Karen Frantz
GHG Monitor
2/21/2014
Utilities should consider partnering with oil companies in carbon dioxide-driven enhanced oil recovery projects in order to make better financial returns, a Department of Energy official suggested at the National Association of Regulatory Utility Commissioners winter meeting in Washington last week. Thomas Sarkus, Division Director at the National Energy Technology Laboratory’s Office of Major Demonstrations, said at a panel on clean coal that NRG Energy, the company heading the Petra Nova post-combustion carbon capture and storage project, also known as W.A. Parish, has entered into a joint venture with oil company Hilcorp Energy in which it shares ownership of the West Ranch Oil Field, where CO2 captured from Petra Nova will be used for EOR.
Sarkus said that the joint ownership allows NRG Energy to share in the oil revenues and bring capital back to its venture, which is a strategy utilities might also employ as they consider whether to take on CCS projects. “You don’t want to capture CO2 at a cost of $80 to $100 a ton, turn around and have to sell it into an EOR market to an oil company for $20 or $30 a ton and then watch that oil company put that into an old oil field and recover 3 barrels of oil that they’re then going to sell for over $300 dollars,” Sarkus said. “You have to get beyond that economics. And what [NRG Energy has] done is they’ve joint ventured with an oil company Hillcorp to conduct the CO2-EOR. NRG brings capital to this venture for building out the CO2 oil field infrastructure; Hilcorp brings the oilfield operations expertise. … NRG and Petra Nova are going to share in the oil revenues. They’re not saddled by having to just sell the CO2 to someone else for $20 a ton. They’re tapping into that oil revenue. Now when I go around and talk to audiences all the time they say, that’s what we need to figure out how to do. I talk predominantly to utility audiences who look at me and say that we’re … utilities and we can’t do that. And I understand that maybe I’m talking to the wrong people, but we need to change the paradigm. And I understand that this may take legislation in some instances to allow them to do things like that.”
The DOE green-lighted $167 million in stimulus cost-share funding for the Petra Nova CCS retrofit in Texas last year. Petra Nova is the only post-combustion CCS project in the DOE’s major demonstration portfolio, and it will use an amine-based system on a 250 MWe flue gas slipstream from a 650 MW coal-fired unit at the pre-existing W.A. Parish Generating Station southwest of Houston. The CCS system will capture 90 percent of the CO2, amounting to 1.5 million tonnes per year, and it is expected to be operational in 2016.
DOE Loan Authorities
At the panel, another DOE official, Jonathan Pershing, Principal Deputy Director of the Office of Energy Policy and Systems Analysis, touted a recently announced $8 billion in loan guarantee authority to support other fossil fuel energy projects that reduce greenhouse gas emissions as part of the Administration’s “all-of-the-above” energy strategy. “We need a successful model for the fossil fuel sector,” he said. “I don’t personally think there is any solution to the climate change problem globally if we can’t find a successful model for the fossil fuel sector.” He said the DOE’s solicitation, for which initial submissions are due on Feb. 28, is “very broad, very inclusive.” “You can do CCS, but you can also do efficiencies,” he said. “You can do combined exercises where gas plays in with renewables to be a backstop structure for a combined program. That qualifies.” He said projects must be in the United States, must deal with greenhouse gases and must be innovative. “We are not looking to pay for things that are already underway, we’re looking to drive the system and the technology forward,” he said. “Outside of that, it is open. People can do whatever they think works.”
Other Issues Remain
But it was clear at the panel that there are some components of carbon capture and storage that are reliant on market drivers—not government funding—for advancement. One attendee asked the panel about whether anything has been done on the government’s part to drive down the cost of pipelines for transporting captured CO2 from power plants, noting that the price at a million dollars a mile is not manageable. Jarad Daniels, Director of Planning and Environmental Analysis at Fossil Energy, said that the DOE has done “zero” to enhance pipelines forward because they are considered a mature technology. “It all gets down to the economics of, do you have enough sources there where you can get the economies of scale of building a slightly larger pipeline with multiple inputs going in and multiple outlets coming out?” he said. “The cost on pipelines is pretty much a function of the cost of steel and labor.” Sarkus added, “Studies are suggesting that for a single plant to a single storage site the limit can be somewhere around 250 miles. … If you wanted to build a pipeline from the Midwest, where you have a lot of coal plants, down to the Gulf Coast, you would need maybe five plants.”
