with Bjørn-Erik Haugan, CEO, Gassnova SF
Last year a record USD 15.8 million was invested by the CLIMIT-demo program into CCS development projects in Norway. How does Norway now stand as an investor in CCS technology on a global level?
Going back just over two or three years, there where huge expectations being placed on CCS technology in terms of how fast it might contribute to combat global warming. Reality has now set in, in the sense that a lot of the projects for the development of CCS technology have not materialized at the pace that people expected. We are now in what others might refer to as the “valley of death” in CCS innovation.
Personally, I am not sure that this is the right metaphor but there is certainly a degree of weariness regarding this technology for various reasons. Firstly, there is the financial crisis and CCS needs a strong financial commitment over an extended period of time. Secondly, people are now suffering the disappointments following their inflated expectations a couple of years back and the fall of climate change issues from the popular agenda is a big problem.
Climate change is accelerating at the moment but it is out of sight and off the radar screen! It is nowhere to be found in the media but we are now experiencing the fourth hottest summer on global records. The sense of urgency in combating this problem has faded and because expectations have not been met with regard to technologies like CCS people are reluctant to develop it seriously. Too many high-profile and ambitious projects have fallen by the way-side.
Within this picture, Norway has stood by its promises despite the significant costs involved in these projects. We invested USD one billion in a technology centers, which is even beyond what the USA is investing in CCS technology. Norway has therefore made a very significant and enduring commitment to developing the CCS industry.
The global CCS industry now need to extricate itself from the trough that it now finds itself in and create some success stories. The pendulum has swung too far towards the naysayers and Norway could end up playing a crucial role in reversing the swing.
However, there are a whole host of clean technologies which can provide equivalent environmental advantages and good economics such as coal power with CCS, offshore winds and others. Politicians should be providing the legislative and financial frameworksand let the technologies compete in the market.
Wind farms are fairly simple to understand. What is the challenge of generating understanding about the CCS industry?
Of course wind farms have been around for centuries, previously being used simply to grind flour. As such, wind power is a very well known quantity and it sounds instinctively like a good idea. However it produces very expensive power and it is unreliable. By contrast, a CCS plant constitutes a huge investment and the concept is difficult to understand.
There appears to be many misconceptions about CCS. Some have seen CO2 storage as potentially dangerous and explosive. There is a huge need for greater public communication about this technology. Germany has practically banned the storage of CO2 because the government has bowed to popular but erroneous belief. This has led to the situation where they are quite happy accept the storage of natural gas under their football stadium in Berlin – which is a gas that can potentially explode. However, they do not accept the storage of a perfectly inert gas in their country. This is not science but a skewed perception of the reality – unfortunately this perception drives behavior and we need to address this first. We need to respond on factual grounds.
Given that this is the popular mindset, how difficult is it to persuade the private sector to support this technology?
There is an intellectual recognition that CCS technologies are emerging and there is some willingness to invest on a small scale by the oil and gas industry. However, in terms of large-scale demo plants, the private sector is much more reluctant to commit its resources. We are talking about significant investments and the market for CCS is not yet evident. Five years ago people might have envisaged this market appearing by 2020, but now we are looking at a timeframe more like 2030 or even later. This is why the private sector is not pouring any real amounts of money into this technology.
There is no price of carbon to speak of so the financial incentives are not there. The lack of regulation and transparent conditions for the industry is also a problem. From an investor point of view they will often choose to invest in something else instead. It is a governmental issue which needs to be resolved.
Why then would a company be interested in investing in this technology in Norway?
Some of the larger corporations have recognized that this technology is on the horizon, albeit quite far out. Eventually CCS will become something that companies need to integrate into their license agreements and business plans. They have decided that they need to be involved but not necessarily on their own. Joint ventures and co-sponsored projects are more common for the development of this technology and thankfully the government of Norway has put its money where its mouth is and this has resulted in programs and joint ventures with serious government funding. Indeed, it was the lack of consistent government funding which led to the failure of CCS in in many other countries including the UK, and across the EU.
However, Norway cannot drive this entire effort globally. Norway is currently undertaking commitments to this technology at a scale which is far beyond its own CO2 problem. The emissions of 50 million tons of CO2 in Norway pale into insignificance when compared to global emissions. We are therefore investing far beyond what is needed to solve our own problem.
The UK is now trying to relaunch CCS programs and in the USA there is the fortunate circumstance that they have the possibility of using CO2 in an enhanced oil recovery application. This completely changes the economics of CCS technology with an additioanl revenue stream coming from enhanced oil recovery.
In 2006 there were huge expectations that an EOR application could be found in Norway; the idea was that we could produce gas in huge quantities, produce electricity and send this to Europe then use the CO2 for EOR and produce more oil. The idea seemed too good to be true and unfortunately it turned out that way.
At that time the oil price was around USD 30 and now it is much higher. There is a renewed interest in the EOR potential of this technology which might change the economics. However, Norway has not been very concerned with the EOR application for around five years and will have to catch up.
Where do you see the main possibilities for partnership between Gassnova and international companies and institutions?
With the new Technology Center of Mongstad (TCM) recently coming online, there are grounds for participation with Gassnova on two fronts. Firstly companies can partner with Gassnova and presently we have Shell, Statoil and Sasol of South Africa as partners in this project. We would like to see other international oil majors joint this program. This would allow these companies to come ringside to the most advanced technology center on the planet for CCS and the fee for entry into this project is very low. Ultimately, the TCM means that CCS research is no longer just a plan but a plant – something that can be used directly for CCS research. There was a hugely positive response to the opening of the TCM because it was an Olympic scaled event in the world of CCS.
Other than being an owner, there is a great opportunity for technology vendors. Siemens, Aker, Mitsubishi and a host of others can test their products utilizing the TCM infrastructure. There are several large scale gas sources allowing them to test their technology with different kinds of exhaust gas, which is a feature that no other test facility has. We have all the support they would need in terms of steam, power, hook ups, laboratories, and offices.
Do you see any of these technology partnerships being able to deliver a game-changing technology?
Unfortunately, we have not yet found a silver bullet. There are many technologies in their research stage but taking this to a full scale power plant will require more than 10 years. There is a steep learning curve in this development and we are taking an evolutionary approach to making this technology more cost effective. Sound engineering, experiments, mass transfer and heat transfer efficiency are all part of the process. It is not dramatic but this is how very successful technologies have evolved. Even the bicycle was a 200-year old invention. The concept of the bicycle is very old but the latest technologies are still driving excitement. I see CCS development in a similar way.
What do you see Gassnova contributing to the global CCS field over the coming years?
Gassnova is making a huge effort at the moment at the TCM and we are in the planning stage for a full-scale plant at Mongstad. The government is going to make an investment decision in 2016 and we are in the planning stages. This is one of our major goals.
I believe that ultimate success will depend on whether we can provide the platform for new technologies to be developed and verified to the point where industry is satisfied that it works, how it works and the economics so that when the financial incentives for this industry finally emerge, these companies can be confident that CCS technologies will work. This is the point where Gassnova can sit back and let the industry develop on its own accord. It is really the industry which needs to carry this forward. I would advise international companies interested in this field to come to Mongstad and see what we are doing at the moment in order to be part of this future technology.