Global Carbon Capture and Storage (CCS) Market: Outlook
Carbon dioxide (CO2), regarded as a key greenhouse gas, has far-ranging environmental and health effects. Carbon emissions from fossil fuel-based power plants and industrial sources account for more than 60% of global greenhouse gas emissions. Albeit, year-on-year increase in carbon dioxide emissions from power and industrial facilities, the technological innovations and policy developments has provided encouraging signs for the future of carbon capture and storage (CCS) technologies. CCS can capture more than 90% of the carbon dioxide (CO2) emissions, produced from the use of fossil fuels in electricity generation and industrial processes, thereby preventing the carbon dioxide from entering the atmosphere. In 2019, more than 30 billion metric tons of carbon dioxide was released from industrial activities and burning of fossil fuels. Of which, close to 35MT of carbon dioxide was captured through CCS technology.
Carbon capture involves separating carbon dioxide from other gases produced during industrial processes or electricity generation. The carbon capturing process or separation of carbon dioxide, from other inert flue gases, is the most expensive and energy intensive aspect of carbon capture, which can increase the production costs of a power plant by over 60%. Once the CO2 has been recovered at industrial facilities, it must be transported to a suitable geological site for its storage. Transportation of CO2 poses no difficulties. It can be transported in a supercritical state (pressure of above 73 bars and temperature of above 31°C) or in a liquid state, by pipelines or ships. Carbon storage requires the identification of suitable formations using geological surveying, selecting appropriate sites and securing storage sites for CO2 injection. These developments take a lengthy time to complete for two reasons: technicalities of surveying, and an immature marketplace.
Government Support, Incentives and Imposed Carbon Taxes to Drive the Market
Key policies for the increased uptake of carbon capture and storage include carbon taxes, range of incentives, cap-and-trade based emission trading, direct funding of carbon capture & storage projects and R&D. Feed-in-tariffs and product-based incentives, and emission performance standards can be used to promote CCS deployment at large CO2 emitting sources.
CCS projects gained considerable momentum before the COIVD-19 crisis hit. Numerous new projects have been announced since 2018. Post COVID-19 pandemic, delays in funding in CCS projects due to capital expenditure cuts by major oil and gas companies, is expected to affect the market.
The key restraint for CCS is no direct financial benefit to any company adding CCS technology to their facilities due to a free and unregulated market. Even enhanced oil and gas recovery technologies could use other inert gases such as nitrogen in their enhanced recovery methodologies or CO2 from natural sources. Hence, the CCS market is fully dependent on regulators putting a price or tax on carbon emissions.
Enhanced Oil Recovery (EOR) Application to Lead
For carbon capture & storage technologies, nearly all large projects operating or under construction are associated with oil and gas production, wherein the CO2 is either captured from natural gas processing plants or is sold for use in EOR. In EOR, CO2 gas is forced into the reservoir to meet the oil. This creates a miscible zone that can be moved more easily to the production well. This trend is likely to continue for the next decade, as passive CO2 storage adds complexity and bears regulatory risks, public-acceptance issues, and reservoir discovery costs that EOR can avoid.
After secondary recovery, normally only around 30% of the oil in the reservoir is recovered and around 70% remains in the ground, and so an operator can consider tertiary recovery (known as EOR). EOR technique enables crude oil extraction from an oil field that cannot be extracted through primary or secondary recovery techniques. This would enhance the consumption for CO2 for EOR activities, thereby, increasing the demand for CCS over the forecast period.
North America Leads in Terms of Operational CCS Facilities
There are more than 20 large-scale CCS facilities across the globe. In North America, 10 of the world’s operating CCS facilities are in the U.S. In addition, at least 15 large-scale facilities are in development, covering a range of applications including natural gas processing; biofuels and cement production; direct air capture (DAC); and gas- and coal-fired power generation. In June 2020, the two Alberta Carbon Trunk Line projects in Canada became operational, raising the number of large operating facilities to 21.
As per EU's current 2030 climate and energy framework, by 2030, emissions from sectors covered by the EU Emissions Trading System (EU ETS), will be cut by 43% from 2005 levels, as part of the. In March 2020, the government of U.K. confirmed its pledge to invest US$ 995 mn in CCS infrastructure, including to establish CCS in at least two locations. In Europe, the EUR 10billion Innovation Fund will begin to support CCS projects (and other clean energy technologies) in 2020. This is expected to drive investments for CCS in Europe.
In Asia Pacific, China, India and Indonesia are major consumer producers of coal. With still growing consumption of coal, deployment of CCS technology in coal-fired based power plantsis a robust option for emission mitigation in the region. In May 2020, Australian government has announced plans to make CCS eligible for existing funding programmes.
Globally, only 0.1-0.2% of carbon dioxide released from power plants and industrial facilities are captured and stored through CCS technology. This provides immense potential for large-scale deployment of CCS technology across the globe. Also, strict regulations and monitoring of carbon emissions from power plants and industrial sectors followed by increasing number of planned and near-term deployment CCS projects in the past 3 year across the globe is expected to further drive the demand for CCS in the next few years.
Global Carbon Capture and Storage (CCS) Market: Competitive Landscape
On May 2020, Equinor, Royal Dutch Shell, and Total SA committed to invest more than US$ 700 mn in the Northern Lights offshore CO2 storage project. Schlumberger Limited has executed more than 80 CCS projects. Other key players involved in carbon capture and storage (CCS) market includes GE, Occidental Petroleum, Mitsubishi Heavy Industrial Ltd., Air Liquid, Air Products & Chemical Inc., Global Thermostat, Carbon Engineering Ltd., CO2 Solutions and others.