Linking the development of enhanced oil recovery in the North Sea to low-carbon electricity can bring significant benefits to the wider UK economy while accelerating carbon storage and providing the most cost-effective pathway to UK decarbonisation targets, a new report proposes.
This comprehensive new analysis by an SCCS-led Joint Industry Project has been made of injecting carbon dioxide (CO₂) derived from low-carbon electricity production and industry to enhance oil recovery from existing North Sea fields (CO₂-EOR).
The report, launched today in London, shows that a synergy between CO₂-EOR and Carbon Capture and Storage (CCS) could be the driver for developing both technologies in the UK Continental Shelf. Part of the CO2 that would otherwise go directly to dedicated storage in CCS projects could be used to drive CO₂-EOR, bringing significant benefits to the wider UK economy – including extending the producing life of the North Sea, reducing imports of oil, maintaining employment, developing new capability to drive exports, and additional direct and indirect taxation revenues.
This approach could also provide the most cost-effective way to accelerate an energy transition between 2018 and 2030 to meet UK Committee on Climate Change decarbonisation pathways, say the authors.
The launch event, held at the Royal Institute of Chartered Surveyors, began with a short introduction by Angus MacNeil MP, the new Chair of the Energy and Climate Change Committee. This was followed by presentations from some of the researchers involved in the study. The report's findings will also be shared at meetings in Brussels and Aberdeen later this week.
Professor Stuart Haszeldine, SCCS Director at the University of Edinburgh, said:
North Sea oil and gas are facing an existential cost challenge, and at the same time the UK is struggling to fund its electricity decarbonisation clean-up. The beauty of this new analysis is that it shows how to help develop big projects in the power industry, while also supporting a transition of the abilities and profits from offshore hydrocarbons into new, sustainable jobs.
The project analysis suggests that this CO₂-EOR route achieves two desirable UK objectives. Firstly, a business demand is created, which drives the sequential construction of CO₂ capture projects – reducing the costs associated with CO₂ supply and enabling cheaper low-carbon electricity. CCS by this route, with secure CO₂ storage already proven, would develop more rapidly and protect the onshore UK economy and industry from increasing carbon prices.
Secondly, through accelerated CCS deployment more CO₂ is abated more quickly than by any other route, and this includes emissions from the additional oil produced. Public subsidy towards the cost of a low-carbon transition would be greatly reduced, and CO₂-EOR may even be profitable across the whole economy. Investment in CO₂-EOR has a national return of up to 7.2x, which is much larger than rival energy opportunities, according to the project’s findings.
However, the report points to a lack of clear supportive legislation and fiscal regimes for CO₂-EOR in the UK. New supportive regimes are needed for CO₂-EOR projects, similar to existing brown field or development allowances, and these must make investing in CO₂-EOR in the UK competitive with the alternative global investment opportunities.
|The project partners with Angus MacNeil MP, Chair of the Energy and Climate Change Committee, at the report launch in London on 16 June 2015. From left to right: Richard Crossick (Shell), David Mirkin (2Co Energy), Stuart Haszeldine (SCCS), Angus MacNeil MP, Stephen Goodyear (Shell), Frank Knight (Nexen), Julien Hailstone (Nexen) and Kath Mansfield (Nexen). Photo: Matt Ball|
- CCS is one of several routes to low-carbon electricity and directly reduces fossil fuel use emissions. In the transition to a UK low-carbon future, fossil fuels with carbon capture will become essential in the generation and industry mix. CCS has the benefit of providing power on demand, independent of the external conditions which impact wind, tidal and solar.
- CO₂ captured in CCS projects can be publicly subsidised and sent to permanent geological storage deep beneath the North Sea. Alternatively, additional oil production using CO₂-EOR, can provide the commercial finance, equipment infrastructure, and project management experience needed to develop lower cost CO2 capture and secure storage, which has lasting benefit to UK low-carbon electricity.
- CO₂-EOR is a proven technology to increase oil recovery, and simultaneously stores CO₂ permanently in the subsurface. Two technically similar projects have been commercially successful in the North Sea offshore since 1998 and 2002, by injecting miscible methane gas. This gives high confidence that CO₂-EOR is achievable in North Sea oilfields. Detailed computational simulations of CO₂ injection to oil reservoirs has confirmed viability of injection and oil production. Measurements from existing CO₂-EOR operations demonstrate secure CO₂ storage into the far future.
- A carbon accounting balance of carbon produced and carbon stored shows that CO₂-EOR continues to enable "green" low-carbon electricity produced by CCS. In addition, CO₂-EOR stores significantly more CO₂ before 2050 than the present publicly funded pathways of CCS. CO₂-EOR enables production of a limited amount of additional oil with less carbon cost than any other method.
- CO₂-EOR can be economic if the CO₂ is provided to EOR projects at a near zero transfer price, and if fiscal structures are introduced that are similar to existing brownfield and cluster allowances. This can encourage further development of existing fields, by ensuring that CO₂-EOR projects surpass international "hurdle rates" of profitability to successfully compete for funding by oil and gas companies.
- Financial leverage into the whole-UK economy is conventionally measured as GDP or by an Economic Multiplier (EM), which measure the ratio of economic return to Government Input. Calculation of illustrative returns show, for UK Government input into CCS linked to CO₂-EOR, this ratio = 7.2 EM; compared against simple CCS fitted on coal = 2.6 EM; compared to offshore wind = 3.3EM. Thus every £1 invested in CO₂>-EOR could generate a return of up to £7.2, which is 2.2 to 3.2x larger than rival clean energies.
- This CO₂-EOR pathway compares well to some independent propositions for future CCS pathways in the UK. The Energy Technologies Institute (ETI) envisage an optimal 60Mt CO₂/yr injection by 2030. The Committee on Climate Change "core decarbonisation scenario" of the 4th carbon budget envisages 52Mt/yr CO₂ capture by 2030 (Element Energy 2013). These can both be met by a UK CO₂-EOR market, which develops commercial CCS projects every year from 2019-2030.
- CO₂-EOR strengthens the case for Government to invest in CCS, and reduces the level of investment required by providing part of the offshore transport storage capacity and storage certainty as an intrinsic part of EOR.
Building a CO₂ Storage Hub in the Central North Sea
This short report was published by Scottish Enterprise in early 2015. Incorporating new economic modelling, it shows how the UK is leading Europe when it comes to funding the development of CCS. And why Scotland, with its unique proximity to significant offshore storage site and 40 years of oil and gas expertise, is an almost ready-made infrastructure for a CCS industry.
Also download Element Energy-led report, Economic Impacts of CO₂ Enhanced Oil Recovery for Scotland.