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Tariq Siddiqui's picture
COO Upstream EP Advisors LLC

Oil & Energy | Business Development | Capital Projects | Offshore Wind -  Proven leader in offshore development and operations, with 25+ years’ expertise in managing business through cycles...

  • Member since 2021
  • 136 items added with 94,947 views
  • Jun 27, 2021
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NRG's Petra Nova carbon capture project in Texas was one of the biggest of its kind before closing in 2020, and it served its primary purpose - to progress carbon capture technology, and delivered valuable insight about this emerging technology. The closure generated headlines, skeptics interpret as death knell for future projects and ‘Red-Flag’ for investors on coal-fired CCS projects. The key insights, however, presents a more balanced view:

KEY INSIGHTS

CCS RELEVANCE: COAL FIRED CCS PROJECT & CAPTURE /  EOR STORAGE

NRG’s Petra Nova facility in Texas – a coal-based project which represents the world’s largest installation of CO2 (5200 tons/d) capture on a power plant, arguably much more challenging with low CO2 concentrations and Storage linked to oil EOR then other more easily captured industrial streams.

KEY LESSONS LEARNT

  1. There was 16% shortfall in CO2 captured over the period; largely due to downtime; largely in process chain rather than Mitsubishi’s capture technology
  2. The outages themselves are not red-flag on capture technology that eventually maintained 95 % uptime.
  3. Issues encountered, mostly concerning leaking heat-exchangers; are surmountable as in in similar Canadian Boundary Dam project
  4. It was primarily conceived as technology demonstration project; scaling up and identifying technical issues with capture process
  5. Mitsubishi stated that learnings from project and improving capture  could reduce cost by 30% (claims to be tested in Prairie State coal power plant in Illinois)
  6. Financial viability relied on alignment of incentives; DOE grant, cheap credit from Japan, and part-ownership in oil field.
  7. Newer projects to rely on expanded 45Q tax credit, favoring CO2 storage in saline aquifer which gives larger tax credit than EOR ($50/tonne vs $35 /tonne)
  8. Part-ownership in oilfield, with no long-term off-take agreement and price plummeting was unique to PetroNova, The Canadian Boundary Dam 3 project off takers continue to take gas CO2 during downturn

BOTTOMLINE

Although, not a red-flag for the CCS or the power industry, nevertheless, even with 45Q, tax credit; the margins for large scale investment in CCS for thermal power generation will be tight.

Discussions
Roger Arnold's picture
Roger Arnold on Jun 28, 2021

Retrofitted CCS on coal-fired power plants, in the absence of a stiff price on carbon emissions, was always going to be the most difficult form of CCS to pull off. The 25 to 30% parasitic power drain on power output from a type of plant that was already having trouble competing with renewables + natural gas was too big an obstacle for the measly IRS 45Q tax credit to overcome.

If we can't muster the political will to impose at least a $50 per ton price on carbon emissions, then we should go with the only viable alternative that I can see: a mandated phase-out of all new oil and gas E&D activity. As the phase-out begins to bite, the price of oil and gas will pushed up by supply and demand. But probably not by as much as many would expect. 

So long as the phase-out follows a reasonable and predictable schedule, declining production will be discounted by enhanced production from mature fields. The price of CO2 for EOR will rise enough to make CCS profitable on its own, even without a price on carbon emissions.

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