The oil and natural gas industry is positioned to lead and benefit from the commercialization of various carbon sequestration strategies, according to a report issued Feb. 12 by Cambridge, MA-based Emerging Energy Research (EER). The report concludes that there is a potential $30-70 billion annual industry waiting to emerge by 2030 in the carbon capture and storage (CCS) business.
EER has discovered that many of the supermajors in the oil/gas sector already are pursuing CCS strategies, and they have the expertise and incentives to develop some of the key demonstration projects among the more than 120 that are now being pursued worldwide. These potential CCS leaders include BP, Chevron, ConocoPhillips, ExxonMobil, Shell and Total, according to EER's report, "Global Carbon Sequestration Markets and Strategies, 2009-2030."
"Several oil and gas companies are stepping up consideration of sequestration within their overall growth strategies, although along varying paths," EER said. "Though still at a nascent stage of development, their strategies are driven by growth ambitions across their traditional value chain."
For EER researchers, sequestration has the potential to help oil/gas operators preserve growth in upstream production through enhanced oil recover (EOR), expanding existing pipeline ownership and tapping "downstream synergies for fuel marketing and hydrogen production." Some of the oil/gas companies are seeing long-term opportunities in reducing emissions and taking advantage of carbon credit offset opportunities.
EER breaks down the oil/gas sector into four groups -- established EOR players (Denbury Resources and Occidental Petroleum); midstream energy companies (Kinder Morgan, TransCanada, Spectra Energy, et al.); traditional oil/gas players (Hess, Santos, et al.); and the supermajors (BP, Chevron, et al.). EER said there are different attractions to the carbon storage business for each group.
Supermajors are seeing the development of sequestration capabilities as an "emerging opportunity" to built competitive advantages, such as exploiting carbon-rich gas fields for liquefied natural gas or placing bigger bets on Canadian oil sands, along with further proprietary coal gasification technology businesses, according to EER. In another grouping, regional independents with the control of extensive depleted oil/gas fields are emerging as off-take partners for CCS projects, the report said.
"Niche EOR players in the United States remain focused on production potential, but have begun advancing their storage know-how, too," said the EER report, noting that established independent producers that have used CO2 for EOR operations are now expanding to look to human-related (anthropogenic) sources of methane to fulfill their oil production growth strategies.
The fourth category of midstream companies is what EER called "slowly being attracted" to the growing CO2 pipeline requirements and CO2 marketing opportunities needed for global sequestration to emerge.
"Carbon sequestration adds cost and complexity to traditional coal-fired power generation and significantly reduces coal's economic advantage over other forms of power generation," the EER report acknowledged. "However, as world energy supplies become increasingly constrained, there will be interest in mitigating coal's emissions to leverage its low fuel cost and security of supply, despite the significant upfront investment requirements, operational costs, insurance, monitoring and liability that face CCS investments."
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