For more than a century, fossil fuels have been central to economic development, helping build the modern world as we know it. But with climate change and global warming posing existential threats to society, industries across all sectors must find practical and economic ways to decarbonize their operations and their products.
Every science-based forecast indicates fossil fuels will continue to be an important part of the primary energy mix for many decades to come, and organizations globally are being tasked to balance social and economic progress and energy security with the required decarbonization efforts to meet crucial net zero targets.
In every reasonable scenario, carbon capture, utilization and sequestration (CCUS) must play a vital role in delivering this carbon abatement. And the E&P industry will be a key contributor in scaling up CCUS, thanks to its decades-long expertise in subsurface knowledge and expertise, complex project management, and technology industrialization.
CCUS evolution. In the early 2000s, a spree of CCUS project announcements took place, led by US and European utility companies. Of these projects, about 60% did not progress beyond the initial feasibility assessment, and the ones that did were directed mostly at EOR applications. At that time, high project costs, coupled with lack of political support, were the main headwinds.
Today, CCUS is poised for a resurgence. In 2021 alone, close to 100 CCUS projects were announced—almost twice as much as the previous peak of 2008. CCUS today spans across industries, well beyond oil and gas. Ultimately, CCUS should play a key role in the decarbonization of hard-to-abate sectors, including petrochemical, steel, aluminum and cement, which have limited, other practical options with current technologies to abate all their operational emissions. Indeed, these industries utilize high-heat and chemical processes, which today cannot be delivered without the use of fossil fuels.
Closing the emissions gap. The gap between aspirational climate goals and the inherent implementation of supportive policies has narrowed considerably in recent years. Given the growing gap between desired and actual cumulative CO2: emissions, all scenarios are pivoting increasingly towards CCUS as a critical lever to close the emissions gap. Yet, all scenarios also indicate that CCUS needs to scale up from about 40 million tons per annum today to many gigatons per annum to meet net zero ambitions.
The sectors with the lowest “cost-to-capture” emissions, including natural gas processing, bioethanol, ammonia production and blue hydrogen, are attracting most CCUS investments today. Sectors with more dilute emissions like power generation, steel and cement, are expected to see a material uptake in CCUS projects sanctioning over the coming decade, especially as decarbonization incentives evolve. Alongside adequate geological storage and a supportive regulatory regime, the conditions to create regional CCUS hubs are now being increasingly met.
CCUS project economics. The CCUS industry has, historically, faced headwinds, due to generally unattractive project economics. But the groundwork for these projects is changing as economic incentives and technological developments make CCUS more investable.
On the regulatory front, the recently approved Inflation Reduction Act (IRA) in the US provides tax incentives that will give small-to-mid-scale CCUS projects a better chance to become economical. The legislation will also support the acceleration of investments into large-scale CCUS hubs in the US. In Europe, the revision of the Emissions Trading System is a promising development towards meeting climate targets. It would cover a wider range of sectors and greenhouse gas emissions. In Canada, the Government of Alberta has allocated multi-million dollars to carbon capture projects through the Emissions Reduction Alberta (ERA) initiative. Australia is also seeing renewed momentum, following significant policy and budgetary support from its federal government.
On the technology front, a step change in carbon capture technology performance can drive meaningful cost reductions across the CCUS value chain. In addition, the derisking of storage site selections through subsurface domain expertise and data integration makes a large impact to CCUS projects’ life cycle economics.
Scaling CCUS projects. Scaling up CCUS will require innovative business models and partnerships across sectors, from emitters all the way to pore space owners. From storage site selection to carbon capture engineering, project construction, operation and monitoring, each building block of the value chain presents opportunities for project derisking and value assurance.
Schlumberger has participated in CCUS across industries for two decades and is currently engaged in over 25 projects globally. With core strengths in storage site subsurface characterization and CO2 containment monitoring, the company can leverage new partnerships across the entire CCUS value chain through business models that align incentives for all parties. This is presenting great opportunities to accelerate decarbonization at scale.
CCUS has a vital role to play in a net zero energy transition. As supportive policies are implemented, technology industrialization and collaborative partnerships will drive material CCUS volume growth in the coming decade. Time and scale are of the essence; the E&P industry and the private sector have pivotal roles to play in bringing effective and economic CCUS projects to fruition, and in doing so play a high-impact role in addressing climate change.
About the Authors:
Frederik Majkut is Senior Vice President of Carbon Solutions for Schlumberger. He has been with Schlumberger for more than 20 years and has held various management and leadership roles with the company.
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