By: Zoë Sutherland, upstream corporate research team at Wood Mackenzie
Carbon capture, utilisation and storage (CCUS) has been the subject of much discussion and considerable research but little in the way of real-world impact. But as net zero ambitions ramp up that could change dramatically. What role could this technology play in Big Oil’s decarbonisation journey? And can it scale at the pace required to support Paris Agreement targets?
Oil and gas will likely remain a key part of the energy mix for decades to come, but the industry is changing. The Majors may be taking different paths to decarbonisation but they are all on that journey, and all mention CCUS in their strategies. Commercial, scaled-up CCUS could be a critical step as a means to greatly reduce emissions by preventing CO2 from entering the atmosphere.
The industry is well placed to leverage CCUS. Having pioneered the technology in the 1970s, the oil and gas industry has first-mover advantage and unmatched experience. It also has access to infrastructure for transporting CO2 and depleted fields to store it, and the relevant skill set to exploit this below-ground capacity. What’s more, with many oil and gas processes creating low-cost opportunities to capture CO2, sufficient market demand could see CCUS emerge as a profit centre for the industry.
How big is the potential of CCUS?
Very big. CCUS features in the strategies of most signatories to the Paris Agreement. Government policies including regulations, carbon taxes, incentives and the development of a tradable carbon offset market will provide a boost to the technology. At the same time, climate tech is also a growing theme for investors.
However, our calculations indicate that current global CCUS capacity would have to increase a hundredfold by 2050 to meet our 2°C energy transition scenario – our view of a possible state of the world that meets the condition of limiting the rise in global temperatures since pre-industrial times to 2°C by the end of this century.
What are the challenges involved in achieving the necessary scale for CCUS?
Growing commitment to emissions reduction will shift CCUS deployment up a gear, but to achieve the necessary scale a number of issues must be resolved. This includes:
- Commercial considerations – especially where CO2 has no value as an industrial input
- High cost, particularly for direct air capture technology
- Lack of regulatory support in some markets
- Lack of infrastructure to transport CO2 safely
- High cost of capital as a ‘new’ technology
- Public resistance, particularly to onshore storage
- Lower oil prices impacting the financial incentive to invest in CCUS.
While none of these problems are insurmountable, addressing them will require a strong level of commitment from key players, and that includes Big Oil.
What’s the current state of CCUS deployment?
Current global CCUS capacity stands at around 41 Mtpa. Over half of this is in the US and Canada, where opportunities to use CO2 in the enhanced oil recovery (EOR) process have historically driven deployment. Around 65% of current total capture is from natural gas processing, where costs are lowest.
The CCUS development pipeline holds 130 million tonnes per annum (Mtpa) of capture capacity.
However, planned capacity additions this decade currently fall well short of what’s needed for our 2°C energy transition scenario. And a 1.5 °C pathway would require a genuine step-change in approach to implement additional capacity at a rate of around 250 Mtpa.