Summit chief confident of future for Captain

By Terry Slavin, Edinburgh
@tslavinm, www.upstreamonline.com

September 20, 2013 – The backer of the Captain carbon capture and storage project at Grangemouth in Scotland is confident the project can proceed without direct funding from the UK government if tariff support can be made attractive enough. Eric Redman, chief executive of Seattle-based Summit Power, told a conference on North Sea carbon dioxide storage in Edinburgh that Captain remains among the world’s “most deliverable” CCS projects on a large power plant, despite losing out in the UK CCS competition. Summit, which is partnered by Petrofac and National Grid, plans to develop Captain as a copy of its government-backed Texas Clean Energy Project (TCEP) in the US. The TCEP is nearing financial closure on a scheme in the Permian basin that will capture 90% of its CO2 emissions and supply CO2 to the Texas oil industry, boosting production by 7 million barrels per annum.

In January, Summit’s director of project finance Chris Tynan had said winning the UK CCS competition was vital to Captain but Redman said the UK government’s plans to award a tariff to clean energy producers could make Captain viable, depending on the level at which it is set. Under the scheme, producers will negotiate a price for their power with government, which will pay the difference between that amount and the market price. He also expects Captain to benefit from a significant amount of credit from China’s Export-Import Bank, which is providing 100% of project debt to the Texas scheme. Redman said the financing deal for TCEP came after Sinopec Engineering Group was awarded engineering, procurement and construction contracts — a similar arrangement could be replicated in Scotland if Captain goes ahead.

Grangemouth is one of four copycat projects Summit is developing, including one more in Texas, where it has already secured contracts to sell all of the CO2 TCEP is expected to produce for the next 30 years, at a price higher than it will get for selling the electricity. “We’ve found that contractors, investors and lenders are more interested if you can show there will be a series of projects, not just a one-off,” he said.“Everyone takes risks on a first project and want to offset that.” He said thousands of hours of engineering that went into TCEP would not have to be replicated. Captain will not earn money from producing urea and sulphuric acid as well as power, something that helps TCEP’s business plan, but will be “simpler”, Redman said.He also pointed out that it will not depend on building a CO2 pipeline, as there is an existing gas pipeline between Grangemouth and St Fergus that consortium partner National Grid plans to convert.

The project would earn money from the carbon market for sequestered CO2, and could get enhanced oil recovery revenues in future. In its bid to the UK Department of Energy & Climate Change (DECC), Captain planned to store 3.8 million tonnes per annum of CO2 in the Captain aquifer. Captain and another contender, Progressive Energy at Teesside, are still on DECC’s “reserve” list if preferred bidders, Shell and SEE’s Peterhead project at Peterhead and White Rose in Yorkshire, fail to negotiate a deal. However, Redman said Captain is looking at other storage options outside the DECC competition. “Assuming Goldeneye [Shell’s field, which will be used to store CO2 from Peterhead] goes forward, our pipeline runs close to that project. We might start to cluster [storage sites],” he said.