Second Shot At Carbon Capture From Coal Burner To Revive Oil Reservoir In Texas

Looking back on Petra Nova.

Petra Nova was a CCS demonstration out of Houston, supported by the US federal government. CCS stands for carbon capture and storage. At Petra Nova, CO2 was captured from a coal-fired power plant smokestack and injected into an old oil field to boost the oil production. The federal support came by way of promises to save coal.

The owners of Petra Nova were NRG and JX Nippon, a Japanese company. The oilfield was operated by Hilcorp Energy using a process called enhanced oil recovery, where the CO2 acts like soap to soften and squeeze the remaining oil out of the rock it was trapped in.

Starting in 2017, Petra Nova operated for 3 years and was claimed to capture the world’s largest CO2 volumes from a coal-burning smokestack. Petra Nova recovered 92% of CO2 from the exhaust gases. It also proved the entire process of enhanced oil recovery was viable on a commercial scale — if the price of oil was high enough.

However, the enterprise was expensive, costing about $1 billion with $195 million paid by the US government. It was a technical success but when the price of oil fell below $50/barrel, the project was shelved in 2020. This was a disappointment and the Secretary of Energy at the time, Rick Perry, lamented that trying to save coal via CCS was like throwing jello at a wall and hoping a lot of it would stick.

NRG sold its 50% stake to Nippon for $3.6 million at end of 2022. At this price it looked like a steal. Nippon is now the sole owner. Nippon’s goal is to help its parent company, Eneos Holdings, to become carbon-neutral by 2040. It’s unclear whether Hilcorp will be involved.

Four obstacles to CCS.

In the larger picture of CCS there are four obstacles to saving coal and coal-fired power plants, such as the relaunch of Petra Nova.

Obstacle 1: Phasing out coal is preferred by many, because it’s such a dirty-burning fuel leading to pollution for both the lower (smog) and upper (greenhouse gases) atmosphere. COP26 in Glasgow ended when 197 nations out of 200 attendees agreed on wording to “phase down” coal.

China and India, both users of vast amounts of coal, and three other nations had pushed back on the wording “phase out” of coal within just the last hour of the conference, because they want to provide cheap power to new industries and to move huge populations to a higher quality of living – just like the west had done decades ago.

Obstacle 2: The US and the world have storage capacity for CCS that could last thousands of years. But, according to Rystad Energy, the world will need to inject ~9 billion tons of CO2 eq per year by 2050. This would require 20% year-over-year growth for decades to expand from current injections.

An enormous new industry for CCS will have to be created — at least as large as the present oil and gas industry and possibly twice as large. Fossil fuel production and a CCS industry together will be too cumbersome and expensive and therefore impractical for energy firms to manage compared to developing renewable energies.

Obstacle 3: The CCS process is complicated and expensive. First, you have to separate the CO2 from other gases in the exhaust from the burning coal. Second, CO2 gases have to be cleaned, compressed and transported, hopefully by pipeline, to a suitable old oilfield (there are plenty of them in the US and the world). Third, the CO2 needs to be injected more-or-less continuously by wells that are deeper than 3000 feet. Fourth, the CO2 needs a guarantee it will not leak through the caprock and contaminate aquifers.

The US DOE has spent more than $1 billion to study carbon capture projects since 2009, according to the GAO (Government Accountability Office) in 2021. Despite varying successes, 8 of 11 projects failed, and most of these were focused on coal power plants.

Obstacle 4. The climate benefits of a CCS project such as Petra Nova in its first lifetime are undermined if the CO2 injection is used to extend the life of an oil field. The enhanced oil production, when burned, leads to enhanced greenhouse gas (GHG) emissions which counteract the emissions saved from burning the coal.

The perspective of big-oil.

Although the oil and gas industry are not focused on coal, they have deep interests in preserving their oil and gas production, which means addressing the GHG caused by burning oil and gas. The oil and gas industry alone provides 57% of the world’s energy and 50% of the world’s greenhouse gases.

But profits by big-oil have just been reported for all of 2022, and they are way over the top in a year when oil prices averaged about $100/bbl and gas prices were higher than in the previous decade.

All the super-majors made record profits in 2022, with the top six earning roughly $220 billion in total and more than doubling profits over the next biggest year, 2018. $220 billion is a Fort-Knox bankful of money that could partly be invested in renewables. ExxonMobilXOM
was top at $59 billion ranging down to Equinor at $23 billion.

As with most big business, the main goal is to make a profit, and profits go up when the world demands more oil and gas. CCS is viewed as an escape hatch as it allows big-oil to continue their production of oil and gas, with all its benefits of energy security, jobs, and cheap gasoline – especially justifiable with Russia’s war on Ukraine.

ExxonMobil is storing 9 million tons of CO2 each year, equivalent to 11 million car exhaust emissions each year. The LaBarge CCS operation in Wyoming captures nearly 20% of all human-made CO₂ captured in the world each year.

Starting in 2022, the company plans to invest $3 billion on 20 new carbon capture and storage facilities, and $15 billion over 6 years on low-carbon plans including hydrogen and biofuels as well as CCS. They have also proposed a $100 billion plan to deploy CCS in a joint venture with a wide swath of Gulf Coast business enterprises.

China and India.

Coal’s “phase down” replaced “phase out” at the behest of India and China at COP26. Over its history, coal drove industrial expansion and helped raise millions out of poverty because it provided cheap and reliable energy. It still does in India and China who are trying to make the economic leaps that the US and the West made years ago.

One potential winner would be for the Petra Nova re-start to hammer out an inexpensive and effective way to capture CO2 from the hundreds and thousands of coal-fired power plants deployed by China and India and other under-developed nations.

This could allow such nations to bring forward their delayed goals of net-zero GHG emissions: currently 2060 for China and 2070 for India, compared with 2050 based on the Paris 2015 accords.

Takeaways.

CCS costs are high and will likely require a carbon-pricing or other mechanism to promote their application. The Infrastructure bill in the US has earmarked $12 billion and the Inflation Reduction Act has increased tax-breaks, as incentives for CCS development in the US.

Despite this, the cost of producing fossil fuels combined with CCS will make fossil fuels more expensive than renewables.

Eventually, demand for fossil fuels will fall in the US and the world due to electrification of vehicles and renewable energy replacing fossil power plants, and this will reduce the need for CCS.

Carbon capture and storage won’t be able to save the US oil and gas industry in its current form. But a Petra Nova re-start may open a door to reduce carbon emissions from multitudes of power plants in China and India who presently say they won’t even get close to achieving net-zero emissions by 2050.