The UK’s £1billion CCS competition was suddenly chopped by the Government late last month without explanation.
While a two-sentence cancellation note was issued to the London Stock Exchange via the Department of Energy & Climate Change, this decision had Treasury written all over it. “Brutus” Osborne had struck again; wrecking yet another of the low carbon initiatives intended to “green” Britain’s energy footprint.
But though I condemn the Government for the manner of its decision regarding the contest, I have to confess that I’ve never been convinced by the Peterhead project . . . I mean the one driven by Shell and Scottish & Southern Energy.
For those who forget, there was an earlier Peterhead CCS scheme kicked off in 2005 and which, in my opinion, was better and could have eventually delivered multiple returns.
Not just technologically but also tens of millions of barrels of additional high quality North Sea oil from the by then mature Miller field, which was already connected to Peterhead by pipeline as its gas had fuelled the power station.
However, the proposal was dumped by BP after a highly visible political battle when New Labour was in power.
The current project is based on post-combustion capture of CO2, then delivery offshore for permanent storage; the prior scheme centred on pre-combustion capture followed by delivery offshore for storage and to drive recovery of at least 40million barrels of oil over 15-20 years.
Read the brochure and one learns that Shell, with support from strategic partner SSE and the UK Government, plans to capture about 90% of the CO2 produced by one of the gas turbines at Peterhead power station.
This CO2, which is currently emitted to the atmosphere, will then be compressed and transported 100km offshore for safe, long-term storage deep underground in the commercially exhausted Goldeneye gas reservoir below the North Sea, with zero commercial return.
If the project ever goes ahead it would be the world’s first commercial-scale, full-chain gas CCS project. But I cannot see Shell sticking with this now; not given the current and enduring oil price slump that is wreaking havoc across the North West Europe Continental Shelf and threatening its long-term viability.
Meanwhile, the super-major and SSE have ploughed a lot of money and effort into their Peterhead project since it was selected as a front-runner by the last government in 2013. The objective was to stuff 10million tonnes of CO2 below ground over the 10 years life of the trial.
They absolutely need a contribution from the public purse to enable continuation; after all, this is for British, EU and global benefit, is it not? If the Goldeneye experiment was to work, then it could/would pave the way to gas and even coal-fired power stations worldwide being fitted with CCS kit.
As things stand, UK coal’s days are numbered. But a new dash for gas has, in effect, just been given the green light by the current government and something has to be done to clean up the emissions of every new plant built, does it not?
Basically, CO2sequestration as an EOR rather than environmental tool has been practiced intermittently for longer than is perhaps generally recognised, but on a small scale, though momentum is now building for a big push.
Shell, for example, has been active in CO2
EOR for 40 years through pilot projects and as an initiator of large-scale CO2transport and EOR floods in the Permian Basin of West Texas.
In the case of Miller, BP had proposed a £500million or thereabouts pre-combustion carbon capture project at the power station in 2005, but pulled out of the plan in May 2007. According to PowerTechnology.com, this was “due to a delay in government approval and concerns over the long-term storage capacity” of the field.
But that is the sanitised version. The real reason is more complex and involves a public row between the then group CEO John Browne and the government of the day. Browne wanted not just political backing for the idea, he wanted public money on the table.
Browne argued that the 40million barrels supposedly remaining in the field would not deliver sufficient return on the investment in financing conversion of Peterhead for the task.
According to the Global CCS Institute, by about 10 years ago, a considerable amount of work had been done identifying the best CO2-EOR prospects in the North Sea.
Not just Miller, but other fields like Forties, Draügen and Gullfaks had been viewed as possible candidates but that “initial evaluation of these prospects concluded that CO2-EOR oil yields are disappointing, and together with escalating capital costs for the conversion of offshore installations, including facilities and wells for CO2 injection, these prospects were determined unlikely to be economic”.
The institute noted too that further studies by Heriot-Watt University and the Norwegian Petroleum Directorate had also deemed CO2-EOR development in the North Sea area uneconomic without financial incentives.
Leaving aside technical issues like reservoir “sweep efficiency”, it really was the lack of public financial incentive at the right time that sank Miller. Then PM Tony Blair, having been keen about the project, said in February 2007 that government had to evaluate “eight or nine” other supposedly similar proposals before making a decision.
The Peterhead-Miller project had been the bird in the hand and Blair should have recognised that. For its part, BP could have played its hand better and launched the project earlier than 2005. As it is, Miller was shut down in 2007.
Maybe UK CCS ambitions might not be in the mess that they are now in; while UKCS EOR could be further advanced, had the first Peterhead project gone ahead.
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