APPENDIX 15
Memorandum from Royal Dutch Shell plc
1. Shell shares the widespread concern that
the emission of greenhouse gases (GHG) from human activities is
leading to changes in the global climate. Our commitment to CO2
reduction is serious and demonstrable, as illustrated by our existing
voluntary GHG target, which will see GHG emissions across all
the facilities we operate 5% lower in 2010 than they were in 1990,
even though our business has grown in that period. However the
needed future global reductions will require a new set of technologies.
2. Shell clearly recognises that a major
change in energy infrastructure and the way energy is used will
be needed over the coming decades if society is going to address
the issue of climate change. No single solution will deliver this
major change. Shell has a long history in research and development
of new technologies, which are an important element of our strategic
direction around the world and we have developed the broadest
new energy portfolio in the industry, with the largest investment
in these technologies of the oil and gas majors.
3. We welcome the Committee's Inquiry into
carbon capture and storage technologies and turn now to some of
the Committee's specific areas of interest.
THE CURRENT
STATE OF
R&D IN, AND
DEPLOYMENT OF,
CCS TECHNOLOGIES
Geophysical feasibility
4. Shell supports and is involved in the
development and deployment of geological sequestration as a safe,
reliable and ultimately cost-effective mechanism to reduce industrial
CO2 emissions.
— The technology required for geological
sequestration is proven and in common use in the oil and gas industry
for enhanced oil recovery. This fits with our business and builds
on our strength in understanding subsurface structures and processes;
— Wide-spread, large storage capacity
has been identified that is sufficient to store significant amounts
of global CO2 emissions over the next century;
— Research has shown that CO2 can be
securely stored for thousands of years or longer, with ongoing
work and field trials to further clarify the risks involved.
5. To help society make an informed choice
about the role that geological CO2 sequestration might play in
a portfolio of measures to mitigate climate change we are:
— Working with national geological
services, research institutions and other energy companies to
develop the science and methodology that is required to comprehensively
assess the environmental performance of geological sequestration.
Examples are:
— In the United States, the West Coast
Regional Carbon Sequestration Partnership and the CO2 Capture
Project, which is a joint industry project comprising eight of
the world's leading energy companies. Technologies developed by
this project will be used in many different industries and applications
around the world.
— The Australian based CO2CRC programme
where Shell is an industry sponsor. This is a research consortium
that is looking into both CO2 capture technologies and geosequestration.
The CRC intends to launch a pilot CO2 sequestration project in
the State of Victoria within the next year.
— Conducting, with the support of the
European Commission and in association with Geo-Research Center,
Potsdam and other partners, a CO2 sequestration field test near
Berlin that aims to provide detailed insight into the subsurface
behaviour and movement of CO2; the CO2 will be generated from
the emission-neutral combustion of biomass.
— Studying novel ways to manage natural
subsurface chemical reactions with a view to further increase
the safety and security of CO2 storage.
— We are developing both pre- and post-combustion
capture technologies. Pre-combustion technologies include gasification
and amine and post-combustion technologies are being considered
for a North Sea field and a Gas-to-Liquids project in the Middle
East.
6. Our work on sequestration is complemented
by the development of technology for the cost-effective separation
of CO2 from combustion sources. The key R&D theme that Shell
has identified is the feasibility and integrity of storage.
Cost
7. In costing CCS components there are different
ranges, in terms of cost per tonne CO2 avoided, for capture from
power plants (including separation and compression), capture from
industrial sources (including separation and compression), transport
(pipeline; mass flow rates) and geological storage.
8. Likely sources for reducing costs are
industrial R&D and learning-by-doing.
9. Given that "learning-by-doing"
is an important source of cost reduction, it would be desirable
to have one or more CO2 capture and storage demonstration projects.
These projects should aim at demonstrating the whole CCS chain,
namely CO2 capture together with geological sequestration. An
important value of these "integrated demonstrations"
is that they could, in addition to technology learning, provide
clarification of the transaction costs and procedures for obtaining
credits for CO2 abated through geological CO2 sequestration and,
furthermore, shed light on regulatory compliance costs and procedures.
These demonstration projects ideally should allow for a variety
of CO2 sources, capture technology and geological sinks in order
to be representatives of a CCS infrastructure. Because of the
cost involved, cooperation with other countries, particularly
those participating in the EU Emissions Trading Scheme appears
to be sensible.
Other obstacles or constraint
10. The spreadsheet (Appendix A) illustrates
future EU-25 energy options in the context of a long term global
atmospheric concentration of CO2 of no more than 550 ppm, which
also has other regions making substantial changes. The options
discussed are not a scenario, but an illustrative hypothesis to
gauge the extent of change needed in our energy infrastructure
and the impact that might have on the EU. The spreadsheet is not
an endorsement of any particular pathway, technology or specific
atmospheric concentration target.
11. Four of the five "Tyndall integrated
scenarios" published in the Tyndall Centre's recent report
"Decarbonising the UK: Energy for a Climate Conscious
Future" suggest that grid connected power stations will
require significant quantities of CCS if the UK is to meet its
target of 60% cut in greenhouse gas emissions by 2050. In
these scenarios the proportion of grid connected energy supplied
using coal or CCGT power stations with CCS ranges from 16% to
55% in 2050. It is only where nuclear forms just under half
of the primary energy demand mix that no CCS is required to meet
the 60% cut.
12. We support practical actions by Governments
to remove non-technical barriers that could impede the deployment
of geological sequestration. These involve the inclusion of geological
sequestration in national and international greenhouse gas inventory
and trading schemes, and establishing a legal and regulatory framework
for sequestration.
13. Spatial planning is an important factor.
New facilities (especially power plants, cement, factories etc)
that produce CO2 should be designed and located so that in time
they can sequester their CO2 emissions or deliver them to CO2
users. New CO2 users should consider locations close by existing/new
CO2 sources. The Government should also lead/steer efforts to
assess the desirability of installing a more comprehensive CO2
network.
14. As noted in the penultimate paragraph
of this submission, we believe that if new major gas infrastructure
is required for CCS then it is likely that no-one company will
be able to meet this cost. This suggests an alliance-based approach
with Government involvement to explore the options for how infrastructure
could be developed.
15. Without a monetising instrument CO2
(and its sequestration) has no real value. In the UK the monetising
instrument is an "allowance" most likely held on a Government
registry under emissions trading legislation such as the EU Emissions
Trading Scheme. To finance sequestration and other carbon abatement
technology (CAT) there must be a link between physical reductions
and allowances. As the EU ETS will most likely be the primary
source of finance of the bulk of CAT commercialisation in the
UK and Europe, there are two key areas that are critical to the
discussion as to how that might happen:
— The implementation of CAT will obviously
be at installations that are defined under the EU ETS, otherwise
the physical reductions could not earn allowances.
— The resulting physical emissions
reductions should be acceptable under the EU ETS Monitoring and
Verification Guidelines. This is a significant issue because sequestration
for example is not currently accepted under the Guidelines. This
means that sequestration at present may physically remove emissions
but will not earn allowances.
16. We acknowledge the work of the DTI Working
Group on CCS and ERM in respect of monitoring and verification
guidelines (Outline Template for Draft interim monitoring and
reporting guidelines for CO2 capture and storage under the EU
ETS, July 2005) and welcome the ongoing consideration of these
important aspects.
17. The complexity of CO2 sequestration
raises numerous questions relating to regulatory, legal, liability
and public acceptance issues. Geological sequestration in particular
takes policy makers into uncharted waters and raises many novel
issues including public perception, regulatory frameworks, legal
liability and intergenerational equity. Apart from the IEA Report
on monitoring CO2 storage, there is relatively little data on
regulatory compliance cost for sequestration projects.
18. In addition, there are unresolved technical
issues, for example we need to validate our reservoir engineering
models against field experiments/tests to increase confidence.
Such field tests could include the Sleipner natural gas field
in the Norwegian sector of the North Sea, the CO2SINK project
near Berlin and other similar projects.
19. If the pace of developments in CO2 sequestration
and CO2 capture do not match, then the overall drive towards CCS
will be held back.
20. With regard to assessing the environmental
risks of long-term geological storage this is an area in which
private companies may lack the credibility and legitimacy required
to drive the process. While some international cooperation on
risk assessment has already started, the process is still in its
infancy and would benefit from a more proactive engagement of
Governments. Academic institutions may also be able to play an
important role in risk assessment activities as independent authorities.
21. Given that the application of CO2 enhanced
oil recovery in harsh offshore environments is not fully mature
(most current examples are onshore), barriers to utilisation include
the economics of expanding and upgrading facilities (the replacement
of facilities is significantly more expensive than in the onshore
environment) and expanding the infrastructure to allow drilling
additional wells. Thus key areas for technology development are:
— Novel technologies that would allow
cheap "in situ" conversion of existing infrastructure
(including facilities and wells) to handle CO2 and subsequent
souring.
— Technology/engineering to greatly
reduce the footprint (or upgrading of existing infrastructure)
needed for compression and oil treatment/CO2 separation.
22. In carrying out its work to date Shell
has identified a number of areas where there are gaps that need
to be addressed in order to fully assess and bring to market carbon
capture and storage technologies such as Trapping Mechanisms,
Risk Assessments, Monitoring, the Regulatory Framework and Site
Selection.
The UK Government's role in funding CCS R&D
and providing incentives for technology transfer and industrial
R&D in CCS technology
23. On the subject of funding we note that
while Government support for R&D is valuable, it appears from
experience with SO2 capture in the United States that market drivers
and cost effective regulation were a more powerful incentive for
innovation and development.
24. As far as incentives are concerned for
CO2 we believe that Government and industry should work in partnership
to develop a new policy framework to scale up investment in low
carbon technologies and processes. If new major gas infrastructure
is required then it is likely that no-one company will be able
to meet this cost. This suggests an alliance-based approach with
Government involvement to explore the options for how infrastructure
could be developed.
25. Another important research field is
the design of a future CO2 infrastructure. As an example Shell
initiated a study with Imperial College on the combined H2/CO2
infrastructure for Greater London transportation systems, which
looked at the question of whether large scale, central production
is preferred to capture CO2 or small-scale decentralised production
that fits better H2 needs. Similar considerations need to be investigated
for centralised or decentralised heat/power generation.
September 2005
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