7.2.1 Cost estimation cases

CCSCarbon dioxide Capture and Storage development can be separated into three different phases: demonstration, early commercial deployment and full commercial deployment; the costing exercise reported in the ZEPEuropean Technology Platform for Zero Emission Fossil Fuel Power Plants study focused on early commercial deploycent, with demonstration projects assessed as a special case for comparison. To simulate the difference between early commercial deployment and full commercial deployment the effect of learning has been used (IEAGHG, 2012).

In order to cover a set of potential storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere configurations and also provide reliable cost estimates, storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere options were separated in six main "representative" cases according to key differentiating features: depleted(hydrocarbon reservoir) one where production is significantly reduced oil and gas fields (DOGF) vs. deep saline aquifers (SA); offshore vs. onshore (Ons/Offs); and whether there is the possibility of re-using existing (legacy) wells (Leg/NoLeg) (Tab. 7-1). Note that the choice was made to restrict the costing exercise to reservoirs with a depth of 1000 to 3000 m.

Tab. 7-1: ZEPEuropean Technology Platform for Zero Emission Fossil FuelOil, gas and coal are fossil fuels, formed over millions of years from the remains of plants and animals (fossils); they are hydrocarbons Power Plants Storage(CO2Carbon dioxide) A process for retaining captured CO2Carbon dioxide, so that it does not reach the atmosphereThe layer of gases surrounding the earth; the gases are mainly nitrogen (78%) and oxygen (around 21%) cases. After IEAGHG, 2012. Case Location Type Re-useable legacy Wells Abbreviation 1 Onshore DOGF Yes Ons.DOGF.Leg 2 Onshore DOGF No Ons.DOGF.NoLeg 3 Onshore SA No Ons.SA.NoLeg 4 Offshore DOGF Yes Offs.DOGF.Leg 5 Offshore DOGF No Offs.DOGF.NoLeg 6 Offshore SA No Offs.SA.NoLeg

For each of the six cases, three scenarios ("Low", "Medium" and "High") were defined to yield a final storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere cost range estimate. The ZEPEuropean Technology Platform for Zero Emission Fossil Fuel Power Plants study also presents a cost breakdown for project components/phases and sensitivity analyses to determine which of the 26 cost elements considered in the study carried the most impact on the final cost.

Data

Generally, DOGF has more data when compared to undeveloped SA. Noteworthy cost differences between DOGF and SA consequently arise in terms of acquiring the necessary data to assess, characterise, develop and monitor the storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere sites. Additionally, the cost of exploration to find a proper site is comparatively inferior for DOGF compared to SA, as most of these costs have already been committed a long time ago, while costs for exploring aquifers will still have to be supported.

Field capacity

Based on GeoCapacity Project data, the estimated capacity of individual sites varies significantly, with only a minority exceeding 200 MtMillion tonnes. The base case has been taken to be three storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere sites for a typical CO2 streamA flow of substances resulting from CO2 capture processes, or which consists of a sufficient fraction of CO2 and sufficiently low concentrations of other substances to meet specifications of streams permitted for long term geological storage. Two other cases were considered for sensitivity analysis of the effect of site capacity: five fields and one field for each CO2 streamA flow of substances resulting from CO2 capture processes, or which consists of a sufficient fraction of CO2 and sufficiently low concentrations of other substances to meet specifications of streams permitted for long term geological storage.

Re-use of wells ("legacy wells")

For SA, it was assumed that no existing wellManmade hole drilled into the earth to produce liquids or gases, or to allow the injection of fluids could be re-used for the purpose of CO2Carbon dioxide storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere. Nonetheless, the possibility of exploration wells being re-used for either injectionThe process of using pressure to force fluids down wells or monitoringMeasurement and surveillance activities necessary for ensuring safe and reliable operation of a CGS project (storage integrity), and for estimating emission reductions was considered.

For DOGF, two distinct cases were appraised. The first considers the re-use of existing wells, subject to including possible work over costs to ensure their suitability as injectionThe process of using pressure to force fluids down wells/monitoringMeasurement and surveillance activities necessary for ensuring safe and reliable operation of a CGS project (storage integrity), and for estimating emission reductions wells. In the second case, existing wells are considered unsuitable for re-use. An optimisation process needs to be established in order to balance the work over of an adequate number of wells vs. drilling new wells on the one hand and, on the other hand, properly abandoning wells that may represent a riskConcept that denotes the product of the probability of a hazard and the subsequent consequence of the associated event to permanent CO2Carbon dioxide storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere.

Hence, the two cases considered may be seen as boundary cases for what could happen in reality. For simplification reasons, it was assumed that sites with wells that can technically and/or financially not be remediated, or would achieve an unacceptable wellManmade hole drilled into the earth to produce liquids or gases, or to allow the injection of fluids integrity, will be de-selected from the site selection procedure.

Assumptions

A number of common assumptions were established and applied for consistency across ZEPEuropean Technology Platform for Zero Emission Fossil Fuel Power Plants studies on the costs of CCSCarbon dioxide Capture and Storage. The assumptions with the maximum impact on storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere cost estimates are summarised below. Note that to remain independent of the captureThe separation of carbon dioxide from other gases before it is emitted to the atmosphere technology selection, storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere costs relate to tonnage of CO2Carbon dioxide stored, not abated (IEAGHG, 2012).

Energy costs

As a result of limited energy requirement of CO2Carbon dioxide storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere, parasitic emissions caused by storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere activities are considered as low.

Project lifetime

The project operational life is assumed to be 40 years of injectionThe process of using pressure to force fluids down wells for commercial projects and 25 years for demonstration projects. In both cases, this is followed by 20 years of post-injectionThe process of using pressure to force fluids down wells monitoringMeasurement and surveillance activities necessary for ensuring safe and reliable operation of a CGS project (storage integrity), and for estimating emission reductions, before hand-over of liability to the Competent Authority. The commercial case is taken as the base case, whereas the demonstration phaseDemonstration phase means that the technology is implemented in a pilot project or on a small scale, but is not yet economically feasible at full scale is modelled using a sensitivity analysis (shortening the lifetime of the project). Note that 40 years is longer than the average expected lifetime of a wWellbore without intervention.

CO2Carbon dioxide streamA flow of substances resulting from CO2Carbon dioxide captureThe separation of carbon dioxide from other gases before it is emitted to the atmosphereThe layer of gases surrounding the earth; the gases are mainly nitrogen (78%) and oxygen (around 21%) processes, or which consists of a sufficient fraction of CO2Carbon dioxide and sufficiently low concentrations of other substances to meet specifications of streams permitted for long term geological storage(CO2Carbon dioxide) A process for retaining captured CO2Carbon dioxide, so that it does not reach the atmosphereThe layer of gases surrounding the earth; the gases are mainly nitrogen (78%) and oxygen (around 21%)

Another assumption is an annual storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere rate of 5 MtMillion tonnes, which calls for 200 MtMillion tonnes of CO2Carbon dioxide storage capacityThe accumulated mass of CO2 that can be stored environmentally safely, i.e., without causing leakage of CO2 or native reservoir fluids or triggering geologic activity that has a negative impact on human health or the environment over a 40-year plant lifetime. Such capacity matches up with the CO2Carbon dioxide emissions of a typical coal-fired power plant equipped with CO2Carbon dioxide captureThe separation of carbon dioxide from other gases before it is emitted to the atmosphere technologies. Deviation of this rate has not been modelled explicitly, but it is dealt with by varying the available storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere field capacities. The CO2Carbon dioxide was assumed to be delivered by pipeline or ship in dense phase and in a state that is "fit-for-purpose" for injectionThe process of using pressure to force fluids down wells, meaning that no further pressurising or conditioning equipment is required at the injectionThe process of using pressure to force fluids down wells location.

Availability of storage(CO2Carbon dioxide) A process for retaining captured CO2Carbon dioxide, so that it does not reach the atmosphereThe layer of gases surrounding the earth; the gases are mainly nitrogen (78%) and oxygen (around 21%)

A basic consideration is the availability and capacity of suitable storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere sites. Data were made available from the EUEuropean Union GeoCapacity Project database, comprising 991 potential storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere sites in SA and 1388 DOGF in Europe.

Currency and time value of money

The reported costs are in Euros, cost basis is European. As input is centred on global experience in a predominantly dollar-based industry, the currency exchange rate used in the ZEPEuropean Technology Platform for Zero Emission Fossil Fuel Power Plants study for conversion is $1.387 = €1. Expenses are split between capital expenditure (CAPEX) and operational costs (OPEX). The CAPEX/OPEX split applied is specific to storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere projects and operations.

The cost of capital for investment, WACC (Weighted Average Cost of Capital) is assumed to be 8% as a base case. WACC could be of great importance given the long duration of projects. For that reason, sensitivity studies were also carried out, within ZEPEuropean Technology Platform for Zero Emission Fossil Fuel Power Plants studies, with values of WACC of 6% and 10%, in line with previously published work.

The CAPEX was annualised and discounted back to present via WACC. The OPEX was not adjusted, i.e., it was assumed that the influence of inflation would be cancelled out by the effect of discounting. Note that the results vindicate this hypothesis, e.g. the learning rate applicable to OPEX COsts has very little influence on the overall expenditures.

Post-closurePeriod after transfer of responsibility to the competent authority, monitoringMeasurement and surveillance activities necessary for ensuring safe and reliable operation of a CGS project (storage integrity), and for estimating emission reductions, measurements and verification(CO2 storage) The proof, to a standard still to be decided, of the CO2 storage using monitoring results; (in the context of CDM) The independent review by a designated operational entity of monitored reductions in anthropogenic emissions (MMV) costs are handled in the same manner as decommissioning costs, with one supplementary step. The costs (taking place in years 41-60) are first summed,then transformed into Present Value by means of the discount factor for year 40, and then annualised. As a result, the discount factor used (1/21.7 for 8% WACC) is somewhat too large. However, since costs are incurred so late in the life of the project, their impact to the cost of storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere is already very small, so the effect of using the correct discount factor, which is even minor, is not material.

Summary of all the cost elements considered

A total of 26 cost elements were considered for the computation of the cost of CO2Carbon dioxide storage(CO2) A process for retaining captured CO2, so that it does not reach the atmosphere. Cost items were presented with their base case value ("most likely"). For the top eight cost drivers, those considered to have a major impact on the overall cost of storing CO2Carbon dioxide, "minimum" and "maximum" values used for computing cost ranges and carrying out sensitivity studies were also reported. Tab. 7-2 presents the eight major cost drivers with the associated "most likely", "minimum" and "maximum" values that have been used for the sensitivity analysis.

Tab. 7-3 presents the other 18 cost elements together with their associated values. The motive for not considering such cost elements in a sensitivity analysis was that either the resulting sensitivity would be small as the cost effect of these cost elements is small, or the sensitivity range would be too small as that particular parameter is wellManmade hole drilled into the earth to produce liquids or gases, or to allow the injection of fluids understood from experience in the oil and gas exploration and production industry.

Tab. 7-2: Main cost elements of the ZEPEuropean Technology Platform for Zero Emission Fossil FuelOil, gas and coal are fossil fuels, formed over millions of years from the remains of plants and animals (fossils); they are hydrocarbons Power Plants study. After IEAGHG (2012). Cost driver Medium case assumption Sensitivities Rationale Field capacity 66 MtMillion tonnes per field 200 MtMillion tonnes per field 40 MtMillion tonnes per field Based on GeoCapacity project data WellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids injectionThe process of using pressure to force fluids down wells 0.8 MtMillion tonnes/yr per wellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids 2.5 MtMillion tonnes/yr 0.2 MtMillion tonnes/yr1 Medium value based on actual projects; High and low based on oil and gas industry experience Liability transfer costs €1.00 per tonne CO2Carbon dioxide stored €0.2 €2.00 Rough estimate of liability transfer cost; Wide ranges reflect uncertainty WACC 8% 6% 10% Same range as McKinsey study, September 2008 WellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids depth 2000m 1000m 3000m WellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids costs strongly depend on depth2 WellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids completion(well) Refers to the cementing and perforating of casingA pipe which is inserted to stabilise the borehole of a well after it is drilled and stimulation to connect a well bore to reservoir costs Based on Industry experience, offshore cost 3 times onshore cost -50% +50% Ranges based on actual project experience #Observation wells 1 for onshore; nil for offshore 2 for onshore; 1 for offshore 1 wellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids extra to better monitor the field # Exploration wells 4 for SA; nil for DOGF 2 for SA, nil for DOGF 7 for SA, nil for DOGF DOGF are known, therefore no sensitivities needed; SA reflects expected success rate 1 0.2 MtMillion tonnes/yr not modelled for offshore cases as costs would become too high to be viable. 2 Supercritical(CO2Carbon dioxide) Conditions where carbon dioxide has some characteristics of a gas and some of a liquid state of CO2Carbon dioxide occurs at depths below 700-800m.

Tab. 7-3: Additional cost elements considered for storage(CO2Carbon dioxide) A process for retaining captured CO2Carbon dioxide, so that it does not reach the atmosphereThe layer of gases surrounding the earth; the gases are mainly nitrogen (78%) and oxygen (around 21%) in the ZEPEuropean Technology Platform for Zero Emission Fossil FuelOil, gas and coal are fossil fuels, formed over millions of years from the remains of plants and animals (fossils); they are hydrocarbons Power Plants study. After IEAGHG (2012). Cost driver Assumption Re-use of exploration wells 1 out of 3 wells is re-usable as an injectionThe process of using pressure to force fluids down wells wellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids; others are not located correctly, do not match the injectionThe process of using pressure to force fluids down wells depth etc. Utilisation Utilisation is 86%, implying a peak production of 116% average Contingency Wells 10% of the required number of injectionThe process of using pressure to force fluids down wells wells is added as a contingency, with a minimum of 1 per field WellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids re-tooling cost Re-tooling legacy wells as exploration wells, or exploration wells as injectionThe process of using pressure to force fluids down wells wells, costs 10% of building the required wellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids from scratch Operations and Maintenance 4% of CAPEX cots for platform and new wells InjectionThe process of using pressure to force fluids down wells testing Fixed cost per field Modelling/logging costs Fixed cost per field; SA costs ~ 2 times as much as DOGF Seismic survey costs + MMV Baseline Fixed cost per field; offshore costs ~ 2 times as much as onshore. In addition, at the end of its economic life, final seismic survey is performed prior to handover (costs discounted for time value of money) MMV recurring costs Fixed cost per field; offshore costs ~ 2 times as much as onshore Permitting costs €1M per project WellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids remediation costs Provision ranging from nil to 60% of new wellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids costs, based on the possibility of risky wells and the costs of handling them Platform costs For offshore there are platform costs: SA is assumed to require a new platform; DOGF is assumed to require refurbishment of an existing platform Decommissioning 15% of CAPEX of all operational wells and CAPEX platform Post-closurePeriod after transfer of responsibility to the competent authority monitoringMeasurement and surveillance activities necessary for ensuring safe and reliable operation of a CGS project (storage integrity), and for estimating emission reductions 20 years after closure, at 10% of yearly MMV expenses during first 40 years Economic life 40 years; demonstration phaseDemonstration phase means that the technology is implemented in a pilot project or on a small scale, but is not yet economically feasible at full scale 25 years (in line with assumptions for CO2Carbon dioxide captureThe separation of carbon dioxide from other gases before it is emitted to the atmosphereThe layer of gases surrounding the earth; the gases are mainly nitrogen (78%) and oxygen (around 21%)) Learning rate 0% as CO2Carbon dioxide storage(CO2Carbon dioxide) A process for retaining captured CO2Carbon dioxide, so that it does not reach the atmosphereThe layer of gases surrounding the earth; the gases are mainly nitrogen (78%) and oxygen (around 21%) technologies are wellManmade hole drilled into the earth to produce liquids or gases, or to allow the injectionThe process of using pressure to force fluids down wells of fluids known and build on oil and gas industry experience Exchange rate 1.387 USD/EUR (as of 6 October 2010) Plant CO2Carbon dioxide yearly captured CO2Carbon dioxide captured is assumed to be 5Mt per year. Variation in the amount captured is implicitly modelled by variation in storage(CO2Carbon dioxide) A process for retaining captured CO2Carbon dioxide, so that it does not reach the atmosphereThe layer of gases surrounding the earth; the gases are mainly nitrogen (78%) and oxygen (around 21%) field capacity as a sensitivity