Potential for a Norwegian CO2 value chain
When the Norwegian Petroleum Society (NPF) held a conference in autumn 2006 about EOR using CO2, it published an article titled Milliardgevinst med CO2-fangst og injisering ("Profits in the billions from CO2 capture and injection"). NPF showed that the extraction percentage in US oil fields was increased by as much as 16 percentage points by injecting CO2 into the fields. In the article, it was stated that:
”Within the last year, an EU report and a Norwegian report have shown that CO2 injection in subsea fields can also enhance oil recovery by a gross value of hundreds of billions of [Norwegian] kroner. At the same time the solution can help Europe – and Norway – to meet the Kyoto obligations on reduced emissions of greenhouse gases.”
Although the tone of the article was optimistic, the profitability of such projects was questioned. Two reports published in 2006 and 2007, respectively, concluded that commercial viability was so far not possible.
Value chain report 2006
In 2006, Gassco, Gassnova and Petoro presented a report on the CO2 value chain, on assignment from the Norwegian Ministry of Petroleum and Energy. In the report, a value chain is defined as including:
- Capture of CO2 from emissions
- Transport of liquid CO2 to the oil field in pipelines or by ship
- Injection into the oil reservoir for enhanced oil recovery
The report focused on the six oil fields Draugen, Gullfaks, Oseberg Øst, Brage, Volve and Gyda and 12 possible value chains associated with these fields.
The idea was that the costs of establishing CO2 value chains would be covered by increased oil production and a reduced need for purchasing CO2 quotas in future quota markets. The report stated that it is technically fully possible to implement such value chains. Preliminary negotiations with CO2 dealers showed that there is commercial interest for value chains. However, the report concluded that the project is so far not commercially viable. Estimates showed that the specific value chains would have cost-income gaps of between NOK 4.4 and 11.8 billion.
In its comments to the 2007 state budget, the Ministry of Petroleum and Energy discusses the conclusion as follows:
”The report thus shows that the commercial actors have very little or no willingness to pay. Furthermore, the report shows that there is no commercial basis for a value chain, and that any further efforts to establish such chains would require considerable public funding.”
Value chain report 2007
A similar conclusion was made by Statoil and Shell in a feasibility study on the Halten CO2 value chain, which was presented in autumn 2007. Their concept was to build a gas-fired power plant at Tjeldbergodden with CO2 management and to use the CO2 to enhance oil recovery at the Draugen and later also the Heidrun oil fields. Furthermore, the electricity generated at the power plant would be used by the offshore installations.
The extensive evaluations showed that the value chain is technically feasible, but not commercially viable. The extra oil volumes that the Draugen licence operator believes to be recoverable are too low to justify the necessary investments in the field. The two companies' joint press release specifically mentions that investments for platform modifications would be extensive and that a one-year shutdown would be necessary.
The research programme Petromaks includes several projects linked to CO2 value chains. There is also international research in the field, e.g., in the EU and the IEA. A Norwegian annual report of IEA activities in 2006 states that there is increasing international interest for EOR, due to both the price of oil and the increasing demand for oil and natural gas.
The environmental organisations Zero and Bellona still believe in the benefits of EOR. According to Bellona, the Gassco, Gassnova and Petoro report was incomplete, both because it did not consider the possibility of dividing the EOR investments among several oil fields, and because it did not take into consideration the considerably higher income that could be generated by EOR, especially for the state. According to Bellona, a 5 % increase in oil recovery would be enough to ensure the commercial viability of the CO2 value chain.
The final word about CO2 value chains has not been spoken. The establishment of commercially viable value chains primarily depends on future price developments of oil and CO2, technology development and the general regulatory framework.