Select Committee on Science and Technology Written Evidence


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.


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.


  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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