UKCS Contribution to Delivering Environmental Targets

Carbon Capture and Storage and Enhanced Oil Recovery

Recent increased focus on carbon abatement technologies is driven both by a growing awareness of climate change, and the provisions of the Kyoto protocol. Carbon capture and storage (CCS) is one such abatement technology, which has the capability to reduce substantially emissions from the use of fossil fuels. It involves three separate stages: capture, transport and storage. The CO₂ from large industrial or power generation sources is first captured using a combination of physical and chemical processes, then transported to a storage location and finally stored in a geological structure such as a suitable mature oil or gas reservoir or an aquifer.

Europe is believed to have extensive CO₂ storage capacity, predominantly located beneath and around the North Sea. The British Geological Survey has estimated the potential storage capacity under the whole of the North Sea at around 20 billion tonnes of CO₂ in oil and gas fields, with an additional 20–70 billion tonnes of CO₂ in confined aquifers. This compares favourably with the UK’s current emissions of around 560 million tonnes CO₂ per year.

CCS has the potential to enable low carbon electricity production and provide an environmentally attractive method of disposing of CO₂. The DTI Energy Review identified a role for carbon abatement technologies such as CCS within the nation’s energy strategy. In parallel, HM Treasury has launched a consultation on barriers to commercial deployment of CCS. However, this correctly identifies that the lack of economic incentive is the single biggest issue to be addressed, if CCS is to be pursued in and around the North Sea.

Figure 52: Carbon Capture and Storage

CCS may in some circumstances provide tertiary oil recovery, as enhanced oil recovery techniques such as water and gas injection have already been employed on the majority of the UK’s oil fields. In many cases, even if the CO₂ is used for EOR, the benefits are anticipated to be insufficient to render a project commercially viable. It should be noted that CCS will not enhance the recovery of hydrocarbons from gas fields, particularly in the southern North Sea. However, such fields in the southern North Sea are closer to shore and possibly cheaper to redevelop for CCS than fields in the central and northern sectors of the North Sea.

Existing offshore oil and gas fields, pipelines and infrastructure have not been designed for CCS. Indeed, the costs and complexity of retrofitting CCS capability on ageing facilities may prove excessive and instead require substantial rebuild which may prove to be similarly costly.

CO₂ storage is only currently used in the North Sea in one application, at the Sleipner field in Norway. Here CO₂ is removed from the produced natural gas, to improve its quality, and then reinjected in the “utsira” formation - a 200m thick sandstone aquifer located 800m below the sea bed. In the case of Sleipner, reinjection of the CO₂ was an integral part of the field’s overall development planning and economics, and the offshore production facilities were specifically designed for that purpose. Sleipner does not involve the import of CO₂ from other fields or onshore industrial processes, nor is the CO₂ used to enhance oil recovery.

The recently announced project to take natural gas from North Sea fields, convert it to hydrogen as fuel in Peterhead and utilise the CO₂ produced from the process for enhanced oil recovery and long-term geological storage in the Miller Field is a first for the UK. Other projects are also being considered elsewhere in the North Sea However all these projects demonstrate the current lack of commercial viability of CCS.

Aspects of the legality of CCS offshore are currently in question. CO₂ is officially designated a waste product and injection offshore is only allowed under international law (the London and OSPAR Conventions) if it is associated with EOR. It is understood these Conventions are being reviewed with the intent of permitting CCS offshore, independent of EOR. Until the Conventions can be amended, it will only be possible to store carbon offshore as a means of providing EOR, which limits the candidate reservoirs and may constrain the development of this business.

In the longer term, if CCS is to emerge as a commercially viable form of carbon abatement, one of the drivers underpinning investment will be the traded price of carbon. Current indications are that the traded price of carbon in the EU Emission Trading Scheme (EU ETS) must be several times higher than the recently seen prices of €20 - €30 before projects using current technology for carbon capture start to become commercially viable. Investors will have to begin to gain confidence in the carbon price and the liquidity and depth of the carbon market before investing in CCS.

The current volatility of the traded carbon market demonstrates that the market is insufficiently mature at this time to drive investment in CCS and it may take many years before sufficient experience is available. The recent drop in the traded price of carbon, which saw prices halve, only serves to emphasise the volatility of the market. Until this market attaches a sufficiently high value to carbon, the UK will need to consider its own means of incentivisation if this potentially significant industry is to develop.