23april 2008 developing a commercial ccs transportation infrastructure alastair rennie, project...
TRANSCRIPT
23April 2008
Developing a commercial CCS transportation infrastructure
Alastair Rennie, Project Director- Renewables, AMEC. 23rd April 2008
2
23April 2008
AMEC at a glance
We have annual revenues of over £2.3 billion
We employ 20,000 employees in over 30 countries
Our shares are traded on the London Stock Exchange where we are listed in the Oil Equipment and Services sector
We are a member of the FTSE* 100
*Financial Times Stock Exchange listing
Services focused on designing, managing the delivery of, and maintaining strategic and complex assets
3
23April 2008
Where we areMain office locations
Our 20,000 employees operate from more than 30 countries
4
23April 2008
CCS – US Activities are onshore and EOR led, doing commercial work
CO2 is Europe is environmentally led, with the CO2 as a cost burden and integrity of storage as the goal, with any EOR as a bonus. As such it is emitter led.
AMEC is an engineering company in doing transportation, flood and dehydration systems, pipeline design services, EOR Conceptual Design Services, PM and Engineering Services for new and existing pipelines.
The North American market is EOR led to increase revenue, with CO2 as a commodity feedstock. As such it is oil producer led. Re-cycling of the CO2 from the oil is simply good cost management.
5
23April 2008
UK CO2 transport workare precursors to business cases
IEA GHG R&D studies – Mersey area– Distributed Collection and Transmission of
CO2 Study– Upgrade of CO2 Pipeline Cost Calculation
Programmes
Yorkshire Forward Regional study – Multiple source network and trunk line CO2
collection– Pipeline study to geological or EOR storage– Economic cost modelling of network
CASSEM -Academic/business consortium– Pipelines and network study for two proposed
CCS locations for potential saline aquifer storage sites
Teesside CCS project and others
BERR demonstration competition has spurred consideration of transport and storage options, including both pipeline and shipping concepts. A number of companies may be doing more specific work this year
6
23April 2008
Will it happen?
Global political agreements EU financial and regulatory support – simple EUA value is not enough Government legislation and financial mechanisms Agree the regulatory regime, especially H&S of high pressure CO2 and long term storage
characterisation
Enabling, by EU or bilateral agreement, the storing of CO2 from another country
just to arrive at a position where Carbon Capture and Storage is a long term commercially viable proposition, enabling the
Commitment to capture (the major commercial cost and risk) Commitment to provide storage or EOR. Some storage has capacity to match sources-
mostly a multiple store strategy will be required to match timescales and sizes of sources.
– Before finally being able to commit to transport of the CO2
Requires a number of things to happen before we see CO2 transported and utilisation of North Sea and Irish Sea storage
7
23April 2008
Factors helping implement transport in the EU
It is a relatively small but necessary part of CCS Identified potential for re-use of existing assets Good timing for use of low risk storage in the North Sea Can benefit from shared infrastructure with clustering of sources Source owners well aware of the low marginal cost in oversizing of
pipelines if there is a foreseen larger supply after the initial flow
Must stress that without decent volume from a number of sources then transport and storage become expensive
8
23April 2008
Shipping and Pipelines – play to commercial strengths, not the distance versus cost diagram
Shipping Low capital cost to user High operating cost 3-10 year commitment Another commodity to a
competitive transport industry Practical issues around
acquisition dominate consenting Interim storage is an additional
constraint Flexible but more disruption risk
Pipeline High capital cost Low operating costs 10-15 year minimum to plant life
commitment Bespoke, improved by networking Slow approval processes Limited capacity variability Rigid asset between a source and
a store leads to fewer commercial options
High reliability
9
23April 2008
Commercial options for a pipe network
This ignores single source to single store situations – covered by in-house or linear commercial agreements
Covers pipeline networks, including shipped CO2 inputs and
outputs
Focus is on earlier configurations of networks - other ownership and commercial arrangements may arise with well established assets and CO2 flows
10
23April 2008
Network commercial demarcations
C
separation
D
dry/compress
measure
Each piped source
Node
P
Pumping, pipes, meters
Common network resources
PortShared port facilities,
export storage
T
Other system-
Transfer of all liabilities and
payment
Shipped CO2
ShipShips
Each final storage asset
S
Licensed storage
Injection, monitoring
11
23April 2008
Network commercial demarcations
C
separation
D
dry/compress
measure
Each piped source
Node
P
Pumping, pipes, meters
Common network resources
PortShared port facilities,
export storage
T
Other system-
Transfer of all liabilities and
payment
Shipped CO2
ShipShips
Each final storage asset
S
Licensed storage
Injection, monitoring
Commitment to CCS
Revenue from CCS
12
23April 2008
Commercial ranges
P C to S or T P plus options on D, Port, Ship (service)
C D P
Port T
Ship
S
For simplicity focus on ownership options for P, the shared network
1. Public or Regulated infrastructure- open access, no market exposure
2. Shared ownership by sources
3. Ownership by an independent transport company
4. Shared ownership by investment stakeholders- sources, transporters, store operators. Could include public bodies.
13
23April 2008
Common issues facing establishment of a network
Ownership of the CO2 whilst transported
Commitment to CCS by source-
– Timing of initial flow, duration, risk of failure to provide CO2
– Peak versus average flow– Initial, stage flow rates, maximum flow
Take or pay contract is obviously a partial answer to cover initial capital spend Storage availability
– Timing (decommissioning, proving, work overs), risk of ability to inject at peak rates, total capacity
– Alternative storageAvoid liability for failure to store (either flow or retention of CO2) Transport availability
– Unplanned breakdowns and maintenance of the network Agree process for planned outages with sources and stores. Avoid consequential losses to store owner and sourcesAgree terms for loss of CO2 whilst within the network boundary
Discount rate for a long life asset
– Cost of the system is driven more by the cost of capital than capacity
14
23April 2008
Relative comparisons of main issues
Ownership \
issue
Public/ regulated
Ownership by sources
Independent company
Stakeholder owned
Ownership of the CO2
Unlikely to own Owns the CO2 Option to own Option to own
Commitment by source
Highly risk averse
Potentially well aligned
Mutual commercial risks
Depends on scale & SPV terms
Storage availability
Mainly fixed fee, small rate/tonne
May enable capacity sharing
Back to back investments
Depends on scale & SPV terms
Transport availability
Seek to limit all exposure
Proportional exposure
Seek to limit exposure
Ideally equity proportional to exposure
Discount rate Lowest Internal to company
SPV- parent driven
SPV – project finance
15
23April 2008
Relative comparisons of main issues
Ownership \
issue
Public/ regulated
Ownership by sources
Independent company
Stakeholder owned
Ownership of the CO2
Unlikely to own Owns the CO2 Option to own Option to own
Commitment by source
Highly risk averse
Potentially well aligned
Mutual commercial risks
Depends on scale & SPV terms
Storage availability
Mainly fixed fee, small rate/tonne
May enable capacity sharing
Back to back investments
Depends on scale & SPV terms
Transport availability
Seek to limit all exposure
Proportional exposure
Seek to limit exposure
Ideally equity proportional to exposure
Discount rate Lowest Internal to company
SPV- parent driven
SPV – project finance
16
23April 2008
Conclusions
Public ownership is possible because it is a network rather than a single source solution. However this is otherwise unattractive, especially as the network must be developed.
The shared ownership by source interests is, on balance, probably the preferred option.
We would suggest that this may be enhanced by elements of other stakeholders, not least to engage with the public and enable increments of investment to reduce the life time costs of moving CO2 to storage.
We see the provision of the wider scope of CO2 services from source to sink as a good way for us to support emitters to minimise costs and for store owners to earn additional income from their oil & gas experience. It is possible to see how good engineering and good commercial design could build cost efficient networks in Northern Europe.