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California Resources Expanding CCS Efforts with Offtake Agreement
California Resources Corp. (CRC) kicked off 2023 with an agreement to sequester carbon dioxide (CO2) from Grannus LLC’s blue ammonia and hydrogen project.
The Carbon Dioxide Management Agreement (CDMA) by CRC subsidiary Carbon Terravault Holdings LLC (CTV) stipulates that it would provide infield transportation to offtake CO2 produced from the Grannus project. The project is expected to produce around 150,000 metric tons per year (mty) of blue ammonia and 10,000 mty of blue hydrogen using natural gas.
CRC CEO Mac McFarland noted the partnership marks an “expansion of our decarbonization efforts in Northern California,” where CRC sees “an incredible amount of carbon capture and storage (CCS) opportunities. Our partnership with Grannus begins a new chapter of carbon storage in Northern California…”
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Tucson, AZ-based Grannus’ technology focuses on near-zero emission solutions to produce chemical products for agriculture and maritime operations. The company recently announced plans for a blue ammonia production facility in Alaska, as well as an agreement to supply an unnamed Pacific Rim-based maritime trading company seeking to transition its fleet from oil to ammonia.
Grannus’ partial oxidation (POx) method creates synthesis gas using natural gas in combination “with a lean supply of oxygen, which prevents full combustion,” according to the company, replacing the traditional steam methane reformer methods to generate ammonia.
In May, Grannus entered into a potential long-term offtake agreement with Calamco to supply all of its ammonia needs for use as nitrogen-based fertilizer. The California-based agriculture cooperative of more than 900 growers represents most of the agricultural ammonia demand in California.
The patented POx method, once combined with CCS, would make the Grannus project a “virtually emissions-free facility,” the company noted. The potentially zero-emissions facility would be a first for the Golden State, which grows more than 30% of the nation’s vegetables and 75% of the fruits and nuts, according to CRC.
Moving forward with CRC “positions Grannus as one of the leading clean-tech companies in the state by introducing a blue ammonia facility in San Joaquin County…,” McFarland added.
CRC in May applied for two Class VI permits for CTV sites that would offer 94 million mt (mmt) of permanent CCS in the Sacramento Basin, known as CTV II and III.
CTV III is slated to come online in 2027, with about 71 mmt of storage capacity. If CTV III gains regulatory approval, the site could see an initial 370,000 mty of CO2 from the Grannus operations.
Grannus CEO Matthew Cox noted CTV’s “unique vault positioning in the heart of Northern California’s industrial sectors, strong subsurface expertise, and their leadership in California’s new energy economy and carbon management.”
The project would not require any long haul CO2 transportation or midstream requirements with CTV III’s proximity, CRC said.
“California’s first blue ammonia fertilizer production facility is expected to further reduce the carbon intensity of California’s agricultural sector while delivering environmentally conscious food to every American’s doorstep,” Cox added.
While CDMA frames the contractual terms between CTV and Grannus, a final investment decision for CTV III and commercial operational dates has not been set. That said, CRC noted its 2027 operational target is the latest launch estimate for CTV III. The independent and its subsidiary are targeting 5 mmty of CO2 sequestration by the end of 2027.
What’s more, the CDMA gives Grannus initial access to 50 surface acres, with an additional 50 acres should the company expand its production operations. As part of the deal for CTV to provide transportation and storage, CTV would receive an injection fee on a per-ton basis, CRC said, which “fits within the previously disclosed economic type-curve for projects that require a storage-only solution.”
CTV would also have the option to purchase equity in Grannus as well as a right of first refusal for future projects based in California.
Working With Tides Of Change
CRC, California’s largest independent, has signaled a shifting focus to CCS and clean energy technologies amid a regulatory crackdown on oil and gas drilling activities in the Golden State.
Last August the state Senate voted to enact Senate Bill 905 (SB 905) to prohibit CCS projects used in conjunction with enhanced oil recovery (EOR).
During the third quarter earnings update in November, McFarland noted that SB 905 “bolstered” CTV’s operations, though shifted the company’s CalCapture Project. Initially, the project was designed to employ CCS for EOR near CRC’s Elk Hills operations, though in light of the legislation, CRC transitioned the “CalCapture project to permanent storage…,” McFarland said.
CRC closed off 2022 with its first CDMA through CTV Joint Venture (JV), a JV between CTV and Brookfield Renewable Partners LP and Lone Cypress Energy Services LLC.
The Los Angeles City Council in December enacted a ban on all new oil and natural gas drilling in all city zones. The ban also mandated a 20-year timeline to phase out existing oil and gas wells. As of 3Q2022, CRC had two rigs operating in the Los Angeles Basin and produced an average of 19,000 b/d of oil and 1 MMcf/d of natural gas.
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