The challenges ahead for the energy industry
What is Carbon Capture, Use and Storage (CCUS)? CCUS is essentially a suite of technologies intended to capture carbon dioxide resulting from the combustion of fossil fuel and biomass in power plants and prevent it from reaching the atmosphere. This is achieved either by reusing it in products or by transporting it to a permanent underground storage facility as outlined in Figure 11. Why do we need it? It is widely accepted that carbon emissions as a result of anthropogenic (i.e. human-related) activities have resulted in the rising global temperatures observed since the Industrial Revolution. Temperatures are forecast to rise further, with significant risks identified. The recent Intergovernmental Panel on Climate Change (IPCC) summary report2 published at the end of 2018, highlighted these risks and described the key mechanisms which could be deployed to limit global warming to 1.5C above pre-industrial level.
Carbon Dioxide Removal critical says IPCC Critically the report identified that in all potential mitigation strategies to limit the rise to 1.5C, including drastic reductions in energy demand, there was a requirement for Carbon Dioxide Removal (CDR). CDR is a term used to describe a range of anthropogenic activities, including CCUS, which remove CO2 from the atmosphere and store it in geological, terrestrial or ocean reservoirs, or in products. Other activities include use of biological sinks, for example afforestation and reforestation. It is clear from the report that CCUS is likely to become an essential component of how climate change will be mitigated in the future. What is the current position? It is recognised that a huge global response is needed, but in a fractured political climate, is there the political will to make the necessary changes in the time we have left? Or will it be down to the industry to lead the way?
In 2015 the UK Government cancelled its £1bn CCS Competition when it was already several years into the process, much to the understandable dismay of the bidders. However, at the end of last year it appears that the UK Government commitment to CCUS is back on track with the announcement of an action plan to enable the development of the UK’s first CCUS project3. The stated ambition within the plan is that the first facility in the UK should be commissioned by the mid 2020s, and that the UK “should have the option to deploy CCUS at scale during the 2030s, subject to the costs coming down sufficiently”. The document also notes that “no technology can proceed at any price” (although one is left wondering if that price is the Earth in the long run), and that they “expect industry will play the leading role” in the delivery of CCUS. It is likely therefore that fiscal incentives, taxation and legislation will be brought to bear in the coming years in order to ensure that industry plays the part intended by Government.
OGCI initiatives In the intervening period, the oil and gas sector has not stood still, with the Oil and Gas Climate Initiative (OGCI) being announced in September 2014. The OGCI promotes and invests in a number of initiatives aimed at reducing the rise in global temperatures as outlined in Figure 2.
Meanwhile BP have recently announced its investment in both the Clean Gas Project on Teesside and also in the UK firm C-Capture4, which is trialling its technology at Drax’s power station in Yorkshire5.
As with the deployment of any new technology, there are risks associated with the development and implementation of the projects, as well as ongoing risks once the processes are up and running. Many of the risks associated with CCUS are not that far removed from a typical Upstream project (apart from that the process of extraction is reversed) and could be considered akin to Enhanced Oil Recovery projects which are now fairly common.
Specific risks may lead to gaps in insurance cover The risks that would apply are those which are generally anticipated and would include those related to contractual matters, Control of Well, Health, Safety and Environmental (HSE), Property Damage, Business Interruption, Transportation risks and so on. There are some risks which are specific to CCUS and would lead to potential gaps in insurance cover. Some of these are identified in documents prepared and published by bidders for the original UK CCS Demonstrator project which was terminated in 20156. These risks include damage to the reservoir itself, CO2 emissions/leakages and any associated legal liabilities, and the long-term liability associated with the perpetual storage of carbon and the additional requirements of ensuring the integrity of storage sites. Additional HSE risks There are however additional Health, HSE risks associated with the capture, transport and large-scale storage of CO2. A loss of containment incident in any of these areas of the process may result in the release of a gas cloud or an uncontrolled release of energy. Harm may be caused to human health or the environment, either by gas inhalation of being in the vicinity of a physical blast, and these are considered in more detail below. CO2 is colourless, odourless and naturally present in the atmosphere but at higher concentrations it causes headaches, dizziness, confusions, loss of consciousness and death. Should CO2 leak from capture sites, pipelines or storage locations, either slowly or as a result of a sudden incident, there are potentially major consequences for human health. Although CO2 generally disperses quickly in the open atmosphere, it is denser than air so it will accumulate in confined environments including basements, trenches and in depressions in the ground. It is widely attested that humans will suffer from unconsciousness and even death at CO2 concentrations above 10%. BLEVE risks Additional potential hazards relate to the storage of CO2 in liquid form, and are related to the Boiling Liquid Expanding Vapor Explosion (BLEVE) phenomenon. This takes place if a vessel containing a pressurized liquid above its boiling point is ruptured; the Global CCS Institute7 provides details of this phenomena. In the case of a BLEVE involving CO2, the effects will be both the blast (due to vapour expansion) and the fragmentation of the container. The causes of the BLEVE in the CCS environment are likely to be through an external fire, external impact, excessive internal pressure and either corrosion or metallurgical failure of the containment. Onshore storage risks In the UK, capture and transport locations may come within relatively close proximity to centres of population; however, UK storage sites will be restricted to offshore locations. In other countries however, onshore storage may be a consideration and this brings with it the additional risks of a major release from an underground storage reservoir near populated areas. Leakage could occur through a catastrophic event, such as an earthquake, or through slow leakage as a result of poor site selection, preparation or maintenance. In either scenario elevated concentrations of CO2 would result at the surface or subsurface, thereby posing risks to human health and the existing ecosystems.
In the UK CO2 is not currently defined as a dangerous substance under the Control of Major Accident Hazards Regulations 1999 (COMAH) or as a dangerous fluid under the Pipelines Safety Regulations 1996 (PSR), the UK Health and Safety Executive (HSE) published a dedicated section on CCS8. The HSE notes that in CCS operations it is likely that CO2 will be handled close to, or above, its critical pressure (73.82 bar) and significant hazards are associated with this dense phase when pressure is lost suddenly. Where the risks are properly controlled, the HSE expects the likelihood of a major hazard incident to be “very low, as in other similar processes in the energy, chemical and pipeline industries.” However, they are will consider extending existing major accident hazard legislation to cover CCS if this is justified by the evidence”. In other words, further legislation may follow.
Groundwater contamination risks A further risk related to onshore storage would be the potential for contamination of groundwater as a result of CO2 becoming dissolved in aquifers. This has the effect of increasing the acidity of the water, which can also increase the mobilisation of metals, thereby possibly making the water supply less potable.
Financial considerations The critical risks for the oil, gas and power sectors are not necessarily technical but are related to the myriad of commercial complexities involved in the delivery of CCUS in the UK and indeed globally. Not the least of these complexities is one simple issue – how are we going to pay for it? Roles and responsibilities In addition to the cost of developing the technology and the huge infrastructure development cost, the implementation of CCUS will be complicated by the number of potential stakeholders. For example, due to the number of assets required to bring a CCUS project to fruition and the likely multiple owners/operators of these assets, there is considerable complexity in determining the roles, responsibilities and risk apportionment in project delivery and implementation. Commercial barriers increase financing costs A typical project will involve at the very least a power producer or emitter, a carbon capture technology provider, a grid operator, an offshore reservoir holder and a series of investors, as well as a number of different regulators. The barriers - and ultimately the risks - are therefore commercial rather than technical. These commercial barriers add a “risk premium” and increase the cost of financing projects.
The UK government recognises this in their action plan and have commissioned a review into identifying the potential workable delivery and investment frameworks, although this is not due to be published until later in 2019. The delivery and investments models identified so far, and to be investigated further, are summarised in the table in figure 4 on the next page.
The UK government has also published some initial work on the range of possible “business models”, recognising that they need to incentivise Energy Intensive Industries (EIIS) including iron and steel, cement, chemicals and oil refining to move towards decarbonising their operations; this is considered to offer significant potential to reduce the UK’s emissions. To this end the UK government is reviewing the barriers to the deployment of industrial carbon capture, including options for establishing a market-based industrial carbon capture framework in 20199. An initial piece of work has already identified a number of options, as outlined in Figure 4 on the next page.
Ultimately, it is considered that, where properly managed, the insurable risks involved in CCUS are relatively low. For example, in the context of appropriate management controls, the HSE expects that the likelihood of a major hazard incident to be “very low, as in other similar processes in the energy, chemical and pipeline industries.”10 However, they will consider extending existing major accident hazard legislation to cover CCS if this is justified by the evidence; in other words, further legislation may follow. Furthermore, it should be noted from Figure 4 above that both energy intensive industries (such as the chemicals sector) and fuel suppliers are targeted, so there are significant risks to the oil and gas sector from increasing legislation.
Although there is still much uncertainty as to how CCUS will be funded and implemented, if past experience is anything to go by, industries such as oil, gas and power are likely to be ultimately liable for turning CCUS into a much needed reality.
Beverley Parrish is an independent consultant. She is a Fellow of the Geological Society of London and a Chartered Geologist with over 25 years of experience in industry and environmental consultancy. Her technical expertise is primarily in oil and gas, waste, biomass, renewables, contaminated land, mining, environmental risk assessment, due diligence and expert witness work.
1 https://www.bp.com/en/global/corporate/sustainability/climate-change/carbon-capture-use-and-storage.html 2 https://www.ipcc.ch/site/assets/uploads/sites/2/2018/07/SR15_SPM_version_stand_alone_LR.pdf 3 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/759637/beis-ccus-action-plan.pdf 4 https://www.bp.com/en/global/ventures/latest-news/media-announcements/bp-invests-in-c-capture.html 5 https://www.drax.com/press_release/c-capture-raises-3-5m-funding-round-led-bp-drax-ip-group/ 6 UKCCS - KT - S10.5 - Shell - 001. Insurance Report. ScottishPower CCS Consortium. April 2011 7 https://hub.globalccsinstitute.com/publications/hazard-analysis-offshore-carbon-capture-platforms-and-offshore-pipelines/annex-f-co2-bleve 8 http://www.hse.gov.uk/carboncapture/major-hazard.htm 9 https://www.newpower.info/2018/11/ccus-action-plan-promises-reviews-to-be-completed-by-end-2019/ 10 http://www.hse.gov.uk/carboncapture/major-hazard.htm