Can carbon capture help Big Oil reach its net zero targets?
CCUS could be a critical step on the Majors’ decarbonisation journey
Zoë is a principal analyst with more than 15 years of industry experience.
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Carbon capture, utilisation and storage (CCUS) has been the subject of much discussion and considerable research but little in the way of real-world impact. But as net zero ambitions ramp up that could change dramatically. What role could this technology play in Big Oil’s decarbonisation journey? And can it scale at the pace required to support Paris Agreement targets?
This article is based on Majors’ CCUS Benchmarking from our Corporate New Energy Series. Read on to find out why CCUS is set to be so important for the oil and gas industry — and fill in the form to get a complimentary extract with a selection of charts from the report.
Why are oil and gas companies interested in CCUS?
Oil and gas will likely remain a key part of the energy mix for decades to come, but the industry is changing. The Majors may be taking different paths to decarbonisation but they are all on that journey, and all mention CCUS in their strategies. Commercial, scaled-up CCUS could be a critical step as a means to greatly reduce emissions by preventing CO2 from entering the atmosphere.
The industry is well placed to leverage CCUS. Having pioneered the technology in the 1970s, the oil and gas industry has first-mover advantage and unmatched experience. It also has access to infrastructure for transporting CO2 and depleted fields to store it, and the relevant skill set to exploit this below-ground capacity. What’s more, with many oil and gas processes creating low-cost opportunities to capture CO2, sufficient market demand could see CCUS emerge as a profit centre for the industry.
How big is the potential of CCUS?
Very big. CCUS features in the strategies of most signatories to the Paris Agreement. Government policies including regulations, carbon taxes, incentives and the development of a tradable carbon offset market will provide a boost to the technology. At the same time, climate tech is also a growing theme for investors.
However, our calculations indicate that current global CCUS capacity would have to increase a hundredfold by 2050 to meet our 2 °C energy transition scenario – our view of a possible state of the world that meets the condition of limiting the rise in global temperatures since pre-industrial times to 2 °C by the end of this century. A 1.5 °C pathway calls for capacity to increase x184.
The good news is that momentum behind CCUS is growing. Fill in the form at the top of the page to access a map of major economies that have committed to CCUS deployment.
What are the challenges involved in achieving the necessary scale for CCUS?
Growing commitment to emissions reduction will shift CCUS deployment up a gear, but to achieve the necessary scale a number of issues must be resolved. This includes:
- Commercial considerations – especially where CO2 has no value as an industrial input
- High cost, particularly for direct air capture technology
- Lack of regulatory support in some markets
- Lack of infrastructure to transport CO2 safely
- High cost of capital as a ‘new’ technology
- Public resistance, particularly to onshore storage
- Lower oil prices impacting the financial incentive to invest in CCUS.
While none of these problems are insurmountable, addressing them will require a strong level of commitment from key players, and that includes Big Oil.
What’s the current state of CCUS deployment?
Current global CCUS capacity stands at around 41 Mtpa. Over half of this is in the US and Canada, where opportunities to use CO2 in the enhanced oil recovery (EOR) process have historically driven deployment. Around 65% of current total capture is from natural gas processing, where costs are lowest.
The CCUS development pipeline holds 130 million tonnes per annum (Mtpa) of capture capacity.
However, planned capacity additions this decade currently fall well short of what’s needed for our 2 °C energy transition scenario. And a 1.5 °C pathway would require a genuine step-change in approach to implement additional capacity at a rate of around 250 Mtpa.
The importance of CCS hubs
One key element which will be critical to the development of commercial CCUS at the scale required to meet climate objectives is the establishment of carbon capture and storage (CCS) hubs.
A CCS hub combines clusters of industrial sources of CO2 in close proximity to storage locations, de-risking development by enabling efficiencies of scale and shared cost. In our recently published report, Carbon capture and storage (CCS) hub identification, we explain the need to identify CCS hubs by matching CO2 sources with sinks based on emissions volumes, storage capacity and available infrastructure. The report uses data from our Lens Subsurface solution and Emissions Benchmarking Tool to assess the potential of four locations as CCS hubs.
Given that CCUS is set to be so important for Big Oil, the next question is: what are the Majors actually doing about it? To find out, read our Majors' CCUS Benchmarking report. You can download a complimentary preview, which includes:
- Chart: carbon removal as a trillion dollar opportunity
- Chart: a market price for carbon is needed for large-scale CCUS deployment
- Map: several major economies have committed to CCUS deployment.