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The Economics of Transportation of CO2 in Common Carrier Network Pipeline Systems

09 April 2010

Large-scale Carbon Capture and Storage (CCS) will require large-scale infrastructure to move CO2 from capture facility to storage formation. Significant resources will have to be dedicated in order to construct and operate a pipeline system.  Many of the design considerations and technologies in large-scale systems are already used by the oil and gas sector in existing hydrocarbon pipeline applications. Due to this experience, the oil and gas industry can play a crucial role in determining a way forward for transporting CO2 to make possible large-scale, commercial deployment of carbon capture and storage. 

Establishing a widespread CO2 transportation infrastructure requires a strategic approach that takes into account the magnitude of potential deployment scenarios for CCS as hundreds of megatonnes (Mt) of CO2 are transported every year through pipeline systems. Transporting CO2 by pipeline is not a new technology; in the US almost 4,000 miles of CO2 pipeline for enhanced oil recovery (EOR) are in operation.  However, the infrastructure for mass CCS could be on the scale of the current gas transmission infrastructure for Europe or North America, and will require significant investment to construct and operate. 

The CO2 Capture Project (CCP) - a partnership of seven oil and gas majors to advance CCS - has been looking at the issues surrounding the economics of transportation of CO2 in common carrier network pipeline systems. The CCP commissioned a study to examine different approaches to infrastructure development. In the study two approaches have been evaluated. The first would see the development of a point-to-point system, the second the development of common carrier pipeline networks, including backbone pipeline systems. This study has helped our understanding of the challenges involved; shedding light on what would be the best scenario and how in practical terms CO2 infrastructure might evolve. The results of this study were presented in a paper - Assessing Issues of Financing a CO2 Transportation Pipeline Infrastructure which was commissioned by the CCP, and completed by ERM.

Results of the Study

The study confirmed that an integrated backbone pipeline network is likely to be the most efficient long-term option. It offers the lowest average cost on a per tonne basis for operators over the life of the projects, if sufficient capacity utilization is achieved relatively early in the life of the pipeline. Crucially, integrated pipelines reduce the barriers to entry and are more likely to lead to the faster development and deployment of carbon capture and storage. However, point-to-point pipelines offer lower costs for the first movers and do not have the same capacity utilization risk.

It is clear that without government incentives for the development of optimized networks, project developers are likely to build point-to-point pipelines. Point-to-point pipelines offer lower costs for the first movers and do not have the same capacity utilization risk.  Consequently, other forms of financial support may be needed which overcome commercial barriers and ensure optimized development of CO2 pipeline networks.

The way forward?

So what is the way forward? Guaranteed capacity utilization is essential for integrated backbone pipeline networks to become economically viable.  Public policy is needed that provides some guarantees as to capacity utilization. Government incentives or loan guarantees are also needed to support a backbone infrastructure and encourage the development of optimized networks. Government support in the first years, when capacity is ramping up, will be essential for eventual commercial viability.

CCP is continuing its research into understanding the financial and policy mechanisms that can be applied to enable the large scale deployment of CCS at lowest cost. Additional work includes a detailed assessment of financing and incentives mechanisms.

Read the complete paper

Written by CO2 Capture Project and Environmental Resources Management (ERM).

This article was published in January’s Carbon Capture Journal and World Pipelines Magazine’s February / March issue.

 

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