CO2 Global

The road from Kyoto to Bali may have seemed like being caught in a revolving door – one could neither move back nor move forwards. Inside there has been much talk, while outside the temperature just kept rising. However the purpose of the Kyoto Protocol was also to create global awareness. In that, it has finally succeeded. Instead of a decade of lost opportunity, it has been ten years of preparation for the tasks ahead.

Carbon Capture and Storage

Since Kyoto, the possibility of significant reductions in carbon dioxide (CO2) emissions using Carbon Capture and Storage (CCS) technology has emerged. By 2020, we could be well on the way to having commercial implementation of technology that addresses the joint challenge of climate change and our continued fossil fuel dependence.

Up until now, more has been said about CCS than has been done. Most work is still based on research and development budgets with government sponsorship; there is not yet any significant private capital targeting longer-term investments. Investors are cautiously staying with limited risk exposure. However low-priced carbon credits combined with cheap clean development mechanisms are not what tackling climate-change is about. Soon it will be about technology, engineering skills and project development. That is what we do in CO2-Global.

Over the last seven years we have been working to identify, develop and commercialise new technology, create strategic partnerships, bring together professional skillsets and create the opportunities for new projects. Power generation from fossil fuels without CO2 emissions is a key enabling technology to sustainable economic growth for developing nations.

One of our project partners is Clean Energy Systems (CES) Inc. CES was founded by a group of former rocket scientists. In 2002, they tested a new combustor – a key enabling technology for zeroemission power generation. Their Gas Generator is currently being implemented in North America and Europe in collaboration with leading industry partners.

CO2-Global is part of the consortium with Jacobs Engineering and Siemens Power Generation in a UK-government-funded study proposing to implement multiple CES combustors in 500 MW turbines. These machines can be available by 2012, if there is the commercial motivation. We are also looking at integrating the same CES technology with smaller turbines for introduction of zeroemission technology into early niche markets where it makes commercial sense.

In Norway CO2-Global owns 30% of ZENG AS that is now targeting deployment of an industrial-size 70 MW Demonstration Plant for advanced oxyfuel cycles. This work is supported by the Norwegian government and conducted with major oil and energy companies. These are high-risk ventures with long lead-times before pay back. But CO2 – both “physical” and “avoided” – will become a commodity like oil did at the turn of the last century. The parallels will be interesting to observe – as happened then, new companies will emerge.

A commodity like oil

Just after Kyoto, in 1998 the oil price was at US$12 per barrel, today it is seven times that at $84. In West Texas over 220,000 barrels per day are produced using CO2 for enhanced oil recovery (EOR). During the past six years the price of CO2 has risen fourfold from below $8 to over 32 $/t CO2, driven by higher oil prices and (ironically) a shortage of supply. However, CO2 for EOR is still only anticipated to be a small part of the global market for CCS. The real question is what will be the price of carbon in the medium and longer term?

Initially it is politicians and regulators that determine the cost. For example the Norwegian offshore CO2 tax, since 1991, has varied between $35 to 50 $/tCO2, not sufficient to trigger investment in new capture technology, but justifying injection of 1 mtCO2/yr into Sleipner, a well-documented pilot project for CO2 storage.

The European Trading System, where 2007 credits are below € 0.07 while those from 2008 are above €20 /t CO2, because the regulators changed the rules and will do so until governments achieve significant reductions in CO2 emissions. But when does the real market take over? The combination of CCS and credit trading provides this opportunity. With stronger restrictions on permitted emissions, the credit price will increase and trigger further investment in the most efficient capture technologies. These will then provide a greater volume of supply to the market. Eventually the credit price will approach the cost of “CO2-avoided” using CCS technology. The price is probably closer to ~ €50 per ton avoided (as opposed to half or twice that number).

In the longer term the CCS cost should reduce further. For some areas “physical” CO2 may become closely linked to the rising oil price already seen in West Texas. There the rule of thumb is that CO2 value in $ per ton can be about three-quarter the cost of a barrel of oil. It is only indicative, but when oil passes $120 your CO2 may have a value of $90 and considerably more than the anticipated cost of capture.

We need to think differently: investors understand this when they assess the early risk and rewards. And fossil fuel can be used in a sustainable manner with CCS putting the carbon back where it came from - in the ground!

W: www.co2-global.com