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Carbon capture projects in limbo as economics, policy remain ambiguous


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Carbon capture projects in limbo as economics, policy remain ambiguous

While there is tremendous uncertainty about the economics of carbon capture, use and sequestration (CCUS) projects, carbon capture systems are still being designed and built to meet lower-carbon emissions goals, experts on a panel at the World Petroleum Congress said to a packed audience.

"Everyone wants policy certainty," said Peter Findlay, director of CCUS economics at oil and gas consulting firm Wood Mackenzie, at the Sept. 20 session. The industry would benefit from a "standard carbon price that's kind of bankable."

"Theoretically there should be some price to emit or credit for not emitting," Findlay said. "But that's the unknown and that just increases the cost of capital ... what developers and users need is reassurance that captured carbon will be worth something."

Wood Mackenzie is tracking more than 800 carbon capture projects around the world, Findlay said, and the clearest trend from the tracker is that most projects have yet to receive a final investment decision from their sponsors. "That next kind of level of investment, the level you need for board approval, they haven't really got to. So they're kind of stuck."

For companies trying to quantify the impacts of their environmental, social and governance goals and net-zero targets, the key question is "what's it worth to us to reduce emissions?" Findlay said. "We're spending shareholder capital here and they're expecting a return."

Financial support for carbon capture projects can come from various sources, Findlay said. Those sources include tax credits and government payouts for captured carbon, payments by customers for the service and income derived from end-use processes such as enhanced oil recovery.

Alberta kicked in $500 million for carbon pipeline

The Alberta Carbon Trunk Line, a carbon capture and storage project that is creating a carbon hub in western Canada, got up and running with strong government backing, an executive with developer and operator Wolf Midstream Canada LP said.

The trunk line connects two large industrial emitters northeast of Edmonton with storage or enhanced oil recovery users 240 kilometers south around Calgary. The trunk line includes a high-pressure 16-inch steel pipeline built specifically to move CO2.

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Alberta's provincial government put up $500 million in capital and operating grants to fund the project, said Jeff Pearson, the president of Wolf's carbon unit. The federal government provided further funding, reducing the immediate uncertainty that the project would be built and put into operation.

That backing helped Wolf to build and evaluate a whole system — from emitters, to capture, to end use or storage.

"Super strong support from the government to fund the entire system rather than just a piece of the system" helped the company to make the project a reality, Pearson said. "We had to get the whole thing off the ground to make it work."

The operator has plans to expand to handle carbon from Air Products & Chemicals Inc.'s new Zero Hydrogen Energy Complex facility near Edmonton, according to Pearson.

The connector to Air Products is expected to manage 7 million metric tons of CO2 per year. The current system is moving 1.6 million metric tons per year of carbon from the two early customers and has a capacity of nearly 15 million metric tons per year, Pearson said.

Developing new networks like this is an iterative process that allows the market to mature and allows operators to gather information on how to size and plan their projects, he said.

"We need to build one. Learn from it. Build another one. Learn from it. We can't build 10 of them at the same time and expect to learn from each project, as we're doing the same thing at the same time," Pearson said. "Start to get the economics behind some of the early projects so that you can learn from them, and everybody can take that to drive costs down and make them more commercial."

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