10.0 Risk Analysis
CCS projects could be considered a special type of oil and gas capital projects. On the one hand, the standard approach used for risk management of oil and gas capital projects is applicable to CCS projects. On the other hand, the uniqueness of CCS projects as well as the characteristics of a particular project should influence the design of the Risk Management System (RMS).
The uniqueness of CCS projects is reflected in the following points:
- CCS integrates several subprojects that are different in nature: carbon capture, transportation, and sequestration. The complexity of interfaces between the subprojects and between the engineering, procurement and construction creates multiple additional risks.
- The technologies used in CCS cannot yet be considered fully proven despite the existence of several working CCS pilots and projects. One of the reasons for this situation is that there is no standard configuration for CCS projects. A variety of technologies are available to be used for carbon capture, transportation and sequestration. The level of maturity of some of them is low, especially in the area of carbon capture and sequestration. This creates the possibility of the existence of unknown risks.
- The commercial model for CO2 marketing is not mature. The absence of supply gives rise to the lack of demand and vice versa. This vicious cycle has yet to be broken. Focused and coordinated efforts are required from industry and governments to resolve this stalemate.
- The economic viability of CCS projects is heavily dependent on realizing a financial benefit from the emissions reductions created. A broad regulatory framework does not exist to create emissions reduction instruments (credits) from CCS nor does a liquid carbon market to provide a mechanism to monetize them.
The challenges facing CCS projects were drivers behind programs by the Governments ofand Alberta to support several CCS projects and to provide funding for their development. Project Pioneer was one of them. In addition to the general CCS challenges, the following characteristics of Project Pioneer added to Project complexity:
- The Project included participation and contributions from TransAlta, Capital Power, Enbridge, the Federal and Alberta Governments and the Global CCS Institute. The large number of partners made stakeholder management one of the sources of risks.
- The Federal and Alberta Governments wore two hats as related to the Project: funding partners and regulators. In the former capacity, governments worked to accelerate project development albeit introducing an added layer of complexity with the funding rules. In the latter role, however, governments became a potential source of delays and complications regarding the permitting process and the promulgation of CCS regulations.
- The CCF was to be retrofitted to the existing Keephills 3 coal-fired power plant. This type of brownfield construction approach generally entails many risks related to physical interfaces with existing facilities and restrictions imposed by power plant operations.
- Even when only one type of storage (geological formation vs. oil reservoir) is contemplated, a CCS project needs to be considered complicated. The scope of Project Pioneer, however, included both types of storage. This increased the overall complexity of the Project and gave rise to several commercial risks relating to sales of CO2 for EOR purposes.
- Part of the Pioneer scope was to prove the economic feasibility of CCS through selling CO2 to an EOR customer. Despite the fact that there are a large number of Alberta oil reservoirs that are a good fit for miscible or immiscible CO2 flooding, the emergence of new technologies for oil recovery such as horizontal drilling and multi stage hydraulic fracturing made CO2 -based EOR a less attractive investment opportunity for the potential EOR customer at the time. This became a major obstacle for Project Pioneer to overcome.
- While regulation of emissions exits in Alberta under the Specified Gas Emitters Regulation, the value ascribed to emissions reductions is a maximum of $15/tonne. This value proved to be too low for Pioneer and it was not clear how additional value could be realised, creating a major source of uncertainty for the Project.
- Four major subprojects were to be integrated to form Project Pioneer: the CCF, the pipeline from the CCF to sequestration facilities,the pipeline from the CCF to the EOR site, and the sequestration facilities. Project development and execution would have required robust coordination and interface management between the several supply, engineering and construction companies involved in the subprojects. This requirement for coordination inevitably generates corresponding risks.
- The project spans four industries, namely power, chemical, pipeline and oil and gas. All these industries conceptually treat the same way but there are differences in methodology, process, criteria and priority. Trying to accommodate this into one set of risk guidelines and a master risk register was a challenge. In addition, corporate risk analysis is confidential, hence complete openness and clarity was not possible in all cases.
Both general CCS challenges and features specific to Project Pioneer were taken into account when shaping the Project RMS.