Industry Perspectives

Carbon Capture and Storage and Enhanced Oil Recovery

An increasing awareness of climate change, with CO2 being seen as its principal cause, has led to greater interest in carbon abatement technologies. This is also driven by the provisions of the Kyoto protocol. Carbon capture and storage (CCS) is one such technology which has the capability to reduce substantially CO2 emissions created by 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 (pre- or post-combustion) using a combination of physical and chemical processes, then transported to a storage location and finally stored in a geological structure such as suitable, mature oil or gas reservoirs, 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 with the UK’s current emissions of around 560 million tonnes of CO2 per year. CCS has, therefore, the potential to enable the production of low carbon electricity and provide an environmentally attractive method of disposing of CO2.

In the autumn of 2006, the Stern Review of the Economics of Climate Change was published. The review recognised the importance of CCS and stated that it is essential to maintain the role of coal in providing secure and reliable energy. The 2007 Budget responded to the Stern Review and set out the next stage in the Government’s strategy for tackling climate change both domestically and globally. The British government declared its intention to finance the first full scale demonstration of CCS, in order to raise its profile; in the recently published Energy White Paper, a competition is planned for the autumn of this year.

In addition, DTI has launched an invitation to tender for a study into the development of CO2 transport and storage infrastructure in the North Sea. Final results of this work will be reviewed by the North Sea Basin Taskforce and reported to Norwegian and British Ministers in July 2007.

Currently, CCS is not legally permitted under the sea; CO2 is officially designated a waste product and injection beneath the seabed is only allowed in international law if it is associated with enhanced oil recovery (EOR). There are two governing conventions:

• the London Convention has been amended under Annex 1 of the protocol to allow CCS in subsea geological structures; this amendment was approved in November 2006 and entered into force on 10th February 2007 – related regulatory and legal impediments to CCS will be removed within 2 years;


• the OSPAR Convention, covering the waters of the north east Atlantic, currently prohibits CCS without EOR and, therefore, this significant hurdle also needs to be overcome for CCS to proceed; the necessary work is in hand and, although the timing of its conclusion remains uncertain, it would appear to be making steady progress.

Figure 56: Carbon Capture and Storage

It should be noted that various other methods of primary and secondary EOR have been employed by the offshore oil and gas industry for many years and so it is important to remove these legal obstacles promptly, if EOR using CO2 is to be applied to the UKCS. As time passes and the depletion of fields progresses, the opportunities for further EOR diminish and become less and less attractive. In addition, the fields in UK waters most suitable for CO2 injection lie in the southern North Sea – a gas producing area – thus eliminating any need for EOR applications.

In the longer term, for CCS to become a workable method of carbon abatement there are other, major issues which must be addressed. Principally, the market price of carbon would need to increase from its current value of €15-20 per tonne in Phase II of the EU ETS. It would require a price several times higher than this before projects using CCS become commercial.

In the current market, if CCS is to be used to enable the generation of low carbon electricity, there needs to be the same economic encouragement as is provided for renewables. This includes renewable obligation certificates (ROCs) and levy exemption certificates (LECs) which prove the reduced carbon associated with the electricity produced. At least eight major CCS projects are currently being considered in various parts of the UK, encompassing some 7,000MW of electrical generating capacity. In addition to higher prices of traded carbon and consistency with renewables, there should also be recognition within the EU ETS for low carbon sources of electricity with an allocation of credits equal to carbon abated.

The 2007 Budget also initiated a consultation on the “change of use” of offshore oil and gas fields which may in future be converted to CCS or gas storage. Discussions are continuing, but it is clear that the existing fiscal regime presents a range of barriers to such re-use of old assets. These will have to be overcome, if the ultimate potential of the UK’s offshore fields and their associated infrastructure is to be realised.

Figure 57: UK Proposed Carbon Capture and Storage Projects