CCS in Australia- the Storage Challenge

Dick WellsChair CCS Council

Global CCS Members’ MeetingRotterdam 9 -10 May 2011

Key Messages:

• Australia potentially has sufficient storage capacity, but costs vary substantially with location

• There are multiple resources in the basins with pre-existing resource property rights

• Establishing storage is the “rate determining step” in most cases for CCS projects

• Need to invest in commercial scale demonstration projects

• Need to consider further policy incentives if CCS is to be available for commercial deployment from 2020

Why CCS in Australia?

• Target: 60% reduction of emissions by 2050

• Coal provides 80% of electricity supply

• 32% of Australia's emissions come from coal-fired electricity

• Australia also has emissions-intensive industries which underpin Australia’s economy

• Offshore and onshore storage capacity

• Other initiatives to meet emissions reduction targets

Demonstration of post-combustion capture – Victoria

CCS Policy and ProgramsAustralian Government investing $2.2 billion

• Clean Energy Initiative – CCS Flagships

• Release of the world's first greenhouse-gas acreage for commercial exploration

• National CCS Council

• A Cleaner Future for Power Stations

• Research, Development & Demonstration activity

– Australian National Low Emissions Coal R&D Limited (ANLEC R&D) Agency

– Small to medium scale pilots

– Large scale demonstration projects - CCS Flagships Program

• International collaboration - Global CCS Institute

Australia’s CCS Council

• Announced November 2010 by Minister for Resources & Energy

• Commercially-oriented advice to the Australian Government on accelerating availability of CCS in Australia

• Includes: power generators (coal-fired and gas-fired), coal industry, upstream oil and gas industries, research sector, Federal and State governments

Builds on previous work in Australia:• CCS for coal-fired power

- former National Low Emissions Coal Council• Multi-user hubs

- former Carbon Storage Taskforce

www.ret.gov.au

“Australian Carbon Storage Task Force” (2009)There is storage capacity for >70 years of emissions....

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Storage of CO2 in saline formations, depleted oil & gas fields are proven & safe

About 40% of saline aquifer storage capacity is located in the east, where CO2 emissions are highest

High confidence of storage capacity for at least 70 and 260 years of emissions respectively in the east and west

The carbon storage capacity of gas&oil fields is 16.5gigatonne

Potential resource conflicts are manageable – fresh water aquifer, existing petroleum production operations, geothermal, CSM etc

Ranking of Australia’s basins for storage suitability

National Carbon Mapping & Infrastructure Plan Australia

Distribution of emissions by industry estimated for 2020. Source: Carbon Storage Taskforce (2009)

Commercial scale demonstration: CCS Flagships Program – Stage 1 Shortlisted

Projects

Collie South West Hub To sequester 2.4 MT per year with potential to 7 MT per year

ZeroGen *400MW IGCC sequestering 3.0 MT per year

Wandoan 330MW IGCC sequestering 2.5 MT per year

CarbonNet hub to sequester 3 – 5 MT per year

* Now being suspended and documented due to withdrawal of investors

ZeroGen- Lessons Learned

• Sequential project development path needed

• Need to diversify storage appraisal (eg more than one option)

• Work on Northern Denison Trough and pre-feasibility work across the integrated project will be valuable

• Learnings will be documented and shared

Gorgon LNG project

Gorgon LNG project off Australia’s north west coast – first gas planned for 2014– 15 million tpa LNG

Gorgon Joint Venture participants:– Chevron (50%), ExxonMobil (25%), Shell (25%)

Gorgon CO2 Injection Project will inject and geologically store around 3.5 million tonnes per annum of captured CO2 reservoir gas

– world’s largest CCS project– project cost approx AUD $2 billion– project recognised by the international Carbon Sequestration

Leadership Forum (CSLF)– will share information from the monitoring program

Long term liability arising from Gorgon’s storage of CO2– Australian and WA Governments jointly accepted

Challenges for CCS Deployment •Greater levels of certainty needed for prospective geological storage

–More prospective areas often have pre-existing resource property rights–Areas without significant resource competition are less prospective and less understood–Screening, characterisation and selection take 5-10 years with development a further 3-5 years – especially in Australia where exploration seismic, rigs are less numerous and widely dispersed.

•Carbon price uncertainties

•Need for whole of CCS project integration of risk management and dependencies

•Certainty over policy settings for treatment of pre-existing resource rights and long-term storage liability

•Community acceptance

Indicative project timeline – Power plant with CO2 capture and storage

Power plant with CO2 capture

Appraise Select Define Execute Conceptual/ OoM

Pre-feasibility and site selection

Feasibility and FEED Financial

close

Construction

Commission MILESTONES: MA MB MC MD 3-6 months Cost < .05%

12-18 months Cost <0.5%

27-36 months Cost 5-10%

6 mths Cost<.5%

36-48 months Cost 88-93%

6-12 months Cost .5%

CO2 geological storage site Multi Basin/ Multi play scoping

Exploration - Multi-area/ Multi-play

Appraisal & development (specific site)

Financ. close

Construction

MILESTONES: M1 M2 M3 M4 Commission. 6-42 months

Cost $2M/basin 24-48 months

Cost $50-70M for each area 36 - 84 months

Cost >$100M for site 4-6 mths 30-36 months

Cost $150M - $200M 4-6 months

Permitting – power plant and storage aspects. Power plant EIS Power plant NT/CH 24-36 months

Access to Land Storage NT/CH Issues, Consultations Exploration Permit CO2 storage licence

6-12 months Timelines being defined

TOTAL TIME 90 – 126 mths (7.5 – 10.5 yrs)

TOTAL TIME FOR STORAGE 93 – 172 mths (8 – 14 yrs)

Milestones and Go/No Go decision points: M1 Access to land granted; exploration permit granted; community consultations started; Areas of interest defined for proceeding with exploration work M2 Site defined for proceeding with detailed appraisal work MA Power plant site selection for feasibility study; MB Power plant site defined for FEED study. Requires high level of confidence for the selected CO2 storage site. M3 Storage EIS prepared; storage NT/CH agreements in place; storage site proved; injection licence confirmed MC FEED completed; EIS prepared; storage NT/CH agreements in place. M4 Final Investment Decision confirmed to proceed with plant construction MD: Final Investment Decision confirmed to proceed with storage site construction

CCS project lead times are long- especially storage evaluation

Exploration & development lead time is on the critical path

Storage is now recognised to be critical path

First capture hub could be commercially viable by 2020. Exploration needs to start immediately to meet this timeline

Few or no commercial drivers for investment today & transitional incentives are needed

The expected level of activity is manageable

CO2 transport & storage has many parallels with oil & gas, but it poses challenges that require a different approach and mix of skills & knowledge for industry & authorities

A targeted pre-competitive data acquisition program is needed

Significant further R&D needed

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Storage exploration, appraisal & development schedule

13Australia's Carbon Storage Capacity - Carbon Storage Taskforce

Cost of transport & storage

Transport & storage tariffs vary widely for hub/basin combinations

Impact on electricity prices is 1-10 cents/kWhr depending on location

Total capital cost of transport & storage $25-35 billionPhased over period 2020 to 2035

Does not include LNG projects

Does not include exploration, appraisal & development (further ~$6 billion)

Taking exploration risk into account could increase tariffs by ~40%

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Insert variable tariffs here

$/tonne CO2 avoided for hub/storage basinsMid depth case CO2 tariff

Range of tariffs for shallow, mid & deep basin locations

Transport and storage cost per MWh For mid depth case CO2 tariff

Public acceptance is essential for deployment, particularly onshore, & particularly for pipelines

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Community need assurance that CCS deployment will be safe & secure

Community perceptionsDisproportionate funding of coal technologies;

solar/renewables as a solution; impact of low emissions technologies on power costs; NIMBY

Need to engage with influential stakeholders, & examine actions to address community concerns more widely

Industry stakeholders to be consulted on the most effective structure to enhance communications for CCS deploymentDevelop credible, verified, consistent

messages, & create a reference source to avoid duplication

Develop CCS messages in the context of the whole portfolio of responses to climate change

Map of Key Stakeholders

Demonstration projects are important for investor confidence

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Reservoir Simulation Modeling – Plume 500 years

Commercial investment unlikely until a carbon market is established

Project financiers see high risk in untested integration of process & in scale-up

Demonstrations should be of significant scale (greater than 1 Mtpa)Gorgon LNG project will be the world’s largest CCS

project (3.5 Mtpa) when sanctioned

Demonstrations need to link capture, transport& storage elements - crucial for investor confidence

Proposals for significant-scale, linked demonstration projects in the Gippsland, Surat&Perth basins should have funding priority

Preferable that demonstrations evolve into demonstration hubs, to show viability and to capture economies of scale

Light grey – low concentration CO2

Dark grey – high concentrationCO2

Red-reservoir Blue – seals

Figures courtesy Chevron

Storage risk & consequence

What needs to be done …

In the next two years:

• Complete national legislative and regulatory framework for storage– Passed in key jurisdictions onshore and offshore– Establish clear licensing pathways across key agencies

• Continue to assess storage potential

• Storage communications strategy

• Progress capture projects

• Develop commercial framework to enable investment certainty

• A price for carbon

Key Messages:

• Australia potentially has sufficient storage capacity, but costs vary substantially with location

• There are multiple resources in the basins with pre-existing resource property rights

• Establishing storage is the “rate determining step” in most cases for CCS projects

• Need to invest in commercial scale demonstration projects

• Need to reconsider policy incentives if CCS is to be available for commercial deployment from 2020

So- we’re like much of the rest of the world