A $100 billion price tag on US supermajor ExxonMobil’s proposed carbon capture and storage hub along the Houston Ship Channel requires cooperation from both public and private sectors, but in such an early stage, details of the project are yet to be released.
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While the proposed hub has the potential to produce significant progress in the carbon capture needs of US climate goals, the plan’s lack of details raises questions about how the project can be economically feasible.
ExxonMobil said in its investor presentation last week that it plans to reduce its CCS costs by a third by 2030, but the company has not shared specifics of what its estimated costs are, which is key to calculating the costs of such a project. Instead, the company pointed Upstream to the National Petroleum Council.
The privately funded NPC, created to advise the US government, published a 2019 report detailing what the US needed to do to address the growing demand for energy and to reduce carbon emissions. The report estimated the cost of CCS from $46 per tonne to $107 per tonne, depending on the source of the carbon.
A 2020 report from research firm Thunder Said Energy founder Rob West said in best-case scenarios, CCS processes cost between $60 and $80 per tonne, but he emphasized the size of the project as a defining factor in its economic success.
“Carbon capture is inherently a scale business,” West told Upstream. “You need to amortise the costs of the pipelines and disposal facilities over very large volumes.”
West’s report clarified projects that inject ideally 4 million to 5 million tpa are more likely to be viable. ExxonMobil’s hub intends to capture up to 100 million tpa by 2040.
“This singular project is substantially larger than any other project currently envisioned,” said Jeff Erikson, general manager of client engagement with the Global CCS Institute.
But Erikson said this project is still just a small portion of the total amount of CO2 that is needed to meet Paris Agreement targets by the middle of the century. The NPC found that the US would need a CCS industry capturing 500 million tpa by about 2045 to meet climate goals.
A third peg in the foundations of the project is the companies that agree to work with ExxonMobil and source the CO2. The oil giant has not announced any partners yet, but said it is currently establishing those connections.
“We are in very early discussions with policymakers and potential industry partners,” an ExxonMobil spokesperson told Upstream. “The idea now is to engage with 50 of the largest industrial facilities near the Houston Ship Channel to determine their interest in the project.”
Erikson said the hub model ExxonMobil has proposed reduces cost and risk for those companies, but further action could be taken to make the project, and other CCS projects, more attractive. The government establishing a price on carbon and providing more incentives, past the current 45Q tax credits, are examples.
Section 45Q of the US tax code incentivizes carbon capture deployment by providing a performance-based tax credit for carbon capture projects.
To claim the credit, a project must have securely stored the captured CO2 in a geologic formation; or beneficially used the CO2 as a feedstock to produce fuels, chemicals, and concrete in a way that reduces emissions as as defined by federal requirements.
“ExxonMobil has the technical and financial capabilities to take the lead on this, and we are glad to see them stepping up,” Erikson said. “But they will require many partners in both business and government to make this project go.”
