Final report for One North East And NEPIC 21/12/10 - The Carbon ...

The case for a Tees CCS networkFinal ReportMark „push‟ factors – these relate to economic factors driving emitters to investin capture plant at their installations. This includes consideration of the value atrisk (as highlighted previously), other incentives (such as demonstration projectfinancing), wider Government targets to decarbonise the UK economy, and thecapacity of CCS to attract new businesses and investments in the region (such ascarbon intensive businesses which face exposures in other parts of the EU absentof a CCS network);Market „pull‟ factors – these are more challenging to identify and have not beenreviewed in depth within this study. They could include the use of captured CO 2for enhanced oil recovery (EOR) in the southern Central North Sea, the attendantenergy security and tax revenues this could deliver for Government, and strategicinterests to North Sea operators to gain experience in offshore EOR and defer thecosts of decommissioning North Sea oil & gas infrastructure.Teesside is in a good position to bring all of these factors into play. CO 2 is already asignificant driver for investment decisions for the carbon intensive businesses in the TeesValley and this is expected to grow in the next five to ten years and beyond. 44 The value atrisk from carbon pricing outlined previously suggests around £8 billion could be at stake inthe region to 2020 (Figure 3; Figure 4). A further £1-2 billion could be available from grantfinancing of CCS demonstration projects from the UK Government and EU fundingsources. New inward investment is an unknown quantity, but could be worth several billionout to 2025 if CCS can attract new business.Furthermore, the technologies involved in CO 2 capture – gas separation, compression andtransport – are familiar technologies to many of the large CO 2 emitters on Teesside. ManyTeesside operators have access to capital for investment (either because they operatecash generative businesses or have excellent credit ratings) and already operate withinchallenging health, safety and environmental performance management systemsassociated with these technologies. Extension to CCS will require a degree of „up-skilling‟but is unlikely to require a shift in working culture or practices for those used to workingwithin the chemical/process industries or their regulators.On the market pull side, if Teesside‟s current emissions could be used for EOR, severalmillion barrels of oil per year could be extracted from the Central North Sea, potentiallyadding up to several billions of pounds to the UK economy, depending on the oil price andproject lifetime.In addition, the region has midstream capabilities to deliver the shared infrastructure thatwould be needed. Businesses in Teesside already share pipeline infrastructure (for steam,hydrogen, oxygen and wastes), so corporate capacity to develop appropriate contractualstructures is already present. This existing institutional capacity could unlock the potentialfor commercial organisations to own and operate capture, transport and storageinfrastructure, without the need for excessive public intervention or oversight. Takentogether, these competencies could facilitate CCS deployment in Teesside as and whenrequired.In the context of a CCS demonstration programme providing one or more „Anchor‟projects, a value chain for a CO 2 pipeline network is shown in Figure 6, which highlightsmarket „push‟ and „pull‟ factors.44 Result taken from a survey of local stakeholders for this project. See Appendix I16