Australia's LNG Industry Takes Risky Bet on Carbon Capture: Russell

Clyde Russell
Wednesday, May 18, 2022

 Australia's vast liquefied natural gas (LNG) sector is betting its future on carbon capture and storage (CCS), a technology it says is vital to decarbonization and is proven.

Convincing everybody else is going to be the tricky part, especially since the only large-scale project of its kind so far hasn't exactly been a resounding success.

Decarbonization and reaching net-zero emissions by 2050 was the major theme of this year's gathering of the companies that make Australia the world's largest LNG exporter at the Australian Petroleum Production and Exploration Association conference this week.

CCS has a poor public image, largely because it is viewed as failing to deliver on its promise, and is an expensive solution to a problem that environmental and renewable energy proponents believe is better solved by eliminating the use of fossil fuels.

Much of the perceived failure stems from the inability of CCS to remove carbon when fossil fuels are burnt, especially in the case of coal-fired electricity generation.

For several years the coal mining industry and lobby touted CCS as a solution that would allow them to operate over the long term.

That promise was never delivered upon. It would be extremely challenging to find a serious energy industry player or analyst who sees any future in CCS for coal-fired power plants.

But Australia's LNG industry, which vies with Qatar and increasingly the United States as the world's biggest exporter, sees CCS as a viable path to decarbonization in its upstream sector.

The plan is both simple and vast in its scope.

LNG producers would dramatically lower their Scope 1 and 2 emissions by capturing the carbon emissions produced in the extraction and liquefaction processes and injecting them back into depleted natural gas and oil reservoirs.

The industry proponents of using CCS repeatedly refer to the process as "proven technology" that is ready to deploy at a large enough scale to make a difference to global emissions.

While it is true that there are several CCS projects at upstream oil and gas ventures, it's gilding the lily to say this is a technology that's ready to be deployed on a massive scale at a price that makes economic sense.

Much is made of the world's largest CCS project at the Chevron CVX.N operated Gorgon LNG plant in Western Australia.

This project aims to capture and store 4 million tonnes of carbon emissions each year, but it only operated at just slightly better than half of that in 2021, storing some 2.1 million tonnes.

It is to Chevron's credit that in an industry that has had a reputation for being tight-lipped about problems, the company has acknowledged the issues with Gorgon, effectively saying it's on a steep learning curve and aims to reach its targets. 

CCS INFANCY

The point with Chevron's struggles at Gorgon isn't to prove that CCS at upstream oil and gas projects is unviable, it's that there are technical challenges that make it difficult, and the technology is still in its infancy when it comes to deploying on a significant scale.

Another large-scale CCS project in Australia is being undertaken by the country's second-biggest oil and gas producer Santos, which is building a 1.7 million tonne a year CCS facility at Moomba, a gas hub in the country's remote center.

Santos Chief Executive Kevin Gallagher told the APPEA event that under the International Energy Agency's net-zero pathway CCS will have to store about 7.6 billion tonnes of carbon dioxide each year, a staggering 200 times what is currently being achieved.

That neatly sets out the scale of the challenge, but it also raises the question as to the cost of achieving this goal.

Effectively, the LNG industry will need to be able to generate carbon credits to justify CCS investments.

This could be viewed either as a sensible way to allow fossil fuels to continue existing in a carbon-constrained world, or as just another handout from taxpayers to the fossil fuel industry.

But perhaps the main challenge for Australia's LNG producers is overcoming the hurdle of public skepticism over CCS, both its cost and its effectiveness.

To do so, the industry will have to demonstrate that the technology can be deployed at scale and speed, without fleecing the taxpayer, and can make a genuine contribution to net-zero goals.

For Australia's LNG industry, putting CCS front and center of their social licence to operate is a massive risk, but it would also appear that making it work is largely within their own hands.


(Reuters  -  Reporting by Clyde Russell - Editing by Christian Schmollinger)


The opinions expressed here are those of the author, a columnist for Reuters.

Categories: Energy LNG Industry News Activity Australia/NZ Insights Decarbonization

Related Stories

BP Expands Oil and Gas Scope in Azerbaijan with New Projects and Exploration Rights

OMV Exits Ghasha Gas Project off UAE with Lukoil Stake Sale

Valeura Concludes Eight-Well Drilling Campaign in Gulf of Thailand

Keyfield Ventures into Indonesia’s Oil and Gas Market with New Partner

Velesto’s Jack-Up Rig Set for Drilling Job off Indonesia

Mubadala Energy Open to Sell Andaman Gas for Domestic Use

Velesto’s Jack-Up Rig Up for Drilling Job Offshore Vietnam

Turkey Discovers New Black Sea Gas Reserve

Indonesia's Medco Starts Production at Natuna Sea Fields

Shell Predicts 60% Rise in LNG Demand by 2040 with Asia Leading the Way

Current News

CDWE Wraps Up Pin Pile Installation Job for Taiwanese Offshore Wind Farm

BP Expands Oil and Gas Scope in Azerbaijan with New Projects and Exploration Rights

Azeri SOCAR Plans New Agreements with Oil and Gas Majors

TPAO, SOCAR and BP to Ink Caspian Sea Oil and Gas Production Deal

Fugro Lands Deepwater Gas Field Job in Southeast Asia

OMV Exits Ghasha Gas Project off UAE with Lukoil Stake Sale

China's Sinopec Laucnhes $690M Hydrogen Venture Capital Funds

CIP, ACEN Partner Up for First Large-Scale Offshore Wind Farm in Philippines

Valeura Concludes Eight-Well Drilling Campaign in Gulf of Thailand

Three Dead in Chevron's Angolan Oil Patform Fire

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com