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Shell Goes for Carbon Sequestration

Peter McKenzie-Brown
October 23, 2008

Is human activity influencing climate change or not? Indeed, is global warming even taking place? There is widespread disagreement within academia about the causes of increased global average air temperature, especially since the mid-20th century. Some argue that the observed “trend” is a normal climatic fluctuation. Others claim it isn’t even happening. These issues are the source of rip-roaring arguments in Alberta. Perhaps because of the impact of geological thinking on a province with a petroleum-based economy, the arguments here are both heated and informed.

Geologists, who think in terms of Earth’s periods and epochs rather than its decades, are well aware that climate always changes. Perhaps they also have an innate scepticism about whether human behaviour can meaningfully alter the powerful natural forces continually changing our planet.

While the debates rage, the scientific “consensus”, as it is delicately called, supports the idea that greenhouse gas emissions from human activity are increasing Earth’s temperatures and thus speeding up climate change.

For many environmental groups the problem seems critical, and they call for urgent action.

Increasingly, so do many corporations. For example, Royal Shell’s position on climate change is unequivocal. According to Jeroen van der Veer, the company’s CEO, “For us, as a company, the scientific debate about climate change is over. The debate now is about what we can do about it. Businesses, like ours, should turn CO2 management into a business opportunity and lead the search for responsible ways to manage CO2, use energy more efficiently and provide the extra energy the world needs to grow. But that also requires concerted action by governments to create the long-term, market-based policies needed to make it worthwhile to invest in energy efficiency, CO2 mitigation and lower carbon fuels. With fossil fuel use and CO2 levels continuing to grow fast, there is no time to lose.”

Carbon Capture and Sequestration: So what’s a company to do? Over the last decade, global think tanks have increasingly focused on of CCS – the common abbreviation for carbon dioxide capture and sequestration (more colloquially, “storage”) as a technologically simple way to remove CO2 at some large processing plants. The most prospective targets for this technology include coal-fired electricity generators and oil sands upgraders.

Problem is, such ventures are not profit-driven enterprises. They are climate-driven – initiated in response to concerns about climate change and related regulation. On its own, CCS doesn’t make sense. It requires government intervention. In that context, the CCS climate changed profoundly last July when Alberta premier Ed Stelmach announced that his government would provide $2 billion to advance these technologies in the province. That is the biggest sum available for CCS anywhere.

Often (unfairly) derided elsewhere in Canada as a Johnny-come-lately to the environmental table, Alberta’s involvement follows a gestation period of deep study. Last January a provincial policy paper observed that “Alberta has a unique opportunity to implement carbon capture and storage to substantially reduce our greenhouse gas emissions. CO2 emissions can be captured where they are produced, transported and stored in geological formations (such as depleted oil and gas reservoirs, coal beds, and deep saline aquifers) that may be located hundreds of kilometres away.... Ultimately, CO2 capture and storage technologies provide the province with the greatest potential to substantially reduce greenhouse gas emissions while, at the same time, retaining our ability to produce and provide energy to the rest of the world.” Alberta is counting on CCS to meet 70% of its long-term GHG reduction targets.

When the September deadline for submitting expressions of interest to the Alberta government arrived, the Department of the Environment received “more than a dozen” proposals, according to government representatives. The province is now narrowing those proposals down to the few with the greatest potential to be built quickly and significantly reduce greenhouse gases. The province hopes to reduce emissions by up to five million tonnes annually through this program.

The names of the contenders have not been publically disclosed, although the rumour mill is speculating on the usual suspects – big players with interests in oilsands or enhanced oil recovery. Devon, Imperial, Syncrude, a Husky/BP partnership, ConocoPhillips, ARC, Petro-Canada and Total E&P come to mind. One player, however, has been quite public in its enthusiasm for CCS. Shell Canada has long been studying a CCS project connected to its Scotford Upgrader, and a story on that project accompanied a great deal of the coverage of Alberta’s CCS incentives.

Sequestration or Storage? The name of that project, Shell Quest, refers to the notion of sequestration. According to Rob Seeley, Shell’s general manager of sustainable development, the idea of sequestration is quite different from storage. “Sequestration implies permanence,” he said. “Storage seems temporary. (In a CCS project) the carbon would be sequestered, not stored. It will be there forever.” In his world, CCS refers to carbon capture and sequestration, not storage.

The venture manager for Quest, Seeley is upfront about the global warming issue. “We (at Shell) are seriously concerned about man-made CO2 emissions in the atmosphere. We know that global warming is a natural process that has been going on for 10,000 years, but we believe that man-made emissions could be accelerating the process. Whatever the science ultimately finds, we believe in the precautionary principle. We need to take action on reducing CO2 now.”

The Scotford Upgrader is part of a complex dating back to 1984, when Shell constructed there the first refinery to exclusively process synthetic crude from Alberta’s oil sands. Located northeast of Edmonton, Shell’s Scotford complex has often been expanded. It, and was augmented with an upgrader in 2003.

The upgrader receives bitumen from the Albian oil sands plant, and transforms it into two types of synthetic oil – Albian premium synthetic oil and Albian heavy synthetic oil. Synthetic oil is bitumen with the impurities removed and hydrogen added. Adding hydrogen yields upgraded oil that can more readily be refined into high-quality products like gasoline, diesel and other types of fuel. The Scotford plant processes 155,000 barrels per day of raw bitumen.

The upgrader is now undergoing a third expansion which, when completed in 2010, will include the commissioning of a third hydrogen plant. Hydrogen plants combine steam and natural gas (methane) to produce hydrogen for upgrading and by-product CO2 that is vented to the air.

The key to Shell Quest would be a facility that captured the CO2 from all three of the upgrader’s hydrogen plants. “We will use a patented Shell process that uses amine solvents to scrub H2S and CO2 from our gas stream,” Seeley said. Once the gas stream was cleaned up, compressors would prepare the CO2 for transport to underground storage sites. Compressing CO2 transforms it into a supercritical liquid – a form of matter which has the properties of gas and liquid simultaneously. Once liquefied, Shell would pipe the CO2 to field facilities, where it would be injected into deep, underground rock formations.

How it would work: CO2 will remain in supercritical form if stored more than 800 metres below ground. Shell is targeting structures 2,000 or more metres deep.

The injection wells would use several casings of steel pipe to ensure the CO2 entered the deep rock formations alone, and would not enter shallower areas of the ground. This would prevent leakage to the surface or into drinking water aquifers.

Cap rocks would trap the CO2 underground. In addition, however, three other down-hole traps would keep the CO2 in the reservoir. Liquefied CO2 is a dense liquid (heavier than seawater) under high pressure, and so would stay below the salty water that may exist in the deep aquifer. Another is that in these reservoirs CO2 can combine with water to form hydrates – dense, stable substances at high pressure. Finally, the CO2 may combine with chemicals within the reservoir to form carbonate rock – limestone, for example. These traps plus the cap rock mean there is little likelihood the CO2 would ever leave the injection sites.

According to Rob Seeley, “We believe CCS is an important piece of the toolkit to reduce CO2 emissions. We think it’s a great opportunity within an oilsands operation to reduce our greenhouse gas footprint.” He notes that capture, compression, transport and sequestration themselves require energy, and that these energy needs will partly offset the benefits of CCS. “If we capture and sequester 1.2 million tonnes of CO2 per year, the net result of putting that away would be roughly 1 million. It depends on where the energy comes from for the capture and sequestration processes and how effectively it’s integrated into the whole process.” All in all, though, “CCS is a great opportunity to reduce CO2 emissions and to help move us on the path to greater sustainability.”

The Role of Government: Seeley was unwilling to discuss the cost of these ventures, but suggested that Alberta’s $2 billion would be distributed among only five CCS projects, each of which would capture at least one million tonnes per year. The simple math says the projects would each receive a $400 million subsidy. Why should they?

“We believe governments should take action on regulation to control CO2 emissions,” Seeley said. “If they do that, it will create a level playing field in which big industrial polluters can innovate to reduce emissions.” Seeley thinks big: “If we can have regulation that is complementary from country to country then we have a better chance of reducing these emissions internationally.”

Seeley noted that CCS faces numerous risks that will require government involvement. These projects “are sitting waiting for regulation. The rules for greenhouse gas regulation in Canada are still not certain. You have to settle regulatory issues such as Canada and Alberta harmonisation before those projects can go forward.”

In his view, “The beauty of (CCS) is that it can capture very large from industrial sources. However, prices of $80-100 per ton are well beyond the prices that have set for CO2 in the near time. If the price of carbon is $15-20 per ton, it will be cheaper for companies to pay into a government tech fund than to actually sequester CO2.” Thus, if governments see CO2 emissions as a problem, helping fund CCS is a way for them to this important CO2 mitigation opportunity started.

“Capital costs will be in the hundreds of millions of dollars, but operating costs will also be high. It could be that over the life of a project the operating costs (present value basis) would be about the same as the capital costs. There are also technological costs.”

Although CO2 has long been used in enhanced oil recovery, Seeley observed that “EOR doesn’t save the day on this. Historically, for EOR you get paid maybe $20 per ton for CO2. With higher oil prices, maybe you will get $30 to $40 per tonne. This is still well short of the $100/tonne cost to capture, compress and transport CO2. Only higher carbon pricing (by government) or the market will make this viable.”

Six Pathways: He adds, “The price of this technology will come down, but first we need some demonstration projects. That’s what Quest is all about – a large-scale demonstration of fully integrated CCS. We need to build this first round of projects so that we can learn from them. As these projects go ahead we will go from using amines to capture the CO2, then move on to cryogenics and other approaches that are more sophisticated.”

The earnestness with which Rob Seeley describes the issue of GHG emissions seems to reflect corporate culture at Royal Dutch Shell. The corporation has identified “six pathways” toward reducing carbon emissions. For the record, here they are: Increase energy efficiency within the corporation. Create technologies that increase efficiency and reduce emissions. Develop low-carbon fuels. Help customers use less energy. Work with governments on effective regulation. Implement carbon capture and sequestration.

This seems like a map other oilsands producers should study.

Peter McKenzie-Brown
October 23, 2008

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