While there are still many regulatory and technology hurdles, the seeming inevitable union of clean coal carbon capture and storage in the power industry with carbon dioxide-hungry enhanced oil recovery (EOR) seems more likely to take place in the current world of $100/bbl oil and a push to lessen the future impact of global climate change. Ultimately how and how much value is placed on carbon dioxide (CO2) will have a lot to say about the impending marriage.

The growing number of developers of new integrated gasification combined-cycle (IGCC) clean coal power generation projects are looking for ways to get rid of their CO2 and maybe even make some money on it. And there are existing EOR companies looking for CO2, which is getting harder to find in naturally occurring sources, such as McElmo Dome in southwest Colorado.

“It comes down to hard-fought commercial negotiations over what exactly that CO2 [from clean coal and other industrial processes] is worth,” said Alex Klein, an analyst with Cambridge, MA-based Emerging Energy Research (EER), a consulting research firm in the global energy sector. “Oil industry negotiators point to the volatility of global oil prices, which they don’t think will stay at more than $100 forever, and the CO2 [that] people are saying it costs a lot to capture it, so I need a price that will make a [clean coal generation plant] project viable.”

As government and industry officials have been learning, there are a lot of very complicated logistical issues involved in extracting the CO2, capturing and storing it, and then shipping it to the EOR market. The best economics are still in the carbon-producing processes that are not associated with power generation, Klein said.

“Carbon sequestration is a big factor in all of this,” he said. “A lot will depend on how carbon policies [at the federal level] evolve. The carbon policies are a function of how well you can monitor what happens to the CO2 and how you assign liability in case it leaks. This issue in particular is one that needs to be addressed in a robust way.”

Klein said there is hope that the IGCC demonstration activity ongoing throughout the United States will address these issues.

A national cap-and-trade system, for example, would have an impact, but whether it ultimately is a positive impact will depend on how the program is structured, according to Klein. In the way such a system was structured in Europe, CO2 credits essentially were given away, so if that was done here, it would not help the economics of the sequestration side of the process.

If, however, an auction for CO2 is developed and the price of carbon was high enough, there likely would be “far greater activity in carbon-capture/storage [CCS] and then the ‘lower-hanging fruit’ would be the EOR market,” Klein said.

With $100 oil the economics are better, but adding a means to add value to the sequestration to make the clean coal power generation more economic is really the key. A number of players in the oil/gas patch are very active in EOR and have interests in getting more CO2 from new sources. These companies include Kinder Morgan, Denbury Resources, Petrosource, Anadarko, Occidental Petroleum and Amerada Hess, according to some EER research Klein published last year showing that EOR demand was “brightening” CCS prospects in North America.

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