Case studies

We analyse case the economics of potential CO2 transport and injection associated with two gas discoveries. One is the Tangga Barat natural gas discovery offshore Malaysia. The other is the Natuna natural gas discovery offshore Indonesia. Both discoveries have high CO2 content. CO2 comprises over 30% of the raw gas in the Tangga Barat discovery and over 70% of the raw gas in the Natuna discovery.

CO2 injection for Tangga Barat will require 4 injection wells and the capital costs of CO2 transport and storage is estimated to be US$220 million, with annual operating costs of US$8 million. Approximately 2.5 million tonnes of CO2-e per year will be injected into the subsurface. The estimated specific cost is US$14 per tonne of CO2-e avoided ignoring fiscal effects. This is within the range of representative specific costs estimated for the Malay Basin on a similar basis.

In the absence of any benefits from a carbon trading regime, our costs estimates translate into a cost of between US$2 and US$5 per tonne avoided after taking fiscal effects into account. Conversely, if a carbon trading regime applied and the carbon price yields revenues that are treated in the same way as revenues from gas sales, the minimum carbon price required to justify CO2 sequestration would be US$26 per tonne avoided.

The other case analysed in the Natuna discovery. No firm plans for the development of this discovery have been made. Therefore, the CO2 transport and injection scheme analysed here is only one of several possibilities and is shown simply as an illustration. In addition, CO2 injection costs for the Natuna discovery are subject to large uncertainties because of large uncertainties in the properties of the injection formation.

Based on an illustrative development, the capital costs of CO2 transport and storage for Natuna are estimated to be at least US$1,975 million, with annual operating costs of almost US$180 million. Approximately 80 million tonnes of CO2-e per year will be injected into the subsurface. The estimated specific cost is at least US$7 per tonne of CO2-e avoided ignoring fiscal effects. This is about twice the representative specific costs estimated for the East Natuna Basin on a similar basis, but the representative case has double the flow-rate. In addition, as mentioned above, the characteristics of the potential storage reservoir are very uncertain. If less favourable reservoir parameters are assumed, then the specific costs could be significantly higher than US$7 per tonne of CO2-e avoided.

The uncertainties mentioned above can have a significant effect on the results of the economic analysis.

In the absence of any benefits from a carbon trading regime, our costs estimates translate into a cost of between US$2 and US$3 per tonne avoided after taking fiscal effects into account. Conversely, if a carbon trading regime applied and the carbon price yields revenues that are treated in the same way as revenues from gas sales,, the minimum carbon price required to justify CO2 sequestration would be US$10 per tonne avoided.