Australian independent Santos is looking to progress its A$210 million (US$151.7 million) carbon capture and storage (CCS) project in South Australia, now it can qualify for Australian Carbon Credit Units (ACCUs).
Santos welcomed the Australian government’s release of its CCS method or the Emissions Reduction Fund (ERF) on Friday, which came a day after the government unveiled A$250 million in fresh funding to help 'turbocharge' the development of CCS Down Under.
In order for a CCS project to qualify for ACCUs under the method, all relevant infrastructure within the project, including capture facilities, pipelines and the storage site or sites, must be located in Australia.
While most emissions-avoidance methods allow for a crediting period of seven years, under the new method, CCS projects will be allowed a crediting period of 25 years to recognise the very large upfront and ongoing costs of the projects, and the fact they are not expected to generate any revenue other than ACCUs.
Santos moving on Moomba
With the release of the method, which came into effect on 29 September, Santos said it would now start the process to apply to register its Moomba CCS project.
Moomba will have the capacity to capture and store 1.7 million tonnes per annum of carbon dioxide under its proposed first phase development plan, with the potential eventually store up to 20 million tpa of CO2 in subsequent development phases.
Santos claims Moomba has the potential to be one of the largest CCS projects globally, as well as one of the lowest cost, with forecast lifecycle cost of just US$24 per tonne of CO2.
Santos chief executive Kevin Gallagher said Friday that, once the project has been registered, the company would then be in a position to make a final investment decision on the A$210 million CCS project.
“CCS will reduce Australia’s carbon emissions and is set to underpin a new, large-scale carbon storage industry for the nation, creating new skilled, secure, well-paid jobs,” Gallagher said.
“The Australian government’s focus on CCS and other low-emission technologies sets Australia up to capitalise on our natural assets and become a carbon storage superpower, building on the position we have established as an energy superpower over more than half a century.”
US supermajor Chevron, which operates the Gorgon CO2 injection project in Western Australia, also welcomed the the government's "recognition of the important role to be played by carbon capture and storage technology".
"The path to our lower carbon future requires a collaborative approach between industry and government to enable new technologies to be developed at scale, tested and continually improved." a Chevron spokesperson told Upstream.
"National leadership combined with industry innovation will help advance the technology required to collaboratively reduce emissions and address climate change."
The Gorgon CCS project has been designed to capture 4 million tonnes of CO2 per annum, however issues with the facility saw its start-up delayed, while continued issues prevented the facility from operating reliably.
The Chevron spokesperson stated Friday the project has so far mitigated more than 5 million tonnes of greenhouse gas emissions since starting up in 2019.
First of its kind
Australia’s Minister for Energy and Emissions Reduction Angus Taylor claims the Australian government is the first globally to award large-scale CCS projects that capture and permanently store carbon underground with tradeable high-integrity units.
Each ACCU earned by a CCS project will represent one tonne of carbon emissions avoided, with projects then able to sell those credits either to the Australian government at bi-annual auctions or on the private voluntary market.
Taylor claimed the new CCS method would help support investment in large-scale CCS projects through a voluntary financial incentive.
“Voluntary incentives, not penalties, are an essential part of our plan to play our part in global efforts to reduce emissions without imposing new costs on Australian households and business,” he stated.
“CCS is a priority under the government’s Technology Investment Roadmap and the new ERF method will incentive emissions reductions from a range of energy-intensive sectors including LNG production, which currently accounts for around 10% of Australia’s emissions.”
Demand for carbon neutral liquefied natural gas cargoes is increasing and Taylor said the CCS method would allow Australia to scale up its “clean” LNG production, while also helping support the production of low emission hydrogen from existing energy sources such as coal or gas.
Australia's Emissions Reduction Fund is a voluntary government scheme that aims to provide incentives for the adoption of new practices and technologies to reduce emissions.
CCS is one of five priority methods being developed in 2021 under the ERF, with the other methods including blue carbon, soil carbon, biomethane or green gas, and plantation forestry.
APPEA backs new CCS method
The body representing Australia’s upstream oil and gas industry, the Australian Petroleum Production & Exploration Association (APPEA) claimed Friday the CCS method under the ERF had the potential to “deliver step-change emissions reductions” for Australia.
“A CCS method under the ERF will encourage more projects, create new jobs and support Australian industries, particularly in regional areas,” said APPEA chief executive Andrew McConville.
“Just as LNG exports are playing an important role in reducing global emissions, CCS in Australia can play an important role in securing the future of Australia’s oil and gas industry in a cleaner energy future.”
McConville also highlighted that the International Energy Agency and the Intergovernmental Panel on Climate Change both see CCS as essential technology in reducing emissions and limiting global temperature rises.
“The world is noticing the opportunity for CCS with 19 projects now operational (10 from oil and gas), including the Chevron-operated Gorgon CO2 Injection Project, which is the largest dedicated CCS project in the world, another four under construction and at least 30 more projects coming on-line in the years ahead,” he added.
“With scale and experience, the cost of CCS will decrease, creating the potential to deliver competitive, large-scale abatement for existing industries and new industries such as hydrogen and ammonia.