SHELL CANADA GIVES FINAL GREEN LIGHT TO QUEST CCS PROJECT

Early Construction Work to Begin this Fall, Company Says  

Tamar Hallerman
GHG Monitor
09/07/12

Royal Dutch Shell has approved final plans for its Quest carbon capture and storage project in Alberta, Canada, and will begin construction this fall, the company announced this week. At a high-profile press conference Sept. 5 in Calgary, Alberta, the oil giant confirmed that Shell Canada, along with its project partners Chevron and Marathon Oil, formally greenlighted its $1.35 billion “flagship” CCS project, the world’s first to retrofit the technology onto an existing oil sands upgrader. “I am delighted to be able to announce today that we are proceeding with the Quest carbon capture and storage project, a world-first application of CCS technology to an oil sands development and now one of a handful of large-scale CCS projects in development or operation globally,” said John Abbott, Shell’s executive vice president for Heavy Oil. He said the project has received all federal and provincial regulatory approvals and is in position to begin operations in late 2015.

The project, which has been guaranteed $865 million in provincial and federal government funding, will capture roughly one-third of emissions, or one million tons of CO2 per year, from Shell’s Scotford Upgrader located near Edmonton, Alberta. That facility processes roughly 250,000 barrels a day of bitumen, or heavy crude oil, produced from Shell, Chevron and Marathon’s Athabasca oil sands project. Shell and its partners will then transport the captured CO2 roughly 50 miles north via an underground pipeline for injection into a deep saline aquifer. Shell said that capturing one-third of the emissions produced by Scotford would be the equivalent of removing 175,000 North American cars from the road annually.

Construction to be Completed in 2014

Company officials later confirmed that construction will begin in earnest this fall. Project spokeswoman Adrienne Lamb told GHG Monitor that work will begin “almost immediately.” “We’re doing preparation activities at the Scotford Upgrader site and now we’re planning drilling activities for this fall,” she said. Shell said project officials would adopt a construction technique widely used in the oil sands industry of doing as much work as possible offsite—with modules being pre-assembled and delivered to the Scotford site via Alberta’s heavy load highway corridor. “One of the things that Shell and some of our contractors bring to this is really looking at how we can … reduce our costs,” Quest Project Manager Anita Spence said in a supporting video released by Shell this week. “We’re looking to use some of the offshore [construction] techniques, where the space is limited, but height may not be as big of a deal.” She said that assembling offsite would be more cost effective and lead to a more controlled construction environment.

Spence added that this year the goal for construction is to prep the Scotford site and to drill injection and monitoring wells in order to start collecting additional field data. Spence said that module and pipeline construction should begin early next year, with construction continuing through fall 2014 before plant commissioning and start-up.

‘Social License’ for Oil Sands Development

Government speakers at the media event emphasized the potential for CCS to allow for the continued development of Alberta’s oil sands, a controversial energy source maligned by environmental groups due to its high carbon footprint compared to traditional oil production. Alberta Energy Minister Ken Hughes said that if successful, the project could help provide a new “social license” for companies to move ahead on oil sands development. “This is a potential game-changer that will provide Alberta with very concrete solutions for meeting our emission targets. It also allows us to maintain the social license we need to continue to develop our immense oil sands resources in this province,” he said. “We are going to continue to develop this national asset, and we will do it in an environmentally responsible way.”

Abbott said CCS could play a large role in helping Canada achieve its goal of reducing greenhouse gas emissions 17 percent below 2005 levels by the end of the decade while also still allowing for the development of fossil fuel sources like the oil sands. “We will continue to see a significant proportion of fossil fuels in the energy mix [going forward],” he said. “It is our intention to be able to manage the emissions in the most responsible way that we know how to do that, and that is why we’re making this investment. It is about putting the infrastructure in place to manage our oil sands operations and proving a technology not only for Alberta and Canada, but for the rest of the world.”

Federal, Provincial Governments Looking for a CCS Winner

The Canadian government’s high hopes for the project were evident during the event. “The advancement of carbon capture and storage places Canada at the vanguard of this leading-edge technology,” Canadian Natural Resources Minister Joe Oliver said. “These investments demonstrate that Canada is a world leader in the development and deployment of energy technologies from renewables to CCS.” The federal government invested $120 million in Quest through its Clean Energy Fund in spring 2011.

The project has received even more help from the Alberta government, which allocated the project a $745 million share of the province’s $2 billion CCS fund, a critical investment from a province whose economic future intimately relies on the development of its fossil fuel resources. The province in particular is itching for one of its remaining CCS projects to proceed after TransAlta Corp. announced earlier this spring that it would be abandoning plans for its $1.4 billion Project Pioneer. The other two projects being funded by the provincial government, Swan Hills Synfuels and the Alberta Carbon Trunk Line, are considered to have promise but are both further behind Shell in terms of planning. To sweeten the deal for Shell to proceed, last year the Alberta government said it would temporarily give Quest double the amount of credits on the province’s carbon offset program for each ton of CO2 stored. With offset prices currently at $15 per ton of CO2 and accounting for Quest’s one million tons of CO2 buried per year, that could help earn the project $30 million over 10 years.

In total, the $865 million in federal and provincial funding will help cover about two-thirds of Quest’s costs for construction and the first decade of operation, according to previously released company figures. Some environmental groups criticized the level of government spending on the project, equating it to a handout to a large oil company. “Canadian taxpayers will hand over a billion dollars of public money to a multinational oil company so that greenhouse gas emissions can go up,” Keith Stewart, Greenpeace Canada’s climate and energy coordinator, told GHG Monitor. “That is a billion dollars that could be better spent on accelerating the shift to electric vehicles and the renewable sources of energy like wind, solar and geothermal energy to power those vehicles.”

‘Flagship’ CCS Project

Abbott said that with that public help, Quest will become Shell’s “flagship” CCS project, heading up the company’s CCS research program and helping develop Shell’s CO2 capture technology. While the company is also involved in CCS research projects in Norway and Australia, this is the first in which Shell has majority ownership. Abbott said Shell is willing to share its results and knowledge learned with the broader CCS community. “The Quest project will provide knowledge to help accelerate the deployment of this technology elsewhere around the world,” he said. “This willingness to share what we learned from our Quest project with others is something that all of those funding this project believe is the right thing to do, important if we are to accelerate the commercial-scale application of this technology globally to help manage carbon emissions.”

Meanwhile, CCS advocates lauded the project as one of Canada’s best chances at developing CCS. “If there was any CCS project that was going to go ahead in Canada, we knew it would be this one because Shell has always demonstrated a commitment to this technology,” Carmen Dybwad, CEO of the Regina-based IPAC-CO2, said in an interview. “This announcement really demonstrates where Shell’s planning is and where they think the world is going to go in terms of CO2, so I think it’s a good bellwether for other Canadian companies going forward.”