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Oil industry looks at CO2 capture and storage to provide carbon-negative fuels

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By Beatrice Bedeschi – Oil production has the potential to contribute to curbing carbon emissions thanks to a new technique that involves capturing CO2 directly from the air and storing it underground as part of oil upstream processes, according to industry experts.

The process of increasing oil production by pumping CO2 underground, known as Enhanced Oil Recovery (EOR) is already common in the oil sector, however energy companies are now looking at using CO2 captured from the air, which would allow the production what could be considered ‘carbon-negative’ oil, Cristophe McGlade, senior analyst at the International Energy Agency (IEA), says.

“There’s quite a large amount of oil production happening, mainly in the US, where they use CO2 and inject into the ground in order to increase pressure and therefore production and oil recovery,” he explains. The technique is used in conventional oil projects.

Currently “nearly all of the CO2 used this way is mined from natural deposits, so as such it represents a cost and has no benefit from an emissions point of view,” he says.

However, there are cases around the world, such as Petra Nova in Texas and Boundary Dam in Canada, where the CO2 used for oil production has been captured from a coal-fired plant. “This helps reduce overall emissions,” he says.

But capturing CO2 directly from the air allows the industry to go even further.

In the US, between 300- 600 kg of CO2 per barrel of oil is injected in the EOR processes. A barrel of oil releases around 400 kg CO2 when combusted, and around 100 kg CO2 on average during production, processing and transportation.

If “the amount of CO2 that goes underground is greater than the amount of CO2 contained in the crude that comes out” this translates into carbon-negative fossil fuel, explains Steve Oldham, CEO at Canada-based clean energy company Carbon Engineering.

The company, which commercialises direct air capture (DAC) technology to remove CO2 from the air for storage or use in projects such as EOR, has been operating a pilot CO2 air capturing plant in Squamish, British Columbia since 2015.

In January 2019, Carbon Engineering secured equity investment from global energy companies Chevron – through its venture capital arm Chevron Technology Ventures– and Occidental Petroleum – through its subsidiary Oxy Low Carbon Ventures – with the move signalling a significant step-up in the involvement of major energy companies in decarbonisation projects.

In May 2019, Oxy and Carbon Engineering announced they were planning to build a commercial scale 500 kilotonnes/year CO2 DAC plant which would supply Occidental’s EOR operations in the Permian Basin, with the CO2 to be subsequently stored underground permanently.

Construction of the new plant is scheduled to start in 2021, with operations to begin by 2023, pending a final investment decision.

The two companies believe that pairing DAC with CO2 sequestration in EOR operations is a significant step forward for the energy industry.
“Using atmospheric CO2 for oil recovery greatly reduces the net addition of CO2 to the atmosphere from oil production and fuel use, and opens a pathway to producing fully carbon-neutral or even net-negative fuels,” says OLCV President Richard Jackson.

Oil demand ‘not going away’ in near-term

“Demand for crude and oil products is not going away tomorrow, it takes time to collectively transition away from fossil fuels,” Oldham says. “We can provide carbon-neutral fossil fuels while we do the transition.”

McGlade adds: “Being able to reduce emissions related to oil production is particularly attractive given that even within a scenario of reaching carbon-neutrality in 20-30 years, you would still end up using quite a lot of oil and gas, so it’s important not to just think of the date, but also the transition towards carbon neutrality.

“The problem with climate change is that the more you emit now, the more drastic the reduction will have to be in the future, so increasing efforts to implement CO2 capture and utilisation systems would help achieving targets while at the same time maintaining a share of fossil fuels in the energy mix.”

The downside of CO2-EOR is that there is a finite number of upstream projects around the world where this technique can implemented. This means that converting all oil production to carbon-neutral or carbon-negative is not possible.

The IEA estimates some 500,000 barrels of oil are produced today using CO2-EOR, accounting for 20 per cent of total EOR projects. This is expected to rise to two million barrels per day by 2040. 

Current oil production stands at around 100 million barrels per day.

Cost is another key issue challenging large scale adoption of this technique.

“CO2 injection is a proven technique that increases oil recovery by 5-20 per cent,” says Jonathan Markham, senior oil and gas analyst at GlobalData. However large-scale implementation is hampered by the “costs of building the injection facilities and sourcing the CO2” he says.

The cost of capturing CO2 either from the air or from an industrial or power plant stands on average at USD100/tonne against around USD20-30/tonne for CO2 mined from natural sources, McGlade says.

Oldham adds: “Costs will fall overtime” to below USD100/tonne “but you need to build a few plants first”.

“In order for DAC to become more widespread, the technology needs to become more efficient and scalable, and governments need to introduce stronger financial incentives for low carbon fuels, such as oil and gas production that uses CCS,” says Markham.
The Low Carbon Fuel Standard (LCFS) introduced in California over a decade ago is one example of incentive “which has reduced the carbon intensity of fuels sold in the state significantly” he adds.

In the US there are also the federal 45Q tax credits which offer USD35/tonne for EOR projects, and USD50/tonne for CO2 capture and storage projects.

“When there are government programmes in place to acknowledge the cost of the CO2 capturing and storage, that enables large-scale construction of the type of plants that we’re building,” Oldham says.

Carbon Engineering and OLCV’s proposed DAC plant will be eligible for both California’s LCFS credits and US federal 45Q tax credits.


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