6 Project Development Considerations

Key Findings:

  • Projects are developed via familiar stage-gate systems for both LNG and CCS
  • LNG projects take up to 10 years or more to select preferred concept, then 4 - 5 years to define and deliver, similar to limited data from CCS LSIPs
  • Individual CCS projects are not as costly as LNG projects ($ billions vs. $10s of billions) but total global target capacity and number of required projects are greater
  • Project partners spread investment cost load, even among largest IOCs and NOCs
  • Current CCS commercial basis is virtually limited to EOR with capture from gas processing but these sources and sinks have limited volume to contribute to global CCS targets
  • LNG has clear demand-driven commercial drivers but for CCS, lack of adequate and predictable GHG mitigation price means there is no commercial basis to justify uptake
  • LNG is bankable but with no commercial basis for CCS, finance availability is extremely challenging
  • Governments and NOCs led early LNG market and now government intervention is required to set policy that supports a predictable CCS market
  • CCS could utilise multiple parallel capture trains similar to LNG liquefaction trains for capacity limits and project phasing
  • LNG experienced CAPEX escalation (more than doubling in last decade) and CCS could be susceptible to similar risk, with resulting impact on production cost
  • There is much greater energy penalty for CCS than for LNG
  • There is much greater technology selection variability and risk for CCS than for LNG

A LNG project is developed and implemented as a result of a resource owner / developer identifying that LNG is the preferred (or one of several) upgrade routes for the gas that will be produced from the resource. The resource owner / developer usually start as the exploration and development company that made the reservoir discovery. If that company is one of the large IOCs / NOCs, then the development of the project will probably continue to be led by that company, possibly with farm-in by other majors to spread the investment load. However, if the E&D company is a minor company, then the development lead may be taken over by the farm-in of a major.

The concept evaluation and selection will usually be performed with support from engineering and technology providers. The timing and extent of contracting of engineering studies during these early phases will be dependent on the internal capability of the owner / developer. The service providers will usually have some degree of specialization in sections of the value chain, e.g., pipelines, LNG plants, LNG process technology, tanks, shipping and regasification.

To develop the selected concept, the owner / developer will proceed with definition, detailed feasibility study, site selection and approvals applications, design (FEED) and cost estimating to allow investment decision. At the same time, the project proponents will seek off take contract commitments, additional investors and finance for the project. Having defined and justified the project and with necessary regulatory approvals, the proponents will make a Final Investment Decision (FID) to proceed with execution of the project.

Usually the implementation of the multiple blocks in the LNG value chain will be by multiple EPC contracts and sub-contracts.

LNG projects are complex developments that can take ten years or more from initial resource discovery to operation. Some projects currently under consideration have still not finalised concept selection 40 years after the discovery of the gas field. Developments are in the range of tens of billions of dollars. CCS developments are and will be similarly complex and costly. CCS will have added complexity of a greater range of sources and sinks, greater range of project costs, and greater diversity in development sites.

CCS almost certainly has a greater diversity of candidate CO2 sources and sinks that may be incorporated into the eventual value chain than is the case for LNG. Also certainly many of these can be expected not to reach a significant volume of mature commercial application as the industry evolves. Examples of CO2 reservoirs include EOR, depleted oil and gas reservoirs, and deep saline aquifers of various morphology and geo-chemistry. Examples of CO2 sources include:

  • Extraction from reducing pressurized environments (pre-combustion) such as processes for gas conditioning, LNG, synthesis gas clean up, hydrogen production, ammonia, methanol, synthetic fuels, and IGCC
  • Extraction from oxidizing low-pressure environments such as post-combustion capture from power generation, cement, and iron and steel flue gases

These sources and sinks and the candidate technologies still under development to enable the CCS value chain are all familiar to Global CCS Institute members and readers familiar with CCS developments. Some aspects of the variety of sources, sinks and process paths are discussed in this report in Section 5 and extensively elsewhere, including Global CCS Institute reports and resources.

CCS is also more likely to have a greater range of commercial and business models. Capture will range from relatively low cost capture from conventional gas processing and chemicals production to higher cost capture retrofit to power generation. Sinks will range from high value disposition in EOR to higher cost storage in sequestration reservoirs.

CCS is also more likely to have a greater range of application sites compared to LNG. LNG terminal and storage sites are constrained to locations at or near a shore or floating production due to LNG marine transport. LNG facilities must also draw from suitably sized gas resources for which LNG has been selected as the preferred (or one of several) development pathway(s). These resources need to be within an economic pipeline distance from potential shore locations. By comparison, the capture plants for CCS will be located at a very diverse range of emissions sources such as coal fired power stations, natural gas processing plants, chemicals and fertilizer manufacture, cement, iron and steel, ethanol bio-fuel production and many more. The site selections for the source processes will often be industry-specific and not related to potential storage formations.

Although large scale LNG has relatively more narrow application than CCS, there are still comparisons that may be interpreted from the LNG industry development. The issues from the LNG industry that may be relevant to CCS are examined in this Section 6 for project commercial basis justification and optimisation aspects, and in Section 7 for project technical definition aspects.