This document provides a summary of a presentation on CO2 transport for carbon capture and storage (CCS). The presentation introduces Element Energy, a UK-based low carbon energy consultancy, and discusses Element Energy's expertise in CCS. It then covers global CO2 pipeline potential based on a study conducted for the IEA, different CO2 transport scenarios for the North Sea region, and a case study of developing a CO2 transport network in the Tees Valley area of the UK. The presentation examines challenges for large-scale CCS deployment including uncertainties around sources, transport and storage options, and the actions needed at a global, European and regional level to support CCS.

1. CO2 Transport for CCS:
Global Potential &
Local Challenges
UKCCSC Winter School
10th January 2012
Harsh Pershad
Element Energy Limited
www.element-energy.co.uk

2. Introducing Element Energy
 Independent, impartial, UK-based low carbon energy technology consultancy.
 Mission is to help our clients make a successful transition to the low carbon
economy.
 Clients include oil and gas majors, power companies, technology developers,
national Governments, IEA, regional/local government, regulators, trade
associations and NGOs.
 Use our expertise in appraising low carbon technologies, markets, business
models, and regulations, to developing strategies for successful technology
deployment.
 Majority (>75%) of work is repeat business from satisfied customers.
 Technologies covered include CCS, hydrogen, fuel cells, low carbon transport, low
carbon buildings, energy masterplanning, energy efficiency, CHP, small scale
renewables, microgeneration. 2

3. Element Energy is a leading low carbon energy
consultancy offering services spanning from strategy
development to high end engineering solutions
Low carbon
power
We operate in three Low carbon transport generation
Low carbon buildings
main sectors
• EV scoping • Master planning • Carbon capture
• H2 vehicles • Building design and storage
• Infrastructure modelling • Policy advice • Renewables
• Business planning • Regional strategy • Microgeneration
• Techno-economics
• Feasibility studies
• Geographic data
We offer three main Strategy Engineering
Due
services to our clients diligence & Policy Solutions
• Technology assessments • Scenario planning • CFD
• Market assessments • Techno-economic modelling • Software tools
• Financial modelling • Business planning • Prototyping
• Commercialisation advice • Stakeholder engagement • Installations
3

4. Element Energy’s CCS expertise
Element Energy helps organisations and consortia to develop and implement their CCS
strategies based on:
 Quantitative asset-wide assessment of CCS potential.
 Understanding of technology requirements, cost and performance, policy and
regulatory frameworks, and business models for capture, transport, and storage.
Projects include:
 Asset-wide analysis and CCS strategy (Multinational oil and gas company)
 Financial Analysis of a CCS Network (Public/private)
 The Economics of CO2 Storage (Public/private)
 CO2 pipelines: An analysis of global opportunities and challenges (IEA)
 CCS in the gas-fired power and industrial sectors (CCC)
 Global economic potential for CCS in depleted gasfields (IEA)
4
 Regional infrastructure roadmap development

5. Outline
• Global CO2 pipeline potential
• North Sea CO2 transport scenarios
• Case study – developing a network in the Tees Valley
5

6. Study on CO2 pipeline infrastructure: analysis of
global challenges and opportunities
 Review of engineering challenges,
legal and regulatory issues.
 Experience from investment and
regulation in the oil and gas pipeline
industries.
 Quantitative modelling of global
pipeline potential in 2030 and 2050,
based on global databases of
sources, sinks and CCS demand
 Funded by IEA Greenhouse Gas
R&D Programme.
6 6

7. How well are emitters and storage matched
globally?
Inputs Modelling
Global sinks database Terrain
Outputs
weighting
Global sources Maps of
database Source-sink
source sink
matching and
Global CCS demand matches
scoring
database algorithms Costs and
Global terrain capacities of
Integrated
database point-to-point
network
and integrated
Existing pipeline maps models
pipelines
Pipeline cost database Cost and
Sensitivity
sizing
Sizing database analysis
algorithms
7 7

8. Starting point was generating databases of sources
and storage sites.
8 8

9. For aquifers, there are no consistent global datasets,
therefore need to work with published data.
9 9

10. Also need estimates of CCS demand from global
economic, energy system, CO2 and climate
modelling.
N.B. These
models change
every year!
10 10

11. Pipeline costs depend primarily on diameters,
lengths, terrain, boosting requirements, location and
overall engineering cost indices.
11

12. The scores for emitters store combinatins can then be calculated,
and for each country the highest scoring projects (based on
transport considerations) can be depicted.
It is possible to meet IEA’s
projection of US total CCS
demand of 500 Mt CO2/year
in 2030 using short pipelines
crossing straightforward
terrains.
12 12

13. Towards 2050, it will
become increasingly
challenging to meet the
IEA’s projection of US total
CCS demand of 770 Mt
CO2/year.
Longer or integrated
pipelines crossing difficult
terrains would be
increasingly required.
13 13

14. Source-sink matching can check projections for CCS and
highlight where capture readiness policy and storage
appraisal should be prioritised.
Ability to meet Blue Ability to meet Blue Importance of Importance of
Cost effectiveness of Cost effectiveness of
Map Demand in Map Demand in aquifer storage in aquifer storage in
new pipelines new pipelines
2030 under baseline 2050 under baseline 2030 wrt baseline 2050 wrt baseline
required for 2030 required for 2050
scenario scenario scenario scenario
Region
Africa High Low Low Low Low High
Australasia High Low Moderate Low High High
Central + High Low Moderate Low Low Moderate
South America
China Moderate Low High Moderate High Very High
Eastern
Europe Low Very Low Moderate Low High Very High
CIS High Moderate Moderate Moderate Very Low Very Low
India High Very Low High Low High Very High
Japan Moderate Very Low Moderate Low Very High Very High
Middle East Very High Low Moderate Moderate Very Low Low
Other Dev
Asia Very High Very Low Moderate Low Low Moderate
USA Very High Moderate Very High Very High High Very High
Western
Europe Very High Low Very High Moderate Low Very High
14

15. Worldwide regions differ substantially in the cost
effectiveness of CO2 pipeline networks.
15 15

16. Where there are multiple sources (and/or sinks)
options for integrated infrastructure may provide
multiple benefits.
16 16

17. Comparison of point-to-point and shared pipelines
17

18. Comparison of shared rights-of-way and shipping
18

19. Permitting transport links is high risk and timescales
can last more than a decade, so integrated pipelines
minimise the need to for multiple large projects.
Also, 1000 km gas
pipelines (e.g.
Nordstream) have taken
14 years from concept
to commissioning).
19

20. If CCS is well planned, phased investment over two
decades can support rapid growth later when
conditions favour large CCS uptake.
20

21. Outline
• Global CO2 pipeline potential
• North Sea CO2 transport scenarios
• Case study – developing a network in the Tees Valley
21

22. Industry and countries around the North Sea have
made efforts to develop CCS, providing a useful
case study of issues for basin-scale networks.
 Element Energy led a quantitative analysis of
capture, transport and storage scenarios
 Included engagement with more than 60
stakeholders.
 Started in September 2009, completed
March 2010.
 ‘One North Sea’ Report available at
www.element-energy.co.uk
 Funded by UK Foreign and Commonwealth
Office and Norwegian Ministry of Petroleum
and Energy, on behalf of the North Sea Basin
Task Force.
22 22

23. Numerous transport networks have been proposed
CO2 networks for the North Sea region to take
advantage of the clustering of sources and sinks.
Different countries and industries
have different priorities (and time
horizons) which influence the level to
which they optimise by ‘future-
proofing’ investments – there is no
‘unique’ answer as to what is the
‘right’ network.
23

24. Large uncertainties in the locations, timing,
capacity, designs and economics of CCS projects
challenge both policymakers and industry.
Capture uncertainties Transport uncertainties Storage uncertainties
CO2 caps? Point-to-point or integrated Aquifer viability?
Renewables/nuclear infrastructure? Hydrocarbon field
contribution? Cross-border projects? storage?
Commodity prices? Pipeline reuse? Onshore storage?
CCS cost reduction? Shipping? Enhanced oil recovery?
Industrial sources (carbon Site-specific issues? Site-specific issues?
leakage)?
Power demand?
Efficiency improvements?
Site-specific issues?
Many alternative scenarios for CCS deployment
(examined through quantitative modelling
supplemented with lit. and stakeholder review) 24 24

25. To understand the requirements for North Sea CCS
infrastructure in 2030, we developed a number of
CCS scenarios.
Scenario CCS demand drivers Transport drivers Storage drivers
Tight CO2 caps
Substantial CCS cost reductions
CCS efficiency improvements Integrated
High power demand infrastructure
Unrestricted – all sinks
Very High CCS mandatory for new build
available for storage
Moderate renewables Cross-border pipelines
Limited new nuclear allowed
Low gas prices
CCS from industrial sources
Moderate CO2 caps
Moderate CCS cost reductions and Point-to point (up to
efficiency improvements 2030). No onshore storage
Medium
No increase in power demand No cross-border permitted.
High renewables and nuclear transport before 2050. Aquifer storage limited
No industrial sources
Unfavourable e.g. Combination of weak
Transport investment
Low CO2 caps, CCS cost increases, no CCS Very low availability
restricted
policies.
25 25

26. Three scenarios encapsulate extremes and most likely
CCS development scenarios for the North Sea region.
Opportunity?
Mt CO2 Leadership, co-operation and
stored/year in the 450 Mt/yr in investment by Governments,
EU, industry and others, to
North Sea region 2050
Very stimulate CCS demonstration
and deployment.
High
More likely?
Fragmented CCS activity.
Limited support beyond
demonstration (except CO2
273 Mt/yr in price).
2030 Restricted transport and
Medium storage.
Possible worst case?
30 Mt/yr in ca. 46 Mt/yr Unsuccessful demonstration.
2020 in 2030 Failure to support
Low deployment.
Poor economic conditions
and regulations
2010 2020 2030 2040 2050 Year Higher costs for CCS.
26

27. With optimistic developments in technology,
policies, organisation, social acceptance, CCS could
provide ca. 10% of European abatement in 2030.
273 Mt CO2/yr
27 27

28. However, with limited support and technology
development, CCS deployment in 2030 could be
limited to only a few simple projects.
46 Mt CO2/yr
28 28

29. Decisions on investment must be made in the context
of very large uncertainty as to eventual use.
Number of new Number of sinks New pipeline km Total Mt
sources in 2030 in 2030 required in 2030 CO2/year
100 required in 2030
40 5000 300
50 200
20 2500
100
0 0 0 0
29 29

30. Very high CCS deployment could bring significant
economies of scale in transport costs.
Marginal transport cost curve for 'Medium' and 'Very High' scenarios
6
5
Very High
Pipeline net present cost
(integrated)
4
€/tCO2
3
2 Medium scenario
1
0
0 100 200 300
Mt CO2/year transported in 2030
Cost represent the capital cost and operating costs (discounted at 10% over 30 years)
for new pipelines constructed in 2030.
Costs exclude financing, capture, compression, boosting or storage.
30 30

31. A combination of favourable drivers are required
to meet the highest demands (e.g. IEA roadmap
CCS demands).
31

32. Overcoming the barriers to large scale CCS
deployment by 2030 requires leadership and co-
operation.
Major investment in low carbon energy technologies (e.g. renewables) has been
achieved through a combination of :
 Robust, substantial and long term economic incentives
 Successful demonstration at intermediate scale
 Confirmation on (large) resource availability and locations
 Solving interdependencies within the value chain
 Clarity on regulations
 Some degree of standardisation to reduce transaction costs
 Political and public support.
32 32

33. Delivering large scale CCS infrastructure
requires action at global and European levels.
Actions at global level
 Worldwide agreement on CO2 emissions limits
 Operational experience with capture and storage at scale, through safe and
timely demonstration projects.
 Reducing the costs of CCS through improving technologies, standardising, and
efficient designs.
 Improved guidelines on capacity and suitability of storage.
 Engagement with the public and NGOs.
Additional actions at European level
 Improve the quality of information on storage available.
 Introduce measures that promote CCS beyond first wave of demonstration.
 Set up supportive national regulatory structures for storage developers.
33 33

34. Delivering large scale transport and storage
infrastructure in the North Sea requires the co-
operation of regional stakeholders.
Actions for North Sea stakeholders
 A shared, transparent and independent storage assessment involving
stakeholders to improve confidence in storage estimates.
 Reduce uncertainties through sharing information on technologies, policies,
infrastructure, regulations, costs and challenges.
 Take advantages of ‘no-regrets’ opportunities, such as capture readiness and re-
use of existing data and infrastructure where possible.
 Improve stakeholder organisation to ensure infrastructure is efficiently designed,
located and delivered.
 Develop frameworks for cross-border transport and storage to reduce the risks
for individual countries.
 Determine how site stewardship should be transferred between hydrocarbon
extraction, Government and CO2 storage operators. 34 34

35. Outline
• Global CO2 pipeline potential
• North Sea CO2 transport scenarios
• Case study – developing a network in the Tees Valley
35

36. Case study of a CO2 transport network
36

37. The North East is the most carbon intensive region
of the UK economy.
70 900
Other Emissions
35%
Industry and power sector emissions
800
60 44% tCO2 per £M Gross Value Added (GVA)
767
Percent emissions from industry and 700
Emission per GVA (tCO2/£million GVA)
51% X%
power
50
CO2 Emissions (MtCO2, 2008)
45%
35% 600
38% 44%
34% 46%
43%
40 500
54%
63%
30 400
300
20
31%
200
10
100
0 0
North Wales Yorkshire N. East Mids North West South Scotland East UK South Greater 37
East & Ireland West Mids West England Average East London

38. Industry is partly insulated against the carbon price,
until at least 2020, but competitiveness will be
increasingly eroded.
Total value at risk, EU ETS Phase III: (2012-20): £2.5 Bn
Total Annual Exposure to EU ETS: £306 M/yr
14
£285 M/yr
12 7 Installations Purchase - auction or market
Free allocation
Annual emissions (MtCO2/yr)
10
Outside scope of EU ETS
8 £12 M/yr
2 Installations
6
£7 M/yr
13 Installations
4
£2 M/yr £0 M/yr
6 Installations 6 Installations
2 (1 Food & drink)
(5 petroleum)
0
Power Iron & Steel Chemicals Others Biomass/Biofuels
Sectors
38

39. Vision of Tees Valley stakeholders – onshore cluster
connected by a transmission pipeline to an offshore
storage site.
39

40. Economic modelling of regional CCS network
40

41. Cashflow for pipeline developer
NPV Expenditure Revenue
£250
£200
£150
£100
£50
/£million
£-
Value
2010 2015 2020 2025 2030 2035 2040 2045 2050
Year
-£50
-£100
-£150
-£200
-£250
-£300
Undiscounted cashflow profile for
41
a large network

42. Tees Valley possesses a number of sources closely clustered.
An onshore network is relatively straightforward to
finance (<US$100m) but how should the offshore
transmission pipeline be sized?
42

43. Because of economies of scale in pipelines, a single large
offshore pipeline provides the least cost if all users
connect, but requires upfront cost for over-sizing.
43

44. Pipeline transport shows excellent economies
of scale.
44

45. The costs can be put in the context of the value of
businesses to the UK economy.
Total GVA at risk, EU ETS Phase III (2012-20): £5.4 Bn
Total Annual GVA at risk: £672 M/yr
500
£433 M/yr
450 3,885 Jobs
400
Gross value added (£M/yr)
350
300
250
200
£121 M/yr
150 2,000 Jobs
100 £59 M/yr
£21 M/yr £38 M/yr 330 Jobs
50 170 Jobs 535 Jobs
0
Power Iron & Steel Chemicals Others Biomass/Biofuels
Sectors
45

46. CO2 pipeline network designs can be compared on
multiple key performance indicators.
Need to make
assumptions as to
growth in utilisation
over time.
46

47. Illustrative dependence of project net present value
on the average charge to users of a network.
£500
Large
Medium
NPV after 20 years operation
£300
Small
£100
Anchor
£2.00 £4.00 £6.00 £8.00 £10.00 £12.00 £14.00
-£100
-£300
-£500
Cost of service (£/tCO2)
47

48. Pipeline economics are sensitive to multiple factors.
Best and worse case can drive pipeline tariffs from £0/t to
>£100/t CO2. (N.B. current CO2 prices in the ETS are 7 48
Eur/t)

49. Through discounted cashflow analysis it is possible
to quantify the impacts of underutilisation over
network or pipeline profitability.
Government is well
placed to determine
policy certainty, which
impacts relevance of
different finance options.
49

50. Certainty on CCS adoption depends on source of
finance.
16% 15%
less than one
14% year acceptable
12% 10%
Discount rate (%)
4 years time possible
10%
8% 5%
11 years lag
possible
6%
4%
2%
0%
0 5 10 15
Maximum years for other emitters to join after anchor
50

51. Additional KPIs for network planning are flexibility
and complexity.
51

52. Risk profile for future-proofed transport network
Regulatory and policy risks
Technical and operating risks
Economic and market risks
Operational start-up from anchor project(s)
Commercial risk profile
Investment in non-anchor
Capture technology demonstrated
capture plant
Build onshore network Non-anchor sources connect
Anchor project capture
CCS chain demonstrated
plant
Storage site integrity
Offshore (over-sized) demonstrated
pipeline
EOR revenues
Anchor closes out
financing tariff revenues
Contract negotiations
between parties Project returns
Permitting & Site closure
FEED studies planning
FID for anchor & oversized pipeline Liability transfer
Storage site assessments
Storage site
Pipeline routes monitoring
Selection for support
Design Development Construction Operation & Maintenance Decommissioning
Project timeline
52

53. Possible organisation to deliver a future-proofed
transport network
REGULATORY ISSUES
EU support
(NER 300)
UK Government support Capture permits; pipeline
Project selection RoW; storage & EOR
and fund permits; long-term liability
disbursement
CCS demo support CCS Levy
CCS Levy, CO2 price floors CO2 price floors
Initial MoU agreements
Lenders Anchor project(s) Additional capture Lenders
sources Loan
Loan
agreements agreements
Onshore network
owner/operator
Tariff arrangements
Equity & cost recovery
Contractors Technical entry arrangements Contractors
specifications
Turnkey contract Turnkey contract
agreements agreements
Equity & cost CO2 supply and off-take
Equipment procurement Equipment procurement
recovery agreements
agreements agreements
arrangements
Performance
Performance Offshore pipeline guarantees
guarantees SPV
Equipment suppliers Equipment suppliers
Insurance CO2 storage Insurance
policy EOR operator(s) policy
operator(s)
CO2 off-take agreements
Insurers Insurers
53

54. Conclusions: A vicious circle of limited investment
and uncertainty could restrict the development of
CCS transport systems.
 Limited operational experience and significant interdependencies for large scale
CCS systems create significant uncertainties in the potential capacities,
locations, timings and costs.
 Therefore policymakers and wider stakeholders are reluctant to provide now the
support that would underpin large scale CCS deployment in 2030.
 But, optimised transport and storage infrastructure has long lead times and
requires investment and the support and organisation of diverse stakeholders.
 Currently, insufficient economic or regulatory incentives to justify the additional
costs of CCS, and uncertain legal and regulatory frameworks (particularly for
storage) further limit commercial interest from potential first movers.
Efficient and timely investment in transport infrastructure requires :
 much more certainty in the locations, capacities, timing and regulations for
storage, and
 robust and sufficient economic and regulatory frameworks for capture.
54

55. Thank you for your attention.
Feedback welcome to
Harsh.Pershad@element-energy.co.uk
01223 852 496
55