- Carbon capture, utilization, and storage have been repeatedly written off as not financially viable.
- Transportation costs for such an effort would be between $11 to $23 per ton of CO2.
- The introduction of dual-fuel diesel-electric vessels altered the landscape for maritime transport in the early 2000s.
- With a 20% increase in efficiency compared to conventional steam turbine vessels, these reduce fuel costs considerably.
- However, there are several challenges which need to be addressed via demonstration projects before ship transport of CO2 can be mainstreamed.
Finding ways to capture carbon emissions, and use or store carbon present both a challenge and an opportunity for the industry, says an article published on Forbes.
How do we achieve this?
Doing so in a way that is both cost-effective and practical will be key to a carbon neutral world. Part of the solution may involve taking advantage of another growth industry: Shipping of liquefied natural gas (LNG) and liquefied petroleum gas (LPG).
Carbon capture, utilization, and storage, or CCUS, has been established as one of the few mitigation strategies that can be relied on for safe and scalable management of carbon. Fundamentally, it consists of three stages:
- The capture of CO2 from a source, such as an industrial plant.
- Its transportation for use or storage.
- Its long-term isolation.
Why is it difficult?
However, the sources of carbon aren’t typically close to the sinks, thereby raising the cost and making it challenging to scale up operations. Pipelines have traditionally been used to bridge this gap, but high capital expenditures and the threat of sunk costs present a significant financial risk for distances over 100 miles, often rendering projects infeasible, especially in the case of offshore pipelines.
How will shipping help?
This is where shipping comes in. Transporting CO2 via dual-purpose ships presents an opportunity for both eliminating the cost of operating an empty vessel on its return trip and providing a cost-effective way to move CO2 from where it is produced and captured to where it can be used or stored.
Why is CCUS not financially viable?
Carbon capture, utilization, and storage have been repeatedly written off as not financially viable. However, an International Energy Agency estimate for the 2°C scenario – that is, for efforts to keep warming at or below 2°C above pre-industrial temperatures – has determined that CCUS must account for sequestering about six gigatons of CO2 per year by 2050. To sequester this quantity of carbon we would require a sink that is 6,000 times the area of the North Sea’s Sleipner gas field and a pipeline network 120 times longer than current enhanced oil recovery pipeline capacity in the US. Transportation costs for such an effort would be between $11 to $23 per ton of CO2.
How will ship transport flexibility help?
The flexibility of ship transport provides an opportunity for CO2 capture from multiple clusters, allowing parallel development of projects of different scales and terms. More importantly, it allows capture from low-cost high-purity capture sources such as ammonia plants, hydrogen production facilities, and refineries.
CO2 can be transported economically over long distances using ships while retaining the flexibility to route the delivery to different locations. This can be especially beneficial for CO2 -based enhanced oil recovery, where uncertainties often exist around the timeline for deploying capture technologies and the need for CO2 at the sink depends on the lifetime of the well.
Dual-Purpose Carriers
Several small dedicated CO2 ships currently serve enhanced oil recovery and other industrial applications. However, significantly larger carriers will be required to transport greater volumes for CCUS to work at scale. CO2 shipments, interestingly, have similar cargo conditions to that of the semi-refrigerated liquefied petroleum gas (LPG) or liquefied natural gas (LNG) carriers operating today. An excellent business opportunity presents itself in the form of dual-purpose carriers: ships that transport hydrocarbons could carry captured CO2 on their return journey, allowing the CO2 to be used for enhanced oil recovery at the original production site.
Like other carbon management processes, a key difference between conventional transportation of LPG or LNG vs. that of CO2 lies in the commercial profitability; while the former are valuable products, CO2, despite its industrial value, is largely considered a waste product. By using it for enhanced oil recovery, carbon gains an end-of-use business value and at the same time provides a use for the vessel on its return journey when it would have otherwise returned empty. This makes the transportation cost of the CO2 delivery almost free.
How is CCUS a radical turning point?
With fuel costs making up about 60% of operational expenses, an empty vessel on the return journey is unquestionably a lost economic opportunity, as charter costs, port charges, insurance, wages, canal costs, and brokerage fees have to be paid nonetheless. Fuel consumption for a cargo-free vessel is only about 25%-30% less than that for a laden vessel. Consider a 250,000 m3 LNG vessel that consumes about 220 tons of fuel per day. If we were to use this vessel and forgo the 30% reduction in fuel consumption by loading it with CO2 – at $440 per ton for bunker fuel and assuming a one-way journey of two weeks – we could be transporting more than 300,000 tons of CO2 at $1.4 per ton. Moreover, from a logistical perspective, CO2 is often produced at points close to LNG offloading (at refineries or chemical plants in close proximity) and the CO2 demand for enhanced oil recovery is close to sources of natural gas. At this transportation price, logistical convenience and with the added value of enhanced oil recovery, we are looking at a radical turning point for CCUS.
How will this result in cost reduction?
Previous scoping studies have analyzed potential shipping routes across the world and have provided estimates for the economics of dedicated CO2 shipping (without dual-purpose ships). A study by the IEA Greenhouse Gas R&D Program estimated the cost of ship transport over 125 miles-7,500 miles at between $18 and $58 per ton of CO2. Studies elsewhere have found similar costs – from between $8 and $14 per ton in the United Kingdom for pre-pressurized CO2, and $42 per ton from Norway to the North Sea. However, these estimates do not take into account the cost implications of the sulfur content cap enforced by the International Maritime Organization starting in 2020. These studies have also demonstrated that for low volumes of CO2 (up to 10 million tons/year) shipping becomes competitive with pipelines at distances between 93 miles and 435 miles, while the breakeven distance is approximately 900 miles for higher volumes (about 30 million tons/year).
The introduction of dual-fuel diesel-electric vessels altered the landscape for maritime transport in the early 2000s. With a 20% increase in efficiency compared to conventional steam turbine vessels, these reduce fuel costs considerably.
Mor Cost Saving
Other advantages include lower maintenance costs, minimum hull space requirements that allow more room for revenue-earning cargo and the high flash point of diesel, which reduces the risk of accidents. Some of the above-mentioned cost ranges for dedicated CO2 shipping also take into account the cost advantage of dual-fuel diesel-electric vessels. It is true that these estimates are founded on project-specific assumptions and conditions. However, it is evident that CO2 transport via ships becomes cost competitive over long distances and low volumes.
In some cases, even shorter distances are cost efficient depending on the scale of transport. Using the experience of a mature industry with a fairly unblemished safety record and leveraging acquired industry experience along with existing port infrastructure and services, transporting CO2 over long distances in combination with LNG gets rid of two crucial CCUS bottlenecks: high costs over the large source-to-sink distances and the need to develop dedicated infrastructure.
Addressing Issues
However, the need to optimize the entire supply chain, address the lack of regulatory support for ship transport of CO2 and establish focused incentives for transportation all need urgent attention. In addition, environmental legislation to check that carbon continues to be produced as a byproduct and not a feedstock, storage regulations, insurance mechanisms, and monitoring and reporting health and safety issues in the work environment will need to be tackled. Overcoming infrastructural challenges that may be imposed by existing ports, along with the readiness of LNG facilities to handle CO2 without corrosive damage or elaborate infrastructural overhauls, will be crucial to scaling up projects.
To address each of these, several demonstration projects will be required before ship transport of CO2 can be mainstreamed. When developing a CO2-LNG transport fleet, the shipping industry’s environmental footprint will need to be assessed and minimized, since maritime emissions contribute about 3% of global emissions, and if left unchecked, could multiply 250% by 2050.
Policies for CO2 sequestration
In the U.S., tax code 45Q provides a credit for CO2 sequestration: $50 per ton credit for geological storage, and $35 per ton for enhanced oil recovery. Can a dedicated transportation tax credit transform the landscape for carbon capture and utilization? This transportation tax credit should also recognize the distinction between the volume and scale of CO2 that can be profitably transported by ship vs. pipelines.
Outside the U.S., regulations under the London Protocol, the European Union Emissions Trading system and international laws such as the United Nations Convention on the Law of the Sea, the International Maritime Organization’s Safety of Life at Sea and IGC code that currently limit or prohibit ship-based CO2 transport for CCUS will need considerable amendments.
More Challenges for China & India
Policy development will prove particularly challenging for countries like China and India, whose carbon emissions are expected to accelerate rapidly in the next few years. However, if incentives are dedicated toward early and rapid implementation of ship-based CO2 transport, CCUS deployment will boost emissions reduction for these high emitters.
As the momentum for carbon management builds, there is a distinct window of opportunity provided by the transport of CO2 via ships. Will a policy overhaul get us on board?
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Forbes
