Select Committee on Science and Technology Memoranda


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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