Speaker 1: This is Dana Perkins and your listening to Switched on
Speaker 1: the B and EF podcast. So back in twenty twenty
Speaker 1: was the last time that we dedicated an episode here
Speaker 1: on this show to carbon capture and storage, and at
Speaker 1: the time we discussed it in terms of an emerging
Speaker 1: technology which could become important in the future for reducing emissions. Well,
Speaker 1: perhaps now the future has come. Within the intervening period.
Speaker 1: CCS looks like it has been growing fast, with the
Speaker 1: investment in CCS having more than doubled year on year
Speaker 1: as of Q one twenty twenty three. The total capacity
Speaker 1: of projects under development as of late twenty twenty two
Speaker 1: stood at two hundred and forty four million tons per annum.
Speaker 1: That's up forty four percent from the year before. So
Speaker 1: which industries and sectors are driving this growth, why are
Speaker 1: they looking at CCS in particular, and how does it
Speaker 1: compare with other carbon abatement strategies. Today's show draws from
Speaker 1: the recent BNF Carbon Capture and Storage market outlook, and
Speaker 1: who better to speak with us about this topic than
Speaker 1: two members of our Sustainable Materials team. The head of
Speaker 1: the team, alent Tom Abraham, alongside Anastasia Tomasidu. Together, we
Speaker 1: discuss the different industries that are utilizing carbon capture and
Speaker 1: storage technology, including oil, gas, cement, and hydrogen and the
Speaker 1: costs involved for each along with other hard to abate areas.
Speaker 1: In the show, we also get into how carbon capture
Speaker 1: is transported and stored In addition to some of the
Speaker 1: surprising things that it can be used for, we also
Speaker 1: address the potential bottlenecks for storing CO two and whether
Speaker 1: it could pose a threat for the expansion of CCS.
Speaker 1: And lastly, we get into the role that policy plays
Speaker 1: in the adoption of CCS technology, in which countries are
Speaker 1: actively encouraging rollout with reforms and how effective they've actually been.
Speaker 1: As always, if you like this podcast, if you subscribe,
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Speaker 1: and if you give us a review on Apple Podcasts
Speaker 1: or Spotify or any other players, it will make us
Speaker 1: more discoverable by others. But right now, let's jump into
Speaker 1: my conversation with Alan and Anastasia about where the CCS
Speaker 1: market has gotten to since we last discussed it. Anna,
Speaker 1: thank you very much for joining today. Thank you and Alan,
Speaker 1: good to have you on the show.
Speaker 2: As well.
Speaker 3: Thank you, Dana. Very excited for this conversation.
Speaker 1: Well, I'm looking forward to it because this is one
Speaker 1: of those topics that we're revisiting because things have changed,
Speaker 1: and that's always a good thing to see technology move
Speaker 1: forward and for markets to be this kind of constantly
Speaker 1: evolving thing. We're talking about carbon capture and storage today,
Speaker 1: and my first question is a definition, one which does
Speaker 1: seem to be where I head at the beginning of
Speaker 1: many shows, because there's a lot of vernacular and one
Speaker 1: thing I've noticed was that a couple of years back,
Speaker 1: everyone was saying CCUS as opposed to CCS. Now I'm
Speaker 1: noticing CCS being back as the go to term. Would
Speaker 1: you be able to clarify the difference between the two
Speaker 1: and essentially which term we're going to use for the
Speaker 1: remainder of our conversation today.
Speaker 3: Carbon capture and storage is what is referred to as CCS,
Speaker 3: and carbon capture utilization and storage is what is referred
Speaker 3: to as CCUS. Now, the utilization part is important because
Speaker 3: a lot of companies previously thought that they could capture
Speaker 3: carbon and then use it for certain applications like creating
Speaker 3: synthetic fuels or any other particular applications that they would
Speaker 3: look for. But because of the maturity and policy, as
Speaker 3: well as some incentives that are coming out in certain
Speaker 3: markets which favor storage, the industry is starting to slowly
Speaker 3: shift towards storage, and that's becoming a more important part
Speaker 3: of the whole carbon captured discussion. And that's why you
Speaker 3: have rightly noticed that a lot of discussions are now
Speaker 3: focusing on ccs instead of ccus, but both are relevant.
Speaker 1: What was the utilization part? What was it being used
Speaker 1: for in a way that was economically beneficial.
Speaker 3: Historically most of it was used for enhancing oil production
Speaker 3: from oil wells. You captured the CU two injected to
Speaker 3: new oil wells and you increase the output from these
Speaker 3: oil wells. Or you could also use it for carbonation
Speaker 3: of beverages, for example, into your soda. That's also one
Speaker 3: particular application. Or you could use it as a greenhouse
Speaker 3: for increasing agricultural output in greenhouse versus agricultural production. So
Speaker 3: different applications, but not very scalable.
Speaker 1: I would say it's possible I drank a soda of
Speaker 1: CCUS captured carbon. This is something that may have happened
Speaker 1: and I didn't even realize it.
Speaker 3: Yes, if you were in the US, if.
Speaker 1: I was in the US. We'll come to the regional
Speaker 1: aspect of this particular technology application in a minute, but
Speaker 1: let's talk a little bit right now about why this
Speaker 1: is time for us to be talking about this. This
Speaker 1: technology has become more prevalent, more often talked about, and
Speaker 1: really in your mind. I mean, I know why we
Speaker 1: asked you to come on the show, but why do
Speaker 1: you think that there was a catalyst for you to
Speaker 1: you talk about this topic and for us to revisit
Speaker 1: CCS at this time.
Speaker 4: So in the last decade, we've seen huge investment in
Speaker 4: this technology, so many new projects and some Mu's news
Speaker 4: it says capacity being announced. Between twenty twenty since we
Speaker 4: last had a conversation, more than forty million tons of
Speaker 4: capacity has been announced, which might sound huge, but by
Speaker 4: the end of this decade, an additional three hundred and
Speaker 4: seventy million tons of zotocupture capacity has been announced. So
Speaker 4: this has been a massive change over the last few years.
Speaker 3: This is something that we always try to look at
Speaker 3: how fast the industry is moving bar and we try
Speaker 3: to capture it in our market outlooks. And one of
Speaker 3: the things that we started noticing when we went about
Speaker 3: writing this market outlook was two other important things that
Speaker 3: were changing. One is we discussed about the use of
Speaker 3: carbon dioxide and where it eventually ends. And historically most
Speaker 3: of the carbon diexcite, like I mentioned, was used for
Speaker 3: enhanced soil togory. About sixty percent of the carbon great
Speaker 3: capacity historically used the CO two to enhance oil recovery.
Speaker 3: But when we look into the future twenty thirty twenty
Speaker 3: thirty five, we are starting to see that flip. About
Speaker 3: seventy five percent of the carbon capture capacity is now
Speaker 3: trying to use the carbon dioxide and storing it away
Speaker 3: permanently in deep geological reserves, when compared to just twenty
Speaker 3: five percent today. So huge shift in terms of like
Speaker 3: where we are sending the carbon dioxide that we're starting
Speaker 3: to capture. And the other one is, of course we're
Speaker 3: starting to see a divergence in terms of the geographical
Speaker 3: footprint of the projects that are starting to be announced. Historically,
Speaker 3: the US has been the largest market. The US continues
Speaker 3: to be the largest market, but new large projects are
Speaker 3: starting to come up in markets such as Canada, the UK, Germany, Netherlands,
Speaker 3: and even the Middle East. So that's another difference that
Speaker 3: we're starting to see when we look at the market
Speaker 3: over the last three to four years.
Speaker 2: Just thought something to what Alan has just said.
Speaker 4: Another pig defense is in which sector is the capacity
Speaker 4: is actually being added, And historically most of the capacity
Speaker 4: was in natural gas processing plants, but now we see
Speaker 4: lots of investment in sectors like hydrogen and cement and power,
Speaker 4: especially in the US, and this diversification in terms of
Speaker 4: verre city is supplied is also driving this huge capacity
Speaker 4: boom that we're seeing.
Speaker 1: So you mentioned that the US has been and continues
Speaker 1: to be a dominant player in this space. So let's
Speaker 1: talk a little bit about the geographical split. This is
Speaker 1: a popular technology from what you're telling me, in the West,
Speaker 1: but why why do you think that it is found
Speaker 1: predominantly in North America and in Europe.
Speaker 3: It's two reasons. One is, like I said, one of
Speaker 3: the reasons for the dominance of the US when it
Speaker 3: comes to carbon captic capacity is that the oil and
Speaker 3: gas companies in the US have been at the forefront
Speaker 3: of using this technology to improve the oil output from
Speaker 3: their production facilities. And that's one of the reasons that
Speaker 3: many of the projects that were initially located were in.
Speaker 1: The US, and is that because perhaps national oil companies
Speaker 1: are less interested at least until this point, in directly
Speaker 1: managing their emissions with this technology.
Speaker 3: It's two ways. One is the emissions is one part
Speaker 3: of it. The other part is, of course, like how
Speaker 3: do you increase the efficiency of your oil and gas
Speaker 3: production as well and improve its output. So I would
Speaker 3: say it's a balancing of both of these different parameters.
Speaker 3: But it also looks at how some of these US
Speaker 3: based oil and gas companies were looking at this technology
Speaker 3: as a way to understand how carbon capture works out.
Speaker 3: And there has been some historical incentives that also helped
Speaker 3: in propping up this industry in the US and even
Speaker 3: in markets like Canada where you used the captured carbon
Speaker 3: dioxide in order to extract more oil and it created
Speaker 3: a value stream for the captured carbon dioxide. Unfortunately, in
Speaker 3: other markets outside of North America, we did not see
Speaker 3: a value proposition for using the carbon dioxide that was captured,
Speaker 3: and that's as a result you see very little projects
Speaker 3: that were built in other markets. And when it comes
Speaker 3: comes to why the US is leading, a lot of
Speaker 3: that is coming down to again the activity of the
Speaker 3: largest players in the market today, they're understanding about the technology.
Speaker 3: And also because the Inflation Reduction Act actually came out
Speaker 3: with huge incentives that were offered to carbon capture projects
Speaker 3: over the next ten to twelve years.
Speaker 1: So the usiras created financial incentives for this to do well.
Speaker 1: But before that took place, you mentioned efficiency being something
Speaker 1: that these companies, the oil and gas community is looking
Speaker 1: for when they're looking at ccs. Is it something that
Speaker 1: helps them make money in the right circumstances or is
Speaker 1: it always an additional cost For the.
Speaker 3: Oil and gas companies, they had to pay a very
Speaker 3: small amount for getting the carbon dioxide from an industrial
Speaker 3: facility or even their own applications. So if they owned
Speaker 3: a refinery or if they owned a natural gas processing facility,
Speaker 3: they already had to remove the carbon dioxide from these
Speaker 3: processes and as a result, you ended up adding a
Speaker 3: cost to your existing operational facility. Now you could use
Speaker 3: that carbon dioxide to increase your oil output or your
Speaker 3: gas output on the other hand, which meant you created
Speaker 3: more value by using that cost to create more revenue
Speaker 3: or profit from using that. So that was basically the
Speaker 3: balancing act that the companies were trying to achieve.
Speaker 1: Here has the emissions trading scheme in Europe, so the
Speaker 1: EU ETS has that been a big catalyst for ccs.
Speaker 3: Like I said, the Europe has never been a big
Speaker 3: market for carbon capture and storage, except for some of
Speaker 3: the markets in the Nordics, such as Norway, where a
Speaker 3: certain carbon tax in the very early stages in the
Speaker 3: in the in the in the nineties, and you know
Speaker 3: in the early two thousands started promoting a lot of
Speaker 3: carbon capture projects in Norway. But beyond Norway, carbon capture
Speaker 3: has never been a tool that has been used effectively
Speaker 3: for emissions reduction in Europe.
Speaker 1: Let's talk a bit about prices then, because we're here
Speaker 1: talking about different schemes that make it more than official
Speaker 1: in certain parts of the world because the government is
Speaker 1: supporting it. What is the current cost and really what
Speaker 1: are some of our projections around where ccs might go
Speaker 1: from a pricing standpoint.
Speaker 4: So these one of the things we have recently explored
Speaker 4: in our research, looting at the cost of capture per
Speaker 4: ton of CO two in various different industries, some of
Speaker 4: which we've mentioned already, And the type of industry makes
Speaker 4: a huge difference because in each industry of gases that
Speaker 4: are emitted from which we capture the COO two from
Speaker 4: have varying concentrations of CO two. The higher the concentration,
Speaker 4: that cheaper it is to capture it. So for high
Speaker 4: concentration sources like natural gas processing and ethanol, the costs
Speaker 4: are cheaper and they vary between twenty to forty dollars
Speaker 4: per ton of CO two, whereas in other sectors where
Speaker 4: concentration of cootwo is lower, like in hydrogen and cement,
Speaker 4: the costs can be as high as eighty dollars per time,
Speaker 4: so almost double.
Speaker 2: And this is because when concentration of cootwo is.
Speaker 4: Lower, more energy is needed, more where solvents are needed,
Speaker 4: and per equipment is needed to capture the same amount
Speaker 4: of SOO two.
Speaker 1: So let's talk about those industries where this is a
Speaker 1: really prime solution. You mentioned cement, steel, I'm hearing hard
Speaker 1: to abate sectors. This is one of the solutions for
Speaker 1: those parts of the economy that cannot electrify readily. What
Speaker 1: would you say, or maybe the top few, top five
Speaker 1: hard to abate sectors where CCS is really becoming increasingly popular.
Speaker 3: There are two ways to look at it. One is
Speaker 3: based on the announced pipeline of projects from now through
Speaker 3: twenty thirty five, and the other is in sectors where
Speaker 3: it is essential to deploy ccs in order to get
Speaker 3: to net zero. So let me address it in two parts.
Speaker 3: On the first part, which is based on the announced
Speaker 3: pipeline of projects, when we look at the period from
Speaker 3: now through twenty thirty five, most of the carbon capture
Speaker 3: capacity is now targeted towards the production of hydrogen or ammonia,
Speaker 3: and again a large portion of it located in the
Speaker 3: US and then comes in streets such as power, where
Speaker 3: again about nineteen percent of the capacity by twenty thirty
Speaker 3: five based on the announced pipeline of projects, could be
Speaker 3: for capturing CU too from coal and gas power plants
Speaker 3: in various parts of the world substantial number again, and
Speaker 3: the third largest category when it comes to cthiu's capacity
Speaker 3: by twenty thirty five could be natural gas processing, which
Speaker 3: is the dominant use case today. So these three sectors
Speaker 3: still become one of the most important ones. But the
Speaker 3: interesting part here is that hydrogen and power were not
Speaker 3: historically big sectors for carbon capture, and they are starting
Speaker 3: to be emerges. Two very important sectors for carbon capture
Speaker 3: capacity by twenty thirty five, and you talked about hard
Speaker 3: to beat industries like cement and steel. These industries do
Speaker 3: require carbon capture in order to reduce emissions and to
Speaker 3: get to net zero. But when you look at the
Speaker 3: timeline between now and twenty thirty five, unfortunately very few
Speaker 3: companies are really looking at investing in this technology in
Speaker 3: order to reduce emissions. As a result, only about seven
Speaker 3: percent of the capacity by twenty thirty five could be
Speaker 3: deployed in these two sectors.
Speaker 1: How low in CCS technology actually get the emissions coming
Speaker 1: from these sectors. I'm assuming that it does not get
Speaker 1: to zero, it does not wipe out the emissions. I'm
Speaker 1: also assuming that it varies widely depending upon the density
Speaker 1: of the carbon, as you had mentioned, So I guess
Speaker 1: what the question I'm really asking is how good is it?
Speaker 1: How effective is it in removing carbon from carbon intensive industries?
Speaker 4: So this varies a lot. Most facilities aim for at
Speaker 4: least ninety percent of the COETO to be captured, and
Speaker 4: there's some facilities that have proven to be able to
Speaker 4: capture a ninety five percent. There's interesting companies that claim
Speaker 4: that they can capture more than ninety nine percent of
Speaker 4: their emissions. But this is something that has only been
Speaker 4: tested at small scale facilities and not actually been employed
Speaker 4: in commercial plants. So it's something that we're also finding
Speaker 4: very interesting. How much can they actually capture and can
Speaker 4: they prove that they can capture as much as they
Speaker 4: claim they come.
Speaker 1: Well, then let's talk a little bit about the different
Speaker 1: technologies that are out there. What is the dominant CCS
Speaker 1: technology and is there a good amount of innovation either
Speaker 1: from within oil and gas companies who are using CCS
Speaker 1: or actually with startups that are VC funded. Really where's
Speaker 1: the change coming from in terms of advancement of this technology,
Speaker 1: because it's been around for quite some time. I mean,
Speaker 1: this has been a topic that the industry within decarbonization
Speaker 1: we have discussed for many years.
Speaker 2: I guess let's start from the beginning. There's firstly, three main.
Speaker 4: Parts of the process that we can capture CO two
Speaker 4: from pre combustion, post combustion, and oxy combustion capture, and
Speaker 4: their names kind of reveal what these means. So pre
Speaker 4: combustion removes COO two from fossil fuels before the fuel
Speaker 4: is actually burned, and this has a big benefit in
Speaker 4: the sense that this gas has high partial pressures of
Speaker 4: CO two, which makes the process quite efficient, but this
Speaker 4: is hard to retrofit and implement that existing facilities. Post
Speaker 4: combustion cupture happens after the fuel is combusted, and this
Speaker 4: is the most commonly used approach and what most of
Speaker 4: these large scale industrial plants use. Now, this is very
Speaker 4: easy to retrofit to existing plants, but is a less
Speaker 4: efficient process. And then, lastly, oxyfuel combustion is when instead
Speaker 4: of air, we use a pure oxygen stream for a
Speaker 4: combustion of the fuel and this generates a nearly pure
Speaker 4: stream of cootwo which bypasses any subsequent capture processes and
Speaker 4: the costs associated with them.
Speaker 2: But how do we actually capture the CO two? How
Speaker 2: do we actually get it? So?
Speaker 4: The liquid absorption is by far the leading and most
Speaker 4: mature technology and is the only technology that has been
Speaker 4: used in large scale commercial plants. In this technology, the
Speaker 4: CO two is essentially dissolved in a solvent, a liquid
Speaker 4: solvent and is then released to create this pure CO
Speaker 4: two stream that we can capture and the solvent is regenerated.
Speaker 4: Many companies provide this technology, for example, MHI it'swishy and shell.
Speaker 4: They provide aimine based solvents to capture CO two, and
Speaker 4: aimines have been around for years as this is the
Speaker 4: benchmark technology, it's what has been traditionally used. But today
Speaker 4: this is quite expensive, it has quite high energy requirements.
Speaker 4: It spares some environmental concerns in terms of aimines being
Speaker 4: leaked in the atmosphere. So there is a few companies
Speaker 4: that are working on developing new innovative solutions, solvents with
Speaker 4: different chemistries that don't rely on aimings at all, but
Speaker 4: also completely different approaches like solid absorption where the CO
Speaker 4: two is trapped but in the pores of very highly
Speaker 4: porced materials, or things like membrane.
Speaker 1: Capture and by quite expensive. Put that in nominal terms
Speaker 1: for me.
Speaker 4: So as we talked about earlier, this varies so much
Speaker 4: depending on the concentration of CO two in the off cases,
Speaker 4: and it can vary from around forty dollars per ton
Speaker 4: of CO two to eighty dollars per ton of CO two.
Speaker 4: But as mentioned, the energy requirements for these plants are huge.
Speaker 1: Is there more to add? Are there more technology advancements
Speaker 1: that are quite different technically speaking from the one you
Speaker 1: just outlined.
Speaker 4: So other than what I just talked about, so developing
Speaker 4: different new more efficient solvents, new sorpents, solid serpents, and membranes.
Speaker 4: Many companies are working on the equipment itself and how
Speaker 4: the process works. And many companies are not looking at
Speaker 4: creating modulary solutions, which makes capital expenditure much lower. They
Speaker 4: can create these standardized solutions that also leads to economies
Speaker 4: of scale, so they can reduce cost a lot. Many
Speaker 4: companies are looking at implementing KEAT integration and recovering their
Speaker 4: systems to lower these huge energy requirements that we talked about.
Speaker 4: These are some of the things they're working on. Also
Speaker 4: simpler things like the arrangement of the equipment, how them
Speaker 4: solid out serpents are packed in the equipment that's being used.
Speaker 2: Just lots is going on.
Speaker 1: So we're talking an awful lot about the captured technology,
Speaker 1: but I want to pivot a little bit to talking
Speaker 1: about what happens after we have all this carbon. So
Speaker 1: if it's not going into my next soda, where is
Speaker 1: it being stored and what are we actually doing with
Speaker 1: it to make sure that it doesn't go back into
Speaker 1: the atmosphere.
Speaker 3: Very good question, thankfully, if it's in soda, it ends
Speaker 3: up in human beings. But otherwise what generly used to
Speaker 3: happen is it used to be used for enhanced oil recovery.
Speaker 3: And as I mentioned, most of the capacity that's expected
Speaker 3: to come in the next ten to fifteen years is
Speaker 3: actually now pivoting towards storing this carbon for long periods
Speaker 3: of time in deep geological reserves. It can be saliine
Speaker 3: equifers or depleted oil and gas reserves. About seventy five
Speaker 3: percent of the capacity, as I mentioned. Now, the big
Speaker 3: question there is whether we have the infrastructure to ensure
Speaker 3: that the CU two that is captured in these industrial
Speaker 3: facilities get transported and the storage facilities and the transport
Speaker 3: infrastructure is available. And that becomes another important aspect when
Speaker 3: we think about carbon captured.
Speaker 1: Is it transported? Is it put on trucks, trains, pipelines.
Speaker 3: It can be done on any of these, but typically
Speaker 3: most of them target to use pipelines, large pipelines where
Speaker 3: you compress the carbon dioxide into a fluid state and
Speaker 3: then push it along these pipelines into storage way wells
Speaker 3: which are either within land boundaries or even offshore. And
Speaker 3: it depends on the strategy from a company's perspective as
Speaker 3: well as you know what different countries have in mind
Speaker 3: when it comes to how to address the CEO to
Speaker 3: that is being captured.
Speaker 1: We're putting it into the ground. Are there specific geological
Speaker 1: conditions which must be required in order to be able
Speaker 1: to store it or is it really just up to
Speaker 1: having the space from a land use standpoint in order
Speaker 1: to put it somewhere.
Speaker 3: Typically the best places to park your CEO two is
Speaker 3: deep geological reserves like Celia aquifers, which are either found
Speaker 3: within land boundaries or even offshore. Now, what I mentioned
Speaker 3: when it comes to how different countries are looking at
Speaker 3: it differently, is that most of the capacity that is proposed,
Speaker 3: say in the US, looks at storing carbon dioxide within
Speaker 3: the land boundaries on shore, but when you come to
Speaker 3: Europe there's a slightly different approach where most countries like
Speaker 3: Germany for example, do not want carbon dioxide to be
Speaker 3: stored within their land boundaries and as a result, they
Speaker 3: want to push it outside deep offshore into depleted oil
Speaker 3: and gas reserves or even Serie aquifers which are offshore.
Speaker 3: So that becomes a different approach in how different countries
Speaker 3: identify where they want to store the carbon dioxide that's captured.
Speaker 1: How do we ensure that it stays where it's being stored.
Speaker 3: That's a very good question, and that's something that the
Speaker 3: industry is starting to like figure out in how do
Speaker 3: we ensure and monitor and verify that the carbon dioxide
Speaker 3: that we inject into these wells stay there for long?
Speaker 3: It depends on the specific geology in some certain cases,
Speaker 3: but overall, companies are starting to use technology AI and
Speaker 3: the deep machine learning as well as digital expertise that
Speaker 3: many of these oil and gas companies have developed over
Speaker 3: the last few years to understand how the geology in
Speaker 3: these wells work and how it behaves as you inject
Speaker 3: more carbon dioxide into these wells. And they're starting to
Speaker 3: put up new technology which will continuously measure if what
Speaker 3: they're trying to achieve is being achieved in terms of
Speaker 3: keeping the carbon dioxide in there for long periods of time.
Speaker 1: So you reference the transportation in storage is a bit tricky.
Speaker 1: How tricky is this how well? Actually, to put it in
Speaker 1: another way, we were talking earlier about technology advancements in
Speaker 1: terms of the actual capture technology. Are there a lot
Speaker 1: of eyes on trying to solve this transportation in storage question.
Speaker 1: And you know, I'm just sitting here having a moment
Speaker 1: also thinking about the fact that we recently did a
Speaker 1: show on grids and how incredibly underinvested and important they
Speaker 1: are for that sector. So I can only imagine that
Speaker 1: this has a similar parallel.
Speaker 3: Absolutely, you're right in that you can draw a parallel
Speaker 3: to this, because transportation and storage is now looking like
Speaker 3: one of those factors that can be the biggest bottlenecks
Speaker 3: for this industry to scale again. In our market outlook,
Speaker 3: we try to track what is the announced capacity of
Speaker 3: transport in storage facilities that is being rolled out over
Speaker 3: the next ten to fifteen years, and what we see
Speaker 3: is that for the four hundred and twenty million tons
Speaker 3: of carbon captured capacity that could be online by twenty
Speaker 3: thirty five, only about two fifty million tons of transport
Speaker 3: and storage infrastructure is being proposed by the same period
Speaker 3: of time, So only about half of the captured carbon
Speaker 3: can be transported or stored based on the announced transport
Speaker 3: and storage infrastructure by twenty thirty five, which means this
Speaker 3: is going to be one of the biggest bottlenecks for
Speaker 3: the carbon captured facilities to scale. All these industries can
Speaker 3: capt carbon, but they don't know what to do with it.
Speaker 1: Transporting anything over a distance is going to require permitting
Speaker 1: and a view on environmental impact in local communities. Not
Speaker 1: only well, there's two questions within this, how difficult is
Speaker 1: it to get these permits and then ultimately how long
Speaker 1: does it take to build some of these projects.
Speaker 3: It is certainly turning out to be very difficult to
Speaker 3: get these new permits. Let me give you an example.
Speaker 3: Some of the projects that companies such as Summit Carbon
Speaker 3: Soedutions or Navigate to SEO two Ventures have now proposed
Speaker 3: in the US, which is by far the most mature
Speaker 3: market when it comes to carbon capture solutions, are now
Speaker 3: facing huge permitting delays because the initial applications that they
Speaker 3: submitted with states in the Midwest such as North Dakota
Speaker 3: or South Dakota were initially declined. And many of these companies,
Speaker 3: like Navigate to SEO two Ventures, are now saying these
Speaker 3: projects are on hold and we are now going to
Speaker 3: revisit the entire project and see where we can find
Speaker 3: other alternative paths to make these projects happen. So it
Speaker 3: is becoming a big hassle to build these pipelines and
Speaker 3: get the permits for these pipelines. And these are long
Speaker 3: infrastructure projects, long duration infrastructure projects. We can take six
Speaker 3: seven years sometimes in the making to build over thousands
Speaker 3: and thousands of miles.
Speaker 1: I've got two questions. One is near term and one
Speaker 1: is long term. But let's start with the nearer term.
Speaker 1: And by nearer term, I mean let's say the next
Speaker 1: decade or so. How critical is this technology to the
Speaker 1: future of a net zero world when it comes to
Speaker 1: the oil and gas industry or in some of the
Speaker 1: hard twobate sectors that you also outlined that really rely
Speaker 1: on this technology to bring their emissions down.
Speaker 4: So this decade has a huge impact on the long term,
Speaker 4: So let's talk about both. In our net zero scenario,
Speaker 4: as we said previously, in this decade, we expect carbon
Speaker 4: capture capacity to grow to around four hundred and twenty
Speaker 4: million tons, which is a huge number. But in our
Speaker 4: net zero scenario, this number for twenty thirty is one thousand,
Speaker 4: seven hundred and fifty million tons. That's one point seventy
Speaker 4: five billion tons of CO two. Now we need in
Speaker 4: our net zero scenario by twenty thirty, So as this
Speaker 4: makes it obvious that the announced projects are far behind
Speaker 4: what we need to see to twenty thirty to reach
Speaker 4: net zero, and we're touching up twenty thirty, but what
Speaker 4: about twenty fifty? So in twenty years time, by twenty fifty,
Speaker 4: in our net zero scenario, we expect cicis to contribute
Speaker 4: about ten percent of emissions of eightmen in power, twenty
Speaker 4: one percent in steel, and a huge seventy five percent
Speaker 4: in cement, which translates to about seven point five billion
Speaker 4: tons of CO two being captured to twenty fifty in
Speaker 4: order for us to reach net zero. So, going back
Speaker 4: to your question, we think it's going to be a
Speaker 4: massive contributor to being able to reduce AT emissions in
Speaker 4: various different sectors.
Speaker 1: And for those who aren't familiar with the net zero
Speaker 1: scenario coming from benf it's part of our new energy
Speaker 1: outlook where we essentially start with the end in mind
Speaker 1: and we say, if we want to reach net zero
Speaker 1: as a planet by twenty fifty, what is it going
Speaker 1: to take for the different sectors that we cover in
Speaker 1: order for it to get there? And needless to say,
Speaker 1: there is a speed and scale discussion in the immediate term.
Speaker 1: I have a follow on question though, when it comes
Speaker 1: to this, which is, we know what it is that
Speaker 1: we need to do. But for those who are in
Speaker 1: businesses and looking at investing in technologies and large infrastructure projects,
Speaker 1: they want to make sure that these projects are going
Speaker 1: to continue to make money for them for a long
Speaker 1: period of time. The parallel I can think of is
Speaker 1: natural gas. If you're going to build a new gas
Speaker 1: fired power station, you want to know that you're going
Speaker 1: to be able to actually use it, and in some circumstances,
Speaker 1: the policy environment does not necessarily make that particular project favorable,
Speaker 1: even if it has a short term benefit from a
Speaker 1: carbon emission standpoint. So as we enter a phase where
Speaker 1: we're talking increasingly about oil demand dropping off and we
Speaker 1: may have actually already reached peak oil demand in the
Speaker 1: oil and gas industry and the application of CCS, do
Speaker 1: we have a feel for whether or not there's cause
Speaker 1: to be concerned on the CCS side of the business,
Speaker 1: or even in the transportation and storage end of things,
Speaker 1: not having a long term viable future for these technologies
Speaker 1: in the hum hypothetical world where we actually do decarbonize
Speaker 1: at the speed that we need to in order to
Speaker 1: reach net zero.
Speaker 3: There are some industries which, even in the long term,
Speaker 3: do not have many pathways to completely face out the
Speaker 3: use of fossil fuels, and one of them is the
Speaker 3: petrochemicals industry. For example, the world is developing, population is rising,
Speaker 3: people are dependent more and more on consuming plastics, for example,
Speaker 3: or any other chemicals that are produced from the petrochemicals industry,
Speaker 3: and all of this petrochemicals industry would require some fossil
Speaker 3: fuel feedstock, which when it goes through the process in
Speaker 3: the petrochemical refineries, produces emissions, and you need to capture
Speaker 3: those emissions, and as a result, there is a stream
Speaker 3: of opportunity for carbon capture in that industry. For example. Similarly,
Speaker 3: for cement, the world is going to build more buildings,
Speaker 3: especially in the developing world, and we need cement to
Speaker 3: build the roads, the buildings, everything in these places. And
Speaker 3: cement has a particular feature in that the process involves
Speaker 3: creating about fifty to sixty percent of the emissions and
Speaker 3: not just the fuel that is burnt in the manufacturer
Speaker 3: of cement. So even if we in a hypothetical world
Speaker 3: entirely switch out the fuels in a cement manufacturing facility
Speaker 3: with clean fuels, you still end up having about fifty
Speaker 3: to sixty percent of CO two emissions from the process
Speaker 3: which needs to be captured. So there are these sectors
Speaker 3: which would still rely on CCS as a technology to
Speaker 3: abate their emissions in an net zero world, and that
Speaker 3: is what is the stream that will help develop some
Speaker 3: of these transport and storage infrastructure remain viable, as well
Speaker 3: as all the investments that's going into these space.
Speaker 1: That really helped me think about the future for this
Speaker 1: industry because I know that it's increasingly complex, as we
Speaker 1: talk about in this room, but there does seem to
Speaker 1: be when I look at the net zero scenario, you
Speaker 1: see certain industries drop off at certain points in the future,
Speaker 1: assuming that things actually do follow that trajectory. And again
Speaker 1: it's a scenario, not a forecast. Those are very different things.
Speaker 1: But the number of industries that CCS is applicable to
Speaker 1: it's interesting and illuminating for me with you guys here
Speaker 1: on the show. Let's talk a little bit then about
Speaker 1: the policy makers who also see this solution. In particular,
Speaker 1: as we've established in the West, and there are two
Speaker 1: ways to go about policy intervention with technology and carbon.
Speaker 1: There's carrot and their stick. Who's doing the carrot and
Speaker 1: who's doing the stick, and what are we seeing in
Speaker 1: the policy space that's making CCS an increasingly viable carbon
Speaker 1: emissions technology.
Speaker 4: So we talked already about many of these new growth
Speaker 4: being in the US and there's a reason for it,
Speaker 4: and it's the Inflation Reduction Act which has made the
Speaker 4: us B a leader in this.
Speaker 1: Technology, which is definitely a carrot hundred percent.
Speaker 4: So last year we saw the updates in the forty
Speaker 4: five Q credits which now give companies that are able
Speaker 4: to start construction of these carbon cupture facilities by twenty
Speaker 4: thirty two dollars per ton of sootwo that they store
Speaker 4: or sixty dollars per ton of sooto that they utilize,
Speaker 4: which a Sin talked about before, can be enhancing oil recovery,
Speaker 4: using in synthetic fuels and different things like that, and
Speaker 4: this can cover some of the costs that we talked
Speaker 4: about earlier, especially for high concentration sources where the carupture
Speaker 4: costs are lower than the benefit dis credits provide, so
Speaker 4: they can really make carbon cupture economically viable business case.
Speaker 4: And this also explains why sixty five percent of the
Speaker 4: new capture capacity that we see, especially in hydrogen, is
Speaker 4: in the US. Also, this kind of deadline to twenty
Speaker 4: thirty two is really pushing for projects to happen now
Speaker 4: because we talked about how long it takes for some
Speaker 4: of these projects to be implemented and how long permitting
Speaker 4: takes and all of that.
Speaker 2: So for a project to start construction.
Speaker 4: In less than ten years time, some of these things
Speaker 4: have to be initiated now. Other countries giving carrots Canada
Speaker 4: providing huge copex support and providing up to fifty percent
Speaker 4: of POINTERSS hypocupture project capital expendicture and again, as we
Speaker 4: talked about earlier, capital costs is the single largest cost
Speaker 4: component of these projects and the initial investment that these
Speaker 4: companies have to make is huge and for industry these
Speaker 4: ranges from around one hundred and seventy million dollars to
Speaker 4: more than a billion dollars, which makes the importance of
Speaker 4: the support obvious. And then coming back to the UK,
Speaker 4: the country has put on the site twenty billion pounds
Speaker 4: to support capocupture projects for the decapitalization of especially industrial hubs.
Speaker 4: So I think these three are the main ones in
Speaker 4: terms of carrots, So it seems that carrots is the
Speaker 4: approach to goal for most of these countries. I don't
Speaker 4: have many good examples for sticks, but will be testing
Speaker 4: to see how that costs.
Speaker 1: My last question, which is really a burning question I've
Speaker 1: had since we've been going through this, is that if
Speaker 1: it really is this incredible use case to bring down
Speaker 1: emissions right now in the oil and gas industry, which
Speaker 1: are creating a large number of emissions, what is it
Speaker 1: going to take for this technology to be useful in
Speaker 1: other parts of the world, perhaps where there are national
Speaker 1: oil companies who don't have the same market based incentives
Speaker 1: through their share price to be looking at things like this.
Speaker 1: What would be the right environment for ccs to be
Speaker 1: all over the world.
Speaker 3: The one thing we need to realize is CO two
Speaker 3: is a waste and capturing that CO two is going
Speaker 3: to cost more. Be it an oil and guest company
Speaker 3: or a cement factory or a steel factory, carbon capture
Speaker 3: is an additional cost, and as a result, governments would
Speaker 3: have to either provide incentives to support the deployment or
Speaker 3: on the other hand, put a very high carbon tax.
Speaker 3: So one of these two would have to happen.
Speaker 1: As we scale this technology, costs are likely to come
Speaker 1: down some. Do you think that that will end up helping.
Speaker 3: For most of the industrial applications? Carbon capture is a
Speaker 3: mature technology, as we discussed previously, and as a result,
Speaker 3: the amount of reduction in cost is going to also
Speaker 3: be fairly limited to some of the technologies that we've
Speaker 3: seen like solar wind or batteries. What we could see
Speaker 3: is for point source carbon capture industrial sources cost COUD
Speaker 3: forarby about forty to fifty percent over the next two
Speaker 3: to three decades. So that's not substantial. It's good, but
Speaker 3: it's not substantial. And as a result, it's going to
Speaker 3: be a cost and it's going to help, but you
Speaker 3: still need incentives to make this happen.
Speaker 1: Okay, Well, on that note, thank you very much for
Speaker 1: walking me through the future of the application of this
Speaker 1: well established technology, which looks like it has an increasingly
Speaker 1: interesting future. Alan, Anna, thank you very much for joining today.
Speaker 2: Thank you, Tana.
Speaker 3: Great to be Thank you, Dana, thank you for having me.
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