INSIGHT: Giving priority to carbon capture and storage

20 March 2013 13:00  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS)--“More than 60% of the world’s known reserves of natural gas are in just four countries, and more than 80% of global oil reserves are located in nine countries – most of which are well away from the hubs of energy consumption,” BP noted in its just published 2012 sustainability review.

These facts start to put the extent of the global energy challenge into perspective. Take into account a rapidly growing world population, the expected movement of large numbers of people to urban areas and the pressure to manage climate change and it becomes immense.

Greater efficiency will act to dampen – or, rather, relieve the pressure on demand – but the trend is for strong growth. “The global energy challenge is to manage and meet demand affordably, sustainably and securely,” the energy major said in its annual review.

However, fast-growing world population and people moving to urban areas will increase the burden on energy production efficiency, delivery and use.

BP and the other energy giants expect a strong increase in energy demand through to 2030. BP’s estimate is for a 36% increase between 2011 and 2030, with 93% of the growth occurring in non-Organisation for Economic Co-operation and Development (OECD) countries.

There are also very real constraints in the system through which energy currently is delivered to the consumer, and clear issues of energy supply security.

BP talks of the “affordability challenge” and the pressure on costs as the availability of easily accessible fossil fuels diminishes, “with many low carbon resources remaining costly to produce at scale”.

The shift to gas and away from coal will help reduce the climate change impact of greater hydrocarbon consumption. But the review notes – and there is a growing weight of opinion behind the view – that carbon capture and storage (CCS) will have to be developed if efforts to tackle climate change are to be successful.

BP suggests that gas will service 26% of energy demand in 2013, with renewable energy sources – wind, solar and biofuels – accounting for just 6%.

However, it adds that “global CO2 emissions from fossil fuels may be 26% higher in 2030 than they were in 2011, partly as a consequence of coal use in rapidly growing economies. These are projections of what we think is likely to happen, not what we would like to see.”

More aggressive government energy policy initiatives could help reduce the growth in carbon dioxide emissions, but they still might not be enough to limit global warming to the desired extent.

The development of shale gas deposits offers a window of opportunity to boost gas usage – particularly in power generation – as a report from the independent think tank The Grantham Research Institute on Climate Change and the Environment at the London School of Economics said on Monday. The report was focused on the UK, but its conclusions are more widely applicable.

“The UK should use natural gas, including from unconventional sources such as shale, to help decarbonise its power sector by replacing coal over the next few years – but should not assume that its price will be low,” the institute said.

It also warned that gas-fired electricity generation was a stop gap option and would not necessarily help the country meet its climate change targets.

“Gas can only play a more significant role beyond the 2020s if CCS technology is deployed on a commercial scale,” it said.

BP’s sustainability report is independently reviewed and audited, and one of those reviewers picked up on the question of CCS, which is technologically challenging and generally prohibitively costly.

"There are two core contributions the oil and gas industry can make in the context of climate change,” Craig Mackenzie, head of sustainability at investment managers Scottish Widows Investment Partnership said.

“By displacing coal in power generation, natural gas can help to reduce global carbon emissions in the next few decades. Longer term it's harder to square the growth in oil and gas with action on climate change. To secure its future in a carbon constrained world, the oil and gas industry needs to give priority to accelerating action on carbon capture and storage," he added.

In this respect CCS moves to centre stage, instead of the search for new shale gas deposits or attempts to squeeze more oil and gas from deep or tight wells.

There were 75 large-scale integrated CCS projects worldwide at the end of September 2012 – a net increase of one project from a year earlier, the Global CCS Institute said in its latest annual report.

It added that more than half of all “newly-identified large-scale integrated projects” are in China.

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By: Nigel Davis
+44 20 8652 3214

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