Executive summary

Purpose and context

The fundamental purpose of this report is to investigate existing and emerging uses of CO2 and to review the potential to capture and reuse CO2 for industrial applications in order to accelerate the development and commercial deployment of CCS. It considers both the near-term application of mature technologies such as enhanced oil recovery (EOR) and the longer term application of a number of promising new technologies that are still in the initial stages of their technical development.

The global CO2 reuse market currently amounts to approximately 80 million tonnes/year, and is dominated by EOR demand in North America. EOR accounts for approximately 50 million tonnes of demand annually, of which around 40 million tonnes is supplied annually from naturally occurring CO2 reservoirs at prices generally in the order of US$15–19/tonne.

The potential supply of anthropogenic CO2 is very much larger than potential demand. It is estimated that globally around 500 million tonnes of low-cost (<US$20/tonne) high concentration CO2 is available annually as a by-product from natural gas processing, fertiliser plants and some other industrial sources. At a much higher cost (US$50–100/tonne), around 18,000 million tonnes could also be captured annually from the dilute CO2 streams currently emitted by power, steel and cement plants.

CO2 reuse for EOR has been a source of revenue for existing CCS projects in North America, and is incorporated into the planning of many proposed North American CCS projects. Elsewhere in the world, particularly in emerging and developing economies, the potential of EOR as an economic catalyst for CCS development is also being examined. The key question addressed by this report is whether and to what extent EOR and other CO2 reuse technologies can accelerate the uptake and commercial deployment of CCS.

The future supply and market price of concentrated CO2 for reuse will be materially affected by the extent to which governments adopt regimes to restrict or penalise CO2 emissions. Consequently, this report considers the potential for CO2 reuse to accelerate CCS development under circumstances of both weak carbon restrictions and prices and strong carbon restrictions and prices and their interaction with both low-cost and high-cost capture of CO2.

Key conclusions

The report’s main conclusions are:

  1. The current and potential future demand for CO2 reuse is only a few per cent of anthropogenic CO2 emissions, and while reuse does not have material global CO2 abatement potential it has the potential to provide a moderate revenue stream for near-term CCS project development in favourable locations where reuse applications and markets are close to the emission source.
  2. EOR will remain the dominant form of CO2 reuse in the short to medium term due to its maturity and large-scale utilisation of CO2. As a result it has a role to play in supporting the near-term development of large-scale CCS demonstration projects in regions of EOR potential and in the absence of strong carbon pricing. This initial phase of large-scale CCS demonstration is an essential pre-requisite to commercial deployment, and is critical to the establishment of practical legal and regulatory regimes, to community acceptance and to CCS project optimisation and cost reduction.
  3. Most of the emerging reuse technologies still have years of development ahead before they reach the technical maturity required for deployment at commercial scale. Mineralisation technologies may ultimately provide a complementary form of CCS to geological storage, and can facilitate abatement of a small proportion of anthropogenic CO2 emissions. Technologies that reuse CO2 in fuel production may also provide indirect mitigation through replacement of fossil fuels. While these are useful attributes, in the near-term they cannot provide a driver to accelerate the commercial deployment of CCS due to their lengthy development timeframes.
  4. CO2 reuse has the potential to be a key component of large-scale CCS demonstration projects in emerging and developing economies, where there is strong demand for energy and construction materials and less likelihood of the early adoption of carbon pricing. The main focus will be on EOR due to its maturity, and potential CO2 utilisation capacity. Carbonate mineralisation, CO2 concrete curing, bauxite residue carbonation, enhanced coal bed methane (ECBM), urea yield boosting and renewable methanol may also be of interest in emerging economies such as China and India. However, as noted in point 3 above, some of these technologies are still in the early stages of development and may not be at the required maturity for deployment at commercial scale to coincide with CCS development timeframes.
  5. The current market price (US$15–19/tonne) for bulk CO2 is indicative of the upper limit of prices that can be expected in the future. There is little prospect of a general long-term strengthening of the current bulk CO2 market price for reuse, and there is every prospect of downward pressure on market prices as and when restrictions on CO2 emissions are introduced. The revenue generated from reuse will be inadequate to drive the development of CCS for power, steel and cement plants, all of which will require a strong carbon price and/or project-specific funding. CO2 supply from low-cost sources, such as natural gas processing and fertiliser production, is likely to dominate any reuse supply growth in the medium term.
  6. CO2 reuse has an initial role to play in supporting the demonstration phase of CCS development in the absence of strong carbon prices and in emerging economies. However that initial role, centred on EOR (due to its maturity), becomes less important as and when the cost of emitting carbon rises, which must ultimately happen to facilitate the widespread-commercial deployment of CCS. Furthermore, as noted in point five above, the likelihood is that the market price for bulk CO2 will fall as carbon prices rise with tightening restrictions on emissions.

Report structure

This report is structured as follows:

 

CO2 reuse technologies

Part 1 of this report investigates existing and emerging CO2 reuse technologies and considers their current and future potential market size. The technologies are short-listed based on the application of a threshold of 5Mtpa of global CO2 reuse potential. This threshold focuses the study on technologies which are likely to demand CO2 on a scale commensurate with the emissions generated from power plants and other large industrial point sources, a key to their ability to contribute in some form to accelerating CCS. The CO2 reuse technologies short-listed for further analysis and evaluation include:

  • CO2 for use in enhanced oil recovery (EOR);
  • Mineralisation (including carbonate mineralisation / concrete curing / bauxite residue processing);
  • CO2 as a feedstock in urea yield boosting;
  • Enhanced geothermal systems (using CO2 as a working fluid);
  • CO2 as a feedstock in polymer processing;
  • Algae production;
  • Liquid fuels (including renewable methanol / formic acid); and
  • CO2 for use in enhanced coal bed methane (ECBM) recovery.

The desktop study of the short-listed technologies above provided an understanding of the characteristics of each technology and highlighted the following:

  • The reuse technologies utilise varying sources of CO2 (from a concentrated stream of CO2 to a dilute stream of CO2, such as untreated flue gas) and have varying abilities to permanently store CO2. These differences lead to varying impacts when considering the objective of accelerating the uptake of CCS. The short-listed CO2 reuse technologies are at varying stages of development and maturity as shown in the diagram below.

Note: The light blue circle represents the technology at demonstration scale, while the dark blue circle represents commercial operation of the technology based on claims from the respective proponents. Consequently, the predictions appear optimistic. The arrow extending from the dark blue circle indicates a more pragmatic timeframe to commercialisation.

 

  • The short-listed CO2reuse technologies fall into the following three broad categories:
    1. EOR and urea yield boosting are proven CO2 reuse technologies already in commercial use and therefore considered to be mature.
    2. Bauxite residue (red mud) carbonation is already in initial commercial operation while renewable methanol is in the process of being constructed at a commercial scale. Both of these technologies are very site specific, and exist due to suitable local conditions.
    3. The remaining short-listed technologies in relative order of advancement (mineral carbonation, concrete curing, ECBM, EGS, polymers, algae and formic acid), are promising technologies that need to be proven further through technical pilots and/or demonstration plants.
  • The short-listed CO2 reuse technologies vary significantly in potential future demand and revenue estimates. The estimated cumulative global demand and gross revenue between now and 2020 for the short-listed technologies are listed below.
Cumulative demand to 2020 Gross revenue to 2020* Technology/application
>500Mt >US$7500M EOR
20Mt to 100Mt Up to US$1500M Urea yield boosting, mineral carbonation and ECBM
5Mt to 20Mt Up to US$300M Polymers, renewable methanol, CO2 concrete curing, bauxite residue carbonation and algae cultivation
<5Mt Less than US$75M Formic Acid and EGS

*Revenues based on assumed bulk CO2 price of US$15/tonne.

Mature reuse technologies, especially EOR, can provide a revenue supplement to the economic viability of early CCS demonstration projects which are necessary to pave the way for later-stage widespread CCS deployment. The early demonstration projects are required to optimise costs through ‘learning by doing’ as well as to gain community confidence in CCS and to establish enabling legislative and regulatory regimes. While EOR has a role to play in accelerating the near-term development of initial demonstration projects in favourable locations, it is less evident that reuse can provide sufficient demand for CO2 to materially facilitate later-stage widespread CCS deployment.

CO2 reuse as an economic driver for CCS

In order to accelerate CCS in the later widespread deployment stage, the reuse technologies must not only demand large quantities of CO2 and generate a revenue stream, but should also be close to commercial operation in order to be aligned with the CCS development timeframe. Furthermore, the magnitude of impact a given technology can have in accelerating the widespread uptake of CCS is also largely a question of economics of the bulk CO2 market, end product value and drivers such as the implementation of a carbon price.

An evaluation of the economics and commercial framework associated with the reuse of CO2 formed an integral part of this report (part 2) and highlighted the following key findings:

  1. In the near term, revenue from CO2 reuse will not be a primary driver for CCS deployment. However, where demonstration projects do proceed, reuse revenues can act as a moderate offset to CCS costs, and hence will benefit early demonstration projects rather than projects in the longer term phase of wide-spread commercial deployment. That is because the potential long-term revenue generated by emitters in supplying CO2 to reuse technologies is likely to experience downward pressure due to the large long-term CO2 supply surplus. Introduction of a carbon price will depress the current bulk CO2 market price due to increased need for emitters to dispose of their CO2 to avoid paying the carbon penalty.
  2. Widespread commercial deployment of CCS will require a global carbon price much larger than the prospective bulk market price of CO2 for reuse. Revenue generated from CO2 reuse, mainly from EOR, is likely to provide moderate economic support to early demonstration projects, but in the longer term the introduction of a carbon price will be the critical driver for the widespread uptake of CCS across the full range of stationary CO2 sources. The current estimated cost gap for CCS from power, steel and cement plants is several times larger than the current bulk CO2 market price, and downward pressure on this market price is likely to eventuate as and when carbon prices increase. For industrial sources where capture costs are low, a modest initial carbon price may be enough to trigger the further near-term deployment of CCS beyond the current population of gas-related CCS projects.
  3. Uncertainty in regulatory acceptance of CO2 reuse abatement credentials presents challenges for the uptake of reuse technologies. Investments in CO2 reuse technologies that do not provide permanent storage of CO2 are ultimately exposed to greater risks due to the uncertainty of the carbon penalty liability between the emitter and the end product. At one end of the spectrum the CO2 emitter (power station or industrial source) may bear the full carbon price/tax despite passing on the CO2 for reuse. This will make capture for the purpose of reuse commercially unattractive. At the other end of the spectrum if the carbon price is passed on to the end product then there is exposure to risk that the product may not be as commercially competitive.

CO2 reuse as a driver of learning and acceptance

Mature forms of CO2 reuse have the potential to materially advance the development of the earlier phase of initial large-scale demonstration projects, particularly in the absence of strong carbon pricing. These demonstration projects play a critical role in the development of practical regulatory regimes, in gaining community acceptance of CCS and in project and cost optimisation through ‘learning by doing’.

The key findings of this report’s analysis of the impact of CO2 reuse technologies on initial CCS demonstration development are as follow:

  1. CO2 reuse for EOR combined with measuring, monitoring and verification (MMV) can provide learnings associated with storage and can help foster community acceptance of storage. The use of CO2 in EOR, when combined with MMV to track migration of the CO2 plume, illuminates the geological detail of the storage reservoir and enhances understanding of the factors influencing sub-surface CO2 migration. The Weyburn-Midale and Cranfield projects are existing examples of this potential.
  2. CO2 reuse through EOR, and to a lesser extent other reuse technologies, may also provide opportunities for capture development and learning. While low-cost sources of concentrated CO2 (such as natural gas processing, fertiliser plants) will generally provide the most competitive supply for reuse, there will also be circumstances where revenue from reuse and public funding are combined to develop demonstration projects based on capturing CO2 from power, steel and cement plants. Such demonstration projects will provide additional or earlier opportunities for capture learning, and non-EOR reuse applications may also enable capture projects to proceed in locations where viable geological storage is not immediately accessible.
  3. CO2 reuse is likely to be a key component of CCS demonstration projects in emerging and developing economies where there is strong demand for energy and construction materials and less likelihood of the early adoption of carbon pricing. EOR will be the key interest, but carbonate mineralisation, CO2 concrete curing, bauxite residue carbonation, ECBM, urea yield boosting and renewable methanol may be of particular interest to emerging economies. However, some of these technologies are still in the early stages of development and may not be at the required maturity for deployment at commercial scale to coincide with CCS development timeframes.

Recommendations

Recommendations for priority action are:

  1. Map regional opportunities for CO2 reuse projects, identifying the point sources of CO2, especially concentrated sources, align with strong demand for products derived from CO2. By necessity, the evaluation of technologies and commercial aspects in this report was undertaken at a global level. Local project opportunities may present themselves when targeting specific regions, where strong demand for CO2-derived products aligns with point sources of CO2. The identification of low-cost, high concentration CO2 sources, such as those associated with gas processing, coal gasification and fertiliser production, will be particularly important in identifying viable opportunities, particularly in emerging economies.
  2. Encourage the deployment of CO2-EOR outside of North America and maximise its associated learning and community acceptance opportunities. The present study has identified CO2-EOR as the CO2 reuse technology best placed to accelerate conventional CCS due to its maturity and large capacity for CO2 utilisation and is likely to be important in facilitating early demonstration projects. The CO2-EOR industry in North America is mature; however, deployment outside of North America has been limited to date. The adoption of rigorous measuring, monitoring and verification (MMV) of the subsurface CO2 plumes generated by EOR is the key to maximising the storage learning and community acceptance benefits they can provide.
  3. Make CO2 reuse opportunities more of a focus in programs that facilitate the development of large-scale CCS demonstration projects in emerging and developing economies. The mapping and ranking of point source CO2 emissions and reuse opportunity alignments should provide a valuable tool in prioritising support and/or funding to facilitate the development of large-scale CCS demonstration projects in developing and emerging economies.