Can CCUS momentum overcome headwinds to the industry?

Wood Mackenzie’s CCUS Conference in Houston is the premier global event focused on CCUS economics, strategy, business development, and investment all along the value chain, whether the anthropogenic CO2 emanates from point-source, BECCS or DAC.

This year's event attracted CCUS decision makers and investors from major oil and gas operators, large industrial emitters, midstream and infrastructure operators, investment banks, technology startups, development companies, pension & private equity funds, and government & regulatory agencies. 

The conference posed hard questions to CCUS industry leaders around the economic, technical, and regulatory feasibility of proposed projects. It also explored the interaction of CCUS with other sectors across potential energy transition scenarios. 

Fill out the form at the top of the page to download our 'CCUS: Past, present and future' presentation from the event, or read on, as our experts tackle key questions that will shape the CCUS debate.

CCUS project development is progressing in Europe, North America, Asia-Pacific, and the Middle East. But how much is total, global CCUS growth stifled by a lack of integration across carbon pricing, carbon accounting and regulation?  

Author: Mhairidh Evans, Vice President and Head of CCUS Research 

Established commodities like oil, food, metals and fertilizer benefit from tightly integrated global markets, but captured CO2 does not…not even close. The lack of integration is ironic as CO2 emissions abatements and removals are technically of equivalent value, no matter where they occur on Earth – we all share one atmosphere. The market price of a barrel of oil varies greatly depending on specification and location for obvious reasons. It is less obvious why a CCUS project is approved at a cost of $200 per tonne while across the world another is scuppered, deemed unprofitable, despite a more competitive $20 per tonne cost.  

The lack of integration goes beyond inconsistencies in carbon pricing and carbon accounting. Vast discrepancies exist across global regions with regards to storage requirements and regulations. Even within the US, for example, the time until liability for stored CO2 after closure passes from the owner to the state varies from just 10 years in some states to 100 in California. Similar issues exist in CO2 transportation, whether by pipeline or ship. 

If the industry is to reach its potential in decarbonising the world, increased collaboration between countries is paramount.      

Are we getting more efficient at connecting CO2 sources to sinks?  

Author: Jon Story, Vice President and Head of CCUS Consulting  

The technical challenges and uncertain costs of capture and storage dominate CCUS discussions – there is no T in CCUS – but transport is proving thorny too. Sure, pipelines have transported CO2 safely for decades across the US Midcontinent, but recent larger-scale leaks from the Denbury Green Line are cause for concern. Permitting headwinds scuppered the Valero- and BlackRock-backed, Heartland Navigator pipeline in the US Midwest while the even more audacious Summit Carbon Solutions pipeline has only received a go ahead from one (Iowa) of the five states it connects. Though Summit seems to be making progress, the delays have come at a heavy cost to the project and depressed its economics.  

CO2 has also historically moved by ship, but at very small volumes destined for use in the food & beverage industry. The proposed ships for high-volume CO2 transport are orders of magnitude larger and travel great distances between continents. Some can even transport multiple commodities: CO2 can be shipped on the outward journey and LPG, or even ammonia, on the return.        

These grand ambitions are at once compelling and complex. Can CO2 pipelines and ships be planned and built to deliver scale savings and enable meaningful global CCUS growth? They can if infrastructure build costs and source-to-sink distances are optimized and regulatory processes are well navigated.           

What is keeping announced projects from progressing and eventually reaching final investment decision?  

Author: Peter Findlay, Research Director and Head of CCUS Economics  

Making money from a world-scale industrial project that does not produce anything is not straightforward. Indeed, most CCUS projects nowadays propose to sequester the CO2 rather than transform it into a product or use it as a catalyst for enhanced oil recovery. Thus, some combination of carbon tax avoidance (or carbon credits earned), government grants, green price premium for the product produced from the emitting process, and perceived (voluntary) value of reducing emissions is needed. However, the value of these incentives over a 20 to 30 year project can be harder to predict than oil or power prices during the same period. Besides, those commodity prices are unlikely to go to zero, which is a risk for the somewhat abstract ‘effective price of carbon.’ 

On the cost side, developers worry about a formidable upfront capture build cost, amine degradation in post-combustion emission streams, how much CO2 subsurface reservoirs can hold, and costly monitoring of CO2 plumes to insure they stay put. 

Add to these headwinds the complexity of coordinating all the risk-reward trade-offs between multiple parties, and it is a wonder why proposed global CCUS capacity counting all capture, transport, and storage projects has gone from around 50 Mtpa in 2019 to 1,960 Mtpa in Q3 2024. To be sure, the majority of these proposals are in an early development, pre-FEED stage. Though some are stalling, most proponents are rolling up their sleeves and getting to work to reach FID.               

More storage projects are under development – can proponents accurately predict storage capacity and costs yet?   

Author: April Read, North American CCUS Subsurface Lead Analyst  

Predicting storage capacity and costs remains a challenge. While the storage project pipeline continues to grow, operational project data and specific well information is sparse. Two key cost components of storage are wells and measurement, monitoring and verification (MMV) programs.  

As additional injection wells come online, knowledge around true injectivity rates and potential in different reservoirs and regions will grow. That knowledge will give proponents a better understanding of how many injection wells are needed to meet announced project capacities. Is it going to take ten 1 Mpta wells or thirty-plus 0.3 Mtpa wells to reach project capacity?  

Measurement, monitoring and verification programs vary widely. There are many different technologies and techniques that can be used and each of these will have its own cost profile. The requirements for these programs will be driven by regulations, many of which are still evolving or under development. This uncertainty favors making assumptions rather than predictions.  

Storage proponents can make educated guesses about capacities and storage costs, but accurate predictions remain elusive for now. 

Voluntary carbon markets for technology-based carbon dioxide removal (DAC and BECCS) are growing, but still immaterial and illiquid; can they be relied upon for commercial scale project development?  

Authors: Nuomin Han, Head of Carbon Markets and Rohan Dighe, DAC and Utilisation Lead Analyst 

The world is not decarbonising quickly enough to reach net zero. Carbon removals, an array of approaches to remove carbon directly from the air (e.g. afforestation, biochar, DACCS and BECCS), may provide a pathway to compensate for a slower-than-needed energy transition.  

To do so, however, Wood Maackenzie projects removals will need to scale up from minimal volumes today to 8 gigatonnes of annual capacity by 2050. A host of promising nature-based and engineered removal solutions have emerged, but cost, deployment readiness, and other characteristics vary drastically, leaving an unclear path to gigatonne scale. 

Today’s cost range of US$30–1,000 per tonne of CO2 removed guarantees a huge bill for net zero and makes clear the need for dramatic cost reductions from technological advancement. However, continued inaction will limit the velocity of these reductions.

For removals to reach gigatonne-scale, governments will need to provide certainty through policies, financial incentives, and a clear price on carbon removal through voluntary and compliance markets. Strong policy support paired with accelerated technological advancement is the only way removals will stand a chance at bringing a delayed energy transition back on track. 

Remember to complete the form at the top of the page to download our presentation, 'CCUS: Past, present and future'.