Jeff Gustavson’s vision for Chevron New Energies is as expansive as the view from the 47th-floor meeting room he has chosen in the US supermajor’s downtown Houston office tower for a discussion about the company’s carbon-cutting ventures.
Gustavson, president of the New Energies business since August 2021, speaks enthusiastically about the company’s energy-transition projects in the US, including the Talos Energy-operated Bayou Bend carbon capture and storage project in Texas and hydrogen production at its Richmond Refinery in California.
Chevron has estimated it will invest more than $10 billion by 2028 in lower-carbon technologies, and Gustavson is especially keen on CCS for industrial clusters.
"Texas-sized" projects
In the Houston area alone, he tells Upstream: “You’ve got a lot of industry, and you can see them out this window. There’s a lot of opportunity to share in some of the capture equipment that can be deployed.
“This is about lowering the cost, minimising the environmental footprint” — and developing the CCS infrastructure, including new facilities, pipelines and carbon dioxide storage sites. So I see all of that coming together.”
Gustavson estimates the carbon capture potential of industrial emissions on Texas’ Gulf of Mexico coast exceeds 100 million tonnes per annum of CO2.
ExxonMobil has thrown down the gauntlet in Houston with what it calls “a Texas-sized proposal for reducing carbon emissions” by developing a multi-stakeholder CCS “innovation zone”, part of a wider push by US oil and gas companies to decarbonise heavy industry after the US government’s Inflation Reduction Act last year improved the financial potential of a CCS market.
Gustavson, 49, counts Bayou Bend CCS as one of Chevron New Energies’ “foundational projects”, with total potential CO2 sequestration capacity of 225 million to 275 million tonnes.
The project, on an industrialised stretch of the Texas coast near Beaumont and Port Arthur, will use carbon capture technology Chevron is piloting in California’s San Joaquin Valley.
Gorgon challenge
Chevron already has experience as the operator of one of the world’s largest CCS projects — the Gorgon CCS facility in Australia, which has sequestered more than 6 million tonnes of carbon dioxide since 2019, Gustavson says.
There have been hitches there and Gustavson acknowledges that the Gorgon project is now sequestering CO2 at a run rate of 2 million tpa, about half its estimated injection capacity.
“We’re working through some technical and other challenges, which is not to be unexpected with any of our developments, traditional or new,” he says.
While Gorgon has provided valuable experience for building new carbon capture, utilisation and storage projects around the world, “unfortunately, some have used some of the challenges that we’ve worked through to condemn CCUS as a sector”, he says.
“We could not disagree with that more."
Chevron New Energies also considers decarbonisation of the Richmond Refinery in the San Francisco Bay area another foundational project.
Grey to green
Chevron produces 1 million tpa of hydrogen, Gustavson notes, including “very large volumes” at the refining complex.
However, the hydrogen produced at the Richmond facility is considered “grey” because it does not yet use carbon capture to abate emissions.
The company is considering CCS for the refinery’s hydrogen production facilities, building out a hydrogen retail network and connecting with heavy transport and power customers in California.
“We’re looking at growing our production of lower-carbon and no-carbon hydrogen,” Gustavson says.
The company is working with Japanese hydrogen supplier Iwatani to build 30 hydrogen fuelling sites in Northern California by 2026 that will use hydrogen produced at the Richmond Refinery.
Chevron also recently announced plans with Hyzon Motors and renewable fuels company Raven SR to develop a facility in Richmond to produce hydrogen from landfill waste, with commercial operations expected to start in the first quarter of 2024.
The Bayou Bend CCS project is targeting first injection in late 2025, and other foundational projects are working towards final investment decisions around mid-decade, although timelines can be somewhat unpredictable.
“It is not as straightforward as putting a well pad in the Permian and drilling six wells off of that,” says Gustavson, who before taking the New Energies post was vice president of Chevron’s North America upstream business, including the Permian basin.
Obtaining federal permits for Class VI wells, as injection wells for CO2 sequestration are known, is time consuming, and a backlog of applications could lead to longer wait times.
Several states are following the lead of Wyoming and North Dakota and pushing for a state Class VI permitting authority, but even that process could take several years.
The permit process for new pipelines or existing facility upgrades could also be slow, and construction could extend timelines by several more years, he says.
Moreover, the profitability of low-carbon initiatives remains largely unproven. But Gustavson is hopeful.
In addition to government incentives, such as the Inflation Reduction Act’s increase of the 45Q tax credit from $50 per tonne of CO2 captured and stored to $85 per tonne, private-sector businesses that have made low-carbon pledges will be willing to pay for CCS as a service, he says.
“The future is lower carbon,” Gustavson says.
“Large industrial emitters are very, very interested in what they can do to lower their carbon footprint. Now, we have to work through what is the best, lowest-cost way to get that done.”
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