back to the engagement
of these types of technologies into, for example, the emissions
trading scheme, you have to be sure about what is down there;
you really do have to quantify that and understand it properly
in a consistent international manner.
Mr Hill: One thing this does bring
up is this really important role of infrastructure and that by
having a good sense of sources and sinks there is then an opportunity
to either look at location of new sources of CO2 or to try to
design an infrastructure which optimises the movement of CO2 from
source and sink. I think, if we want to see CCS play a large role
in helping combat climate change, infrastructure will become an
important issue and an important piece of the puzzle.
Chairman: We move to a key area of our
inquiry, which is costs.
Q155 Mr Newmark: A range of costs
is cited for different sectors. One sector will be dealt with
later on so I am not going too much into that. According to your
calculations, are costs of generating electricity using carbon
capture, nuclear fuel and renewable technology such as wind power
comparable? What are the uncertainties in your calculations?
Mr Allam: The best data on costs
is in the recently published IPCC report. I believe the committee
has probably had the summary of that report, a technical summary.
The full report will be issued shortly. That gives costs for all
the perceived methods of carbon capture with assessments of the
benefits of different forms of storage, particularly the benefit
if it is used for EOR. Those figures need to be looked at carefully
because they use rather low values for the price of oil and they
assume that you can take the whole operation of carbon capture
and storage as one economic benefit, and clearly there are different
commercial interests active in carbon capture, generation and
carbon storage, and EOR. There are questions of transfer price
and the regulation between the two. As far as the risks go, they
are quantified in that report. Gardiner and I have talked about
that previously, about the different degree of risk for different
types of capture, whether it be the pre-combustion, post-combustion
or oxyfuel method, and with various types of fuel. One thing about
that report is that you will see there is a wide variation of
costs given. It is necessary to go to the full report to take
the latest values—
Chairman: We are anxious to know what
your views are rather than what is in the report. We have a summary
of the report.
Q156 Mr Newmark: To be clear, I have
not read the report but I am also concerned with the other alternatives
out there. Does that report go through the alternatives or various
forms of carbon capture?
Mr Allam: The report merely deals
with carbon capture and storage. You have to look at other assessments,
such as the Royal Academy of Engineering assessment, which gives
pretty good figures on wind power, nuclear and renewables.
Q157 Chairman: May I repeat that
I am anxious to know what the commercial view is from you rather
than just what the report states.
Mr Scoins: You are asking for
a single answer.
Q158 Mr Newmark: We are asking as
much for an impression as for a specific amount.
Mr Scoins: The measure of the
alternatives is really a CCGT plant in terms of alternatives.
That is what the basic technology for deployment is at the moment.
You are looking at comparing alternatives; you are looking at
that being a function of gas price and the carbon price. Alternatives
have to be looked at against that, site-specific. When you talk
about EOR, it might be a site-specific advantage for a carbon
capture project. You cannot get away from that. In general, if
you took a base idea, nuclear would probably be the cheapest,
in our view.
Q159 Mr Newmark: Is that is for all
costs and incentives or stripping out incentives from that case?
Mr Scoins: I do not know what
you are talking about when you say "incentives". How
can I answer that? A free description is subsidy-free. I think
we put the detail in our written submission to you and it lists
the various factors for each technology, but if they are going
to be ranked, then probably all technologies can co-exist depending
on the regulatory environment for each.
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