APPENDIX 22
Memorandum from BP
SUMMARY
The potential offered by Carbon Capture and
Storage—or, more accurately CO2 Capture and Storage (CCS)—to
reduce Green House Gas emissions is substantial, and the UK has
a unique opportunity to adopt a leading international position.
Storage under the United Kingdom Continental Shelf (UKCS) offers
a good place to store CO2, and together the oil, gas and saline
aquifiers are estimated to have the capacity to store all of the
CO2 emissions from power generation from all of Europe for 50
years.
CCS technology can be used to de-carbonise fossil
fuels by converting the fuels into Hydrogen (H2) and CO2. The
CO2 can be permanently stored in subsurface structures, thus ensuring
that it does not enter the atmosphere. The carbon free hydrogen
can then be used to provide heat and light either through direct
use as fuel in power stations or through addition to natural gas
systems as a form of carbon dilution.
BP's and partners' Decarbonised Fuels Project
(known as DF1) based on the Peterhead Power Plant and the UKCS
Miller Field presents an immediate and effective way of establishing
the necessary large-scale technology demonstration of CCS. It
would produce significant environmental benefits by reducing emissions
of CO2 by 1.3 million tons per year, the equivalent of removing
300,000 cars from the roads. Indeed, in terms of the immediate
future, this single project would provide around 350MW of clean
electricity—enough to provide power for all the homes in
a city the size of Glasgow or Manchester.
Policy makers should realise that any credible
policy to reduce CO2 emissions must embrace CCS as part of the
portfolio, as recognised by the IPCC special report on CCS; and
that this ought to be acknowledged in any fiscal or regulatory
regime designed to assist low carbon or carbon free energy to
compete with fossil fuels.
INTRODUCTION
1. There is no single solution to the problem
of how best to reduce CO2 emissions at both the national and (more
importantly) global level, but the potential offered by CO2 Capture
and Storage (CCS) is increasingly recognised, as evidenced by
the recent IPCC Report. CCS needs to be seen as complementary
to both energy efficiency and renewable options for power generation.
2. The United Kingdom is especially well
placed to explore the potential of CCS. The North Sea basin is
ideal for large scale storage. As a result of historical policy
frameworks, the geology under the North Sea is very well understood
and there are sound grounds for confidence that UKCS oil and gas
fields are well suited for storing CO2 and allowing Enhanced Oil
Recovery (EOR). In addition, the North Sea basin often has large
deep saline aquifiers which offer the potential of excellent CO2
sites. Indeed, together the oil, gas and saline aquifiers have
adequate capacity to store all of the CO2 produced from power
generation in Europe for some 50 years. Finally, recycling the
North Sea pipeline infrastructure could play an important part
in enabling cost effective access to these reservoirs. But much
of this infrastructure will be decommissioned over the next 20
years, so the UK's window of opportunity to gain material benefit
from CCS technology will close as that infrastructure is removed.
3. The potential reductions in CO2 offered
by CCS can begin to be realised through BP's and partners' Decarbonised
Fuels Project (known as DF1) based on the Peterhead Power Plant
and the North Sea Miller Field in the UKCS (United Kingdom Continental
Shelf). This project offers this country an unrivalled and rapid
opportunity, once sanctioned by government, to demonstrate CCS
technology on a substantial scale and will give the United Kingdom
the chance of becoming a global leader in the whole area of CCS
and low carbon energy generation. It could also offer substantial
help to this country in meeting its CO2 emissions reductions targets
for 2010 and 2012.
4. This memorandum provides BP's view on
the current state of CCS technology; its commercial viability;
and the policy mechanisms required to make it a reality (especially
relating to DF1). The inherent advantages of the UKCS in terms
of storage and infrastructure not only provide the UK with an
opportunity to achieve significant and rapid reductions in CO2
emissions—DF1 alone would reduce them by 1.3 million tons
annually. But in addition, higher employment and enhanced energy
security would be one of the consequences of the widespread deployment
of CCS in the North Sea.
THE TECHNOLOGY
5. The technology is developing rapidly,
and has three elements: Capture; Transportation; and Storage.
When integrated, these can be used to generate "green"
electricity using CO2-free hydrogen. Each element is described
below, and then integrated using the example of DF1.
6. "Capture technology" is already
available, but for the most part it has only been tested at relatively
small scale (although DF1 provides the first opportunity of demonstrating
the technology in association with a large power plant in operation).
Capture technology includes pre-combustion decarbonisation, post
combustion decarbonisation and oxy firing technologies. In different
industrial settings, each can be deployed at power plants as new-build
and, in some cases, retrofit, and they have application to all
fuel types from gas to coal. However, all are capital intensive,
and their further development will continue at a limited pace
in the absence of policy initiatives.
7. In respect of "Transportation",
the oil and gas industry has over 30 years experience in transporting
large volumes of CO2 in pipelines and ships. The costs and issues
of CO2 transportation are well known and little further Research
and Development is required for commercial deployment.
8. Finally, there is the "storage"
aspect. The oil and gas industry has over one hundred years of
experience identifying and managing fluids in the deep sub-surface.
The geological storage of CO2 is very similar to the management
of other liquids and gases routinely handled by the industry throughout
the world. Indeed, for over 30 years, CO2 has been injected into
reservoirs for the purpose of EOR. Technologically, what sets
it apart from normal EOR operations is the requirement for assurance
of long-term storage integrity. Much of the technology currently
under development is concentrated upon providing confidence around
this whole aspect. The structural and mechanical integrity of
the reservoir and wells are areas of specific study, as are the
appropriate conditions necessary to allow a reservoir to become
an active storage site. Ultimately, when the geological reservoir
is at the end of its active storage phases, it will be abandoned.
Once again, the industry has considerable experience of oil and
gas abandonment, and much of this will be used to form the basis
for secure abandonment to ensure long term safe, secure storage
on CO2 in the rock. The associated issue of long term liability
and the monitoring and reporting of the sealed reservoir will
need to be resolved.
THE COSTS
9. Clearly, there are important issues of
cost and what is required in terms of market and policy measures
to allow the technology to be commercialised. It is not fanciful
to expect existing CCS technology to be in operation within five
years, provided that stable market conditions and the necessary
policy mechanisms are in place. Over a decade, there will be even
greater scope to achieve significant improvements in the technology's
cost performance, although the policy framework will always be
important since it will always cost more to decarbonise fossil
fuels than to burn them without decarbonisation.
10. The costs of power generation using
H2 are competitive with those of renewables and nuclear, but not
non-decarbonised fossil fuels. Current estimates of the incremental
costs of generating power from H2 (as against fossil fuels) are
$55-65 per megawatt hour ($/MWh), which is similar to the level
of support offered to renewables under the Renewable Obligation
Certificate (ROC) scheme. It is expected that technology costs
of CCS will reduce over time, and will require diminishing support.
If so, the competitiveness of CCS will progressively increase.
11. Infrastructure costs for moving CO2
are a significant component. But some of this cost can, as with
DF1, be offset if the re-use of existing infrastructure is possible
and encouraged. Equally, were the United Kingdom to become a global
leader in the export of technology and expertise, this would further
help to offset the initial costs of developing CCS technology.
12. Finally, one should be aware of the
economic advantages offered by pre- (as opposed to post-) combustion.
CCS technology can be used to disassociate the emissions of Green
House gases from the large scale combustion of fossil fuels by:
— removing CO2 from the exhaust stream,
following combustion of fossil fuels (known as post combustion
capture); or by
— removing the carbon before combustion,
thus separating the hydrogen and the carbon that make up hydrocarbons
and producing decarbonised fossil fuels.
If the resultant CO2 stream can be securely
geologically stored, "green" power can be manufactured
from the hydrogen at a comparable cost to the nuclear or renewable
alternatives, or the hydrogen can be added to the natural gas
grid as a form of carbon dilution.
BP'S DF1 PROJECT
13. Against this background, it may be helpful
to describe a little more fully the DF1 Project, which has three
main components:
— the generation of "carbon free
electricity" through the conversion of an existing gas-fired
power station near Peterhead in Scotland to run on hydrogen;
— the manufacture of hydrogen—in
order to supply the power station—by reforming North Sea
gas and capturing the resulting carbon dioxide;
— the transportation of the captured
carbon dioxide via an existing offshore pipeline to the Miller
oil and gas field in the North Sea—and injecting it into
the reservoir to recover additional oil reserves and to extend
the productive life of the field by about twenty years.
14. This project offers an immediate and
effective way of establishing the necessary large-scale technology
demonstration and of helping to meet current emissions targets.
When completed, it will set several technology milestones including
the:
— largest carbon dioxide EOR project
in the North Sea;
— first carbon dioxide pipeline in
the North Sea;
— largest hydrogen-fired power generation
facility in the world;
— largest Auto Thermal reformer for
generating hydrogen.
15. There is no single solution which can
by itself deliver the world's CO2 targets, but there is a portfolio
of technologies that have been demonstrated at scale, and which
collectively offer the opportunity to make the necessary reductions
over the next 50 years. Because the world will be dependent on
conventional hydrocarbons for the next 50 years, hydrocarbon-based
technological solutions for climate change will be one of the
major contributors to stabilisation. DF1, for example, will reduce
carbon dioxide emissions by some 80 to 90% for each unit of electricity
produced. Indeed, if applied to only 5% of the new electricity
generating capacity which the world is projected to require by
2050, the world would have the potential of reducing global CO2
emissions by around one billion tonnes a year.
16. There are also security of supply implications.
The project will prolong the life of the Miller Field through
enhanced oil recovery and through the postponement of abandonment
(which could eventually be imitated throughout the North Sea).
But more important, it demonstrates a viable technology pathway
for clean energy production from a broader range of primary energy
sources (eg coal, biomass) which would improve energy security.
17. In terms of the immediate future, this
single project would reduce emissions of CO2 by 1.3 million per
year (the equivalent of removing 300,000 cars from the roads)
and provide around 350MW of clean electricity—which is enough
to power all the homes in a city the size of Glasgow or Manchester
(250,000 homes).
18. DF1 (and other CCS projects) has one
other major environmental benefit. It does not require back-up
from fossil fuels to address the problem of the intermittency
of wind or sun. It provides base load capacity, and although it
may not be totally carbon free, it provides virtually carbon free
energy for 100% of the time.
THE ROLE
OF GOVERNMENT
19. As stated above, the costs of CCS are
similar to renewables which suggests that the time has arrived
to consider seriously whether a Climate Change Policy should not
seek to be rewarding low carbon (or carbon free) energy on an
objective, impartial basis rather than through the "picking
of winners" as exemplified by the current policy which favours
renewables. This in no way questions the role of renewable energy
initiatives. BP is involved in this area as well, and there is
no doubt that a variety of carbon reduction strategies and technologies
will be required in order to reduce significantly green house
gas emissions.
20. But the opportunity offered by DF1 is
unique, and will not remain indefinitely which is why the implications
for public policy need to be confronted quickly. This is because
DF1 offers the possibility to prove the concept of CCS in the
UK and North Sea in a relatively short time frame. Before DF1
became a possibility, the Miller Field was a certain candidate
for decommissioning—and would still be if, for any reason,
DF1 were to be prevented from happening. Hence, it is necessary
that incentives should be in place quickly which are equivalent
to those currently available to non-carbon options. This is not
merely to facilitate DF1; and it is not just to demonstrate the
technology, important though this is; it also provides the UK
with the opportunity of seizing a leadership role in promoting
CCS technology globally by the early utilisation of part of the
UKCS storage capacity. But to do this, the necessary policy instruments
need to be in place.
21. There are other issues, in addition
to incentives, where government has a role to play. For example,
provisions of both OSPAR and the London Convention will need to
be discussed. The rules of the European Emissions Trading System
(EU ETS) will need to clarified. And new regulations and permits
will also be required embracing a number of areas, including approvals
for new plant onshore (for pre-, post- or Oxy-firing technology);
for pipeline access to move CO2 ; and for injection of CO2 offshore
geological structures under the seabed for EOR and ultimately
for storage.
22. But over the next twelve months, as
UK Energy Policy evolves, it is vital for policy makers to recognise
that any credible policy to reduce CO2 emissions must embrace
CCS: and that this ought to be acknowledged in any fiscal or regulatory
regime designed to assist low carbon or carbon free energy to
compete with fossil fuels. BP anticipates that over time—and
given increasing scale, experience and technological expertise—the
cost of schemes like DF1 will reduce. But that is not the case
today, even though CCS is well placed to argue that it is both
commercially and environmentally on a par with (if not ahead of)
any existing alternative. Obviously, a properly functioning Emissions
Trading System would be of enormous benefit to CCS projects—although
the specific European system is currently insufficient, even if
the rules were to be clarified, because it fails to provide a
framework of sufficient duration and the current (and indeed,
forecast) level of carbon price is inadequate to encourage business
to invest the very large sums required.
CONCLUSION
23. It is estimated that up to one third
of the required reductions in global CO2 emissions could be made
by CCS technology. CCS is uniquely placed to help build a bridge
to a low or no carbon energy future in the next 50 to 100 years.
24. The United Kingdom is also uniquely
placed to lead this process of commercialisation. Geological storage
is the primary method of storage for CO2 in this context—and
as already stated, together the oil, gas and saline aquifiers
have adequate capacity to store all of the CO2 produced from power
generation in Europe for some 50 years. However, there is no time
to lose because all the North Sea infrastructure (required for
CCS) will disappear over the next 20 years unless something changes.
25. The UK has the opportunity presented
by the Miller Field alone to store permanently all the CO2 produced
over 20 years by the Peterhead onshore plant. If replicated wider,
this would also enhance security of supply, since the injection
of CO2 into the North Sea will also prolong the life of existing
fields which otherwise were due to be decommissioned. But, as
already emphasised, the window of opportunity is small.
26. For all these reasons, policy makers
throughout the world need to embrace CCS within their mix of measures
by creating a level playing field of support and incentives for
low and zero carbon energy. If the ultimate objective is to reduce
Green House gas emissions, there is no doubt that a policy framework
which supports the widespread deployment of CCS is both necessary
and desirable.
October 2005
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