Carbon capture is becoming big business, here is how

The Shell Norco Manufaturing Complex, at sunrise in St. Charles Parish, La. Last year, Congress pledged $3.5 billion to carbon capture and sequestration projects around the US, which has been called the largest federal investment ever by advocates for the technology. APShow less

ExxonMobil says carbon capture, use and storage (CCUS) will be a $4 trillion market by 2050. Most reputable climate analysts find CCUS is essential to meeting our climate targets. Environmental groups, with a few honourable exceptions, loathe it. But perhaps the most important question is – can it make money, and how much?

CCUS covers a range of technologies that trap carbon dioxide from industrial facilities, power plants and other emitting sites, usually from burning oil, gas, coal, waste and biomass, or manufacturing cement. This carbon dioxide is then used to make valuable products such as fizzy drinks, fuels or plastics, or reacted to produce solid minerals. Or, it is injected deep into the ground, either to liberate additional oil, or to be stored permanently and safely.

Environmental groups dislike CCUS because of its association with the oil and gas industry, and its competition with renewables – which is apparent rather than real. They reserve more vitriol for it than for real climate problems such as burning coal. Even usually objective media such as the Financial Times and Bloomberg are all but unable to mention it without including lists of its alleged problems.

But carbon capture will address different challenges from renewables. It will meet about 16 per cent of the required reductions in greenhouse gas emissions by 2050, primarily applied to heavy industry such as iron and steel, cement, ammonia and “blue” hydrogen. Gas or coal plants with CCUS can help alongside batteries to balance out renewable-heavy electricity systems.

Costs for CCUS vary widely depending on the application. Most of the costs are used for capturing the carbon dioxide; the transport to a suitable point were storage is relatively cheap. Perhaps $20 per tonne for the cheapest options, where carbon dioxide is already separated as part of processes such as hydrogen or ammonia manufacture or natural gas processing, rise to $120 or more for challenging operations such as cement.

Of course, when no one was willing to pay for CCUS, no one did it, an obvious statement that somehow escapes many critics. Now, carbon prices are coming into force and rising in a growing number of countries.

The estimated CCUS costs compare to $85 per tonne offered in tax credits by the US, about $76 per tonne currently under the EU’s emissions trading system, and an intended US $125 per tonne by 2030 for Canada’s carbon tax. So, many carbon capture approaches should now be entering economic viability. The GCC has no carbon price yet, but industries that export to the EU will increasingly be exposed to its carbon border tariffs.

Articles on CCUS often confuse it with a related but different approach, direct air capture (DAC). This takes carbon dioxide directly from the atmosphere. This offsets residual emissions elsewhere that are very hard or expensive to capture or avoid and draws down our vast atmospheric liability of past pollution.

The technological means for doing this operate today, but only on a small scale, and are costly, at $500 per tonne or more. Biological, geochemical and other approaches may be cheaper, but have to be proven technically, or are limited in the amount they could capture.

CCUS is a crucial part of GCC climate plans. The Gulf’s large emitting sources are close to well-understood, big and high-quality underground storage sites. The major Gulf oil and gas companies have significant expertise: Adnoc started its first large operation eight years ago, and it, Saudi Aramco and QatarEnergy plan in total to capture more than 25 million tonnes annually by 2030.

Worldwide, current capture capacity is about 40 million tonnes per year. The International Energy Agency believes that needs to rise to more than 7.6 billion tonnes annually by 2050, with 980 million tonnes of DAC. Other estimates put DAC up to 5 billion tonnes and growing further after 2050.

Vicki Hollub, the chief executive of Occidental, has talked of a $3-5 trillion global industry, and says it could generate as much earnings as the company’s oil and gas business does today. ExxonMobil compared the anticipated $4 trillion CCUS market to the $6.5 trillion it expects for the midcentury petroleum market.

Assuming ExxonMobil is using a similar figure for volumes to the IEA’s, that implies a value of more than $500 per tonne captured through CCUS, which seems excessive. Perhaps $120 for CCUS and $200 for DAC is more realistic, which would make the overall market about $1.1 trillion by 2050 – still very large, more than five times the size of the current liquefied natural gas business.

There are essentially six ways to make money from CCUS. First is to be paid by others to decarbonise the domestic economy, which helps on meeting national climate goals but doesn’t generate external value.

Second is to use the captured carbon dioxide for something. Applications are currently somewhat limited in size and value. The main one, injecting into oilfields to enhance recovery, is hated by anti-fossil fuel campaigners – but the combination of DAC with enhanced oil recovery can yield net-zero carbon oil for essential future uses in areas such as aviation and petrochemicals.

Third is to import carbon dioxide from others who do not have suitable storage opportunities themselves, and who are willing to pay to clean up – Japan and South Korea being obvious candidates.

Fourth is to do direct air capture at home and sell the carbon removal service to others. Microsoft, Stripe and other companies have already made major commitments to decarbonise their operations in this way. Big airlines are another obvious candidate – indeed, it may be the only way for them to keep flying as they do today.

Fifth is to establish low-carbon versions of polluting industries, using CCUS to make them near-zero carbon, and export the products – such as steel, cement, “blue” hydrogen and ammonia. GCC countries are already moving into this opportunity.

Sixth is to provide the technology and equipment. GCC countries could be more proactive investors and researchers. There are still challenges to overcome: reducing costs and energy use, standardising systems, ensuring maximum levels of capture and avoiding any leakage from underground. With a little capital and good pilot opportunities to prove themselves, exciting innovations in CCUS and DAC can become reality. The Gulf should be a pioneer, not just North America, Europe, China and Australia.

Even if it does not quite reach the size of petroleum today, carbon capture is going to be a big and profitable business. To succeed in the climate struggle, we need CCUS to grow much faster, with bold and capital-rich supporters. Balancing its future oil and gas outlook, the GCC should seize a larger share of the carbon capture cake.

Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis