Development of long-distance and large-scale carbon capture and storage (CCS) value chain using liquefied CO2 ship transportation

Daein Cha

doi:10.1071/EP23085

RESEARCH ARTICLE (Open Access) (Non peer reviewed)

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Development of long-distance and large-scale carbon capture and storage (CCS) value chain using liquefied CO₂ ship transportation

Daein Cha ^A ^*

+ Author Affiliations

- Author Affiliations

^A deepC Store Pty Ltd, Level 8, 167 St Georges Terrace, Perth, WA 6000, Australia.

With over 25 years of energy and resources industries experience and through senior roles for international business development, major capital project management, and commodity sales and trading at Tokyo Gas and Chevron, Daein Cha brings extensive expertise, experience and network to originate and develop multi-billion dollars industrial projects. Daein is currently the Director of Transborders Energy (mid-scale gas resource commercialisation company) and Managing Director of deepC Store (commercial scale CCS project developer). Daein received his Bachelor’s degree in management from the International Christian University (Japan), Master’s degree in business administration from the University of Virginia Darden School of Business, and qualification as Certified Cost Professional of AACE International. Daein is also a certified member of the Association of International Energy Negotiators and the Society of Decision Professionals.

^* Correspondence to: getintouch@deepcstore.com

Australian Energy Producers Journal 64 S119-S124 https://doi.org/10.1071/EP23085

Accepted: 5 April 2024 Published: 16 May 2024

© 2024 The Author(s) (or their employer(s)). Published by CSIRO Publishing on behalf of Australian Energy Producers. This is an open access article distributed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND)

Abstract

Carbon capture and storage (CCS) is central to clean energy transition. Globally, potential aggregated carbon dioxide (CO₂) storage resource capacity is ~13,000 billion tonnes. Assuming global greenhouse gas emissions of 51 billion tonnes per annum, CO₂ storage capacity equates to 250 years of global emissions reduction. While there is significant momentum to deploy CCS technology for meeting Paris Agreement targets, the key challenge for offering CCS to all industrial sectors is that many major CO₂ emission sources are located hundreds of kilometres away from geological storage sites. To address this key challenge, there is a need to develop a long-distance and large-scale CCS value chain that utilises liquefied CO₂ (LCO₂) ship transportation. This paper discusses key technical, commercial, and regulatory considerations that must be addressed in parallel for developing such a CCS value chain. More specifically, it will cover the following: (1) technical – CO₂ liquefaction condition, CO₂ supply specification and LCO₂ ship parcel size; (2) commercial – business model (ownership of CO₂ retained by emitters or transferred to CCS project proponent), CO₂ supply or CCS facility lease terms and conditions; and (3) regulatory – domestic versus transboundary projects and associated needs for policy and legislative underpinning.

Keywords: carbon capture storage, carbon capture storage Asia Pacific, carbon capture storage Australia, CCS, CCS APAC, CCS Asia Pacific, CCS Australia, floating CCS hub, liquefied CO₂ ship transport.

Context

Carbon capture and storage (CCS) is central to clean energy transition. Globally, potential aggregated geological carbon dioxide (CO₂) storage capacity is ~13,000 billion tonnes (Global CCS Institute 2021). Assuming annual global emissions of 51 billion tonnes (Gates 2021), storage capacity equates to 250 years of global emissions reduction.

The key challenge for CCS is that many emission sources are located hundreds of kilometres away from geological storage sites. To address this, the author proposes to develop long-distance, large-scale CCS value chains utilising liquefied CO₂ (LCO₂) ship transportation. Regarding cost comparison of transportation, the Japanese Government highlights that (Japan’s Ministry of Economy, Trade & Industry (METI) 2022a):

(1) upon exceeding 200 km, transportation via LCO₂ shipping can be lower cost than that by pipelines;
(2) technical capability to manage low pressure (LP typically around 7 bar, −49°C) conditions for LCO₂ ship transportation is essential.

Key technical considerations

Liquefaction conditions

LCO₂ can be transported under three pressure regimes:

(1) LP;
(2) medium pressure (MP around 19 bar, −25°C);
(3) high pressure (HP around 75 bar, 10°C).

As pressure increases, tank wall thickness increases relative to tank size. This increases unit cost due to increased tank wall thickness and quantity of steel required for the pressure increase.

CO₂ liquefaction conditions will influence design, cost, and operations of the entire value chain:

(4) Onshore facilities: affects liquefaction facility and storage tanks;
(5) LCO₂ ship: affects storage tanks and hull;
(6) CO₂ injection facilities: affects storage tanks and CO₂ conditioning equipment.

It is also noted that:

(7) For LP and MP conditions, concentration of light ends (H₂, CH₄, N₂, Ar, CO, C₂) in the bulk liquid is reduced to levels that match the actual solubility in LCO₂, resulting in a higher purity CO₂ fluid. The author highlights (deepC Store Pty Ltd 2023):
1. supplier of CO₂ (CO₂ Supplier) and CCS project proponent need to agree on how to manage Boil Off Gas (BOG) of light ends immediately post liquefaction;
2. light ends that remain soluble will not be removed.
(8) For HP conditions, no BOG management is expected since light ends will not drop out of the CO₂ fluid (deepC Store Pty Ltd 2023).

CO₂ supply specifications

Philosophies

The following considerations are proposed:

(1) follow industry norms to ensure compatibility with the emerging LCO₂ shipping industry;
(2) ensure that no risk to CCS facility integrity or health, safety and environment (HSE) risks are introduced;
(3) maximise flexibility such that:
1. cost of CO₂ capture is minimised;
2. venting and downtime is minimised;
3. all components are detectable and measurable with reasonable accuracy.

Specification prior to liquefaction

Specification for the three liquefaction conditions (LP, MP, HP) is identical, with CO₂ limit expected to be ≥95% (deepC Store Pty Ltd 2023).

Specification post liquefaction

Provided specification is adhered to prior to liquefaction, there is no requirement for compositional control post liquefaction (deepC Store Pty Ltd 2023).

LCO₂ ship parcel size

Context

Determining ship parcel size is a key design decision due to its impact on design, cost, and operation of the entire value chain:

(1) onshore facilities: affects storage tanks and offloading facilities;
(2) LCO₂ ship: affects storage tanks and hull;
(3) CO₂ injection facilities: affects loading facilities and storage tanks.

Key considerations

Key premises for ship transportation are:

(1) LCO₂ is delivered in full cargoes;
(2) entire unloading process per ship occurs within 24 h.

The following considerations are proposed to optimise unit cost while balancing operability:

(3) number of CO₂ Suppliers and annual offtake volumes from each;
(4) distance between CO₂ Suppliers and CO₂ injection site;
(5) number of LCO₂ ships and average ship utilisation rate;
(6) utilisation rate and storage tank size of CO₂ loading facility;
(7) standardisation of LCO₂ ship design.

Key commercial considerations

Context

Currently, 230 Million Tonnes per Annum (MTPA) of CO₂ are used by fertiliser industry, etc. (International Energy Agency 2019). This equates to >1% of annual global emissions. Setting aside CO₂ being used, captured CO₂ has limited commercial value. Instead, value is derived from the following regulatory constructs that allow for monetary value generation (Association of International Energy Negotiators 2024):

(1) carbon tax;
(2) ‘cap and trade’ market-based mechanism;
(3) tax credit;
(4) subsidy for CCS activities.

Risks and opportunities across the CCS value chain

Key risks and opportunities are summarised in Table 1.

Table 1.Key risks and opportunities across the CCS value chain.

Key risks and opportunities		Description
Risks	Cost/schedule overrun and performance risks	Risk of overrun of EPC schedule and/or cost; risk of achieving performance threshold within and outside the warranty period from EPC handover
	Delivery/offtake risks	Risk of meeting annual CCS contract volume and/or agreed CO₂ specification
	Asset damage/loss risks	Risks of asset damage or loss due to force majeure (FM) or non-FM event(s) during EPC and operation
	Payment risks	Failure of counterparties to pay agreed fees
	CO₂ price risk	Risk of carbon credit market price fluctuation relative to CCS contract price and/or failure of carbon credits to be obtained (where relevant)
	Environmental liabilities	Remediation and third party liability obligation for CO₂ leakage/release
	Decommissioning liabilities	Obligation to decommission facilities after completion of operation
	Long term sequestration liability	Perpetual obligation to keep CO₂ geologically sequestered
Opportunities	Under-run of EPC schedule and/or cost	Opportunity to deliver CCS facility under budget and/or earlier than planned
	Excess CCS volume/capacity	Opportunity to capture and store more than annual CCS contract volume
	CO₂ price upside	Opportunity of carbon credit marked price fluctuation relative to CCS contract price
	Residual value of facilities after initial contract duration	Opportunity to continue CCS activities beyond initial CCS contract duration

Business models

Key risks and opportunities need to be addressed through suitable allocation to parties best positioned to manage them, contractual arrangements to clarify associated terms and conditions, and risk mitigations and remedies by parties managing them. The decision on ‘who owns the CO₂ injected’ (CO₂ Supplier or CCS project proponent) is also important.

Table 2 compares two business models based on allocation of key risks and opportunities between CO₂ Supplier and CCS project proponent.

Table 2.Assessment of key risks and opportunities allocation based on who owns the CO₂ injected.

Key risks and opportunities		Business models				Notes
		CO₂ ownership retained by CO₂ supplier		CO₂ ownership transferred to CCS project proponent
		CO₂ supplier	CCS project proponent	CO₂ supplier	CCS project proponent
Risks	Cost/schedule overrun and performance risks	Risk owner for CO₂ capture scope	Risk owner for transportation and storage scope	Risk owner for CO₂ capture scope	Risk owner for transportation and storage scope	No difference in risk allocation nor contractual arrangement between business models
	Delivery/offtake risks					While there is no difference in risk allocation nor contractual arrangement between business models, the owner of the CO₂ will be held liable by the government(s) for fulfilling annual CCS volume and meeting agreed CO₂ specification
	Asset damage/loss risks					No difference in risk allocation nor contractual arrangement between business models
	Payment risks	Risk of cost recovery for CO₂ capture scope	Risk of cost recovery for transportation and storage scope	Risk of cost recovery for CO₂ capture scope	Risk of cost recovery for transportation and storage scope
	CO₂ price risk	Subject to price mechanism	Subject to price mechanism	Subject to price mechanism	Subject to price mechanism
	Environmental liabilities	Risk owner for CO₂ capture scope	Risk owner for transportation and storage scope	Risk owner for CO₂ capture scope	Risk owner for transportation and storage scope	While there is no difference in risk allocation nor contractual arrangement between business models, the owner of the CO₂ will be held liable by the government(s) for fulfilling obligation when CO₂ leakage/release occurs.
	Decommissioning liability	Risk owner for CO₂ capture scope	Risk owner for transportation and storage scope	Risk owner for CO₂ capture scope	Risk owner for transportation and storage scope	No difference in risk allocation nor contractual arrangement between business models
	Long-term sequestration liability (post CCS operation completion)	Risk owner	–	–	Risk owner	Until the obligation is transferred to the relevant government, the owner of the CO₂ is liable.
Opportunities	Under-run of EPC schedule and/or cost	Potential beneficiary for CO₂ capture scope	Potential beneficiary for transportation and storage scope	Potential beneficiary for CO₂ capture scope	Potential beneficiary for transportation and storage scope	No difference in risk allocation nor contractual arrangement between business models
	Excess CCS volume/capacity	Beneficiary	Beneficiary	Beneficiary	Beneficiary
	CO₂ price upside	Subject to price mechanism	Subject to price mechanism	Subject to price mechanism	Subject to price mechanism
	Residual value of facilities after initial contract duration	Beneficiary	Beneficiary	Beneficiary	Beneficiary

Key policy and regulatory considerations

Business conditions were assessed by leveraging IEA’s assessment categories for CCS policy and regulatory mechanisms (International Energy Agency 2023):

(1) Enabling legislation and rules: legal basis for effective stewardship of CCS activities.
(2) Cost reduction measures: government grants, loans, and tax credits; can also refer to involvement of State Owned Enterprises (SOE) and/or government equity investment.
(3) Carbon pricing measures: price on carbon for incentivising CO₂ emitters to reduce emissions.
(4) Strategic signalling by government: policies highlighting CCS as a strategic area of interest.

Assessment result is shown in Table 3:

Table 3.Assessment of CCS business conditions across key jurisdictions.

	EU	USA	Australia	Malaysia	Indonesia	Japan
Enabling legislation and rules	●	●	●	●	●	▲
Cost reduction measures	●	●	▲	●	●	▲
Carbon pricing measures	●	▲	▲	▲	▲	▲
Strategic signalling by government	●	▲	▲	▲	▲	●

● Sufficient measures in place.

▲ Measures insufficient.

Assessment basis is:

(1) Enabling legislation and rules
1. EU: CCS Directive establishes the EU legal framework (International Energy Agency 2023).
2. USA: legislation implemented at Federal and State-level (Global CCS Institute 2023).
3. Australia: Australia has highly advanced legal and regulatory regimes at Commonwealth and State-level (Global CCS Institute 2023)
4. Malaysia and Indonesia: legal frameworks established (Global CCS Institute 2023).
(2) Cost reduction measures
1. EU: Innovation Fund awarded over EUR 1.7 billion to 15 projects with a CCUS component since 2020 (International Energy Agency 2023).
2. USA: Infrastructure Investment and Jobs Act (IIJA) provides approximately USD 12 billion for CCUS through 2026 (International Energy Agency 2023). 45Q tax credit provides projects with significant tax credits. IIJA also establishes USD 2.1 billion CO₂ Transportation Infrastructure Finance and Innovation Act program to provide loans, loan guarantees and grants to CO₂ transportation projects (International Energy Agency 2023).
3. Australia: Carbon Capture Technologies Program supports research and devlopment to capture and use CO₂, providing AUD 65 million between 2023 and 2031 (Australian Government DISR 2023). Powering the Regions Fund grant could support CCS (Australian Government DCCEEW 2023).
4. Malaysia: Petronas (SOE) took FID on Kasawari CCS (3.3 MTPA capacity) in 2022 (Association of International Energy Negotiators 2024). Petronas signed a Memorandum of Cooperation with Japan’s METI and Japan Organisation for Metals and Energy Security (JOGMEC) to strengthen collaboration on transboundary CCUS (Association of International Energy Negotiators 2024).
5. Indonesia: Pertamina (SOE) signed preliminary agreements with ExxonMobil and Chevron to develop its own CCS hub (Association of International Energy Negotiators 2024).
6. Japan: In 2023, JOGMEC announced seven projects (two with overseas storage) to provide funding support (JOGMEC 2023). Japan’s CCS Long Term Roadmap considers ongoing funding support to achieve ‘operation ready’ status for total 6–12 MTPA CCS capacity by 2030, though details not announced (Japan’s Ministry of Economy, Trade and Industry (METI) 2022b).
(3) Carbon pricing measures
1. EU: EU ETS applies to all EU countries plus Iceland, Liechtenstein, and Norway (International Energy Agency 2023).
2. Australia: Introduced ETS system via its Safeguard Mechanism reform (International Energy Agency 2023).
(4) Strategic signalling by government
1. EU: EU’s Net Zero Industry Act proposes to set an EU-wide goal to achieve CCS capacity of at least 50 MTPA by 2030 (International Energy Agency 2023).
2. Japan: CCS Long Term Roadmap aims to achieve ‘operation ready’ status for total capacity of 6–12 MTPA by 2030, and 120–240 MTPA by 2050 (Japan’s Ministry of Economy, Trade and Industry (METI) 2022b).

Key considerations for enabling transboundary CCS

The following actions are required among nations to enable transboundary CCS:

(1) Deposit a unilateral declaration on the provisional application of 2009 Amendment to Article 6 of the London Protocol (International Maritime Organization 2019). To date, seven countries (Denmark, South Korea, Netherlands, Norway, United Kingdom, Belgium, and Sweden) have deposited this declaration (Global CCS Institute 2023).
(2) Execute a bilateral agreement including allocation of responsibilities, consistent with the London Protocol and other applicable international law. To date, Belgium and Denmark entered into a memorandum of understanding for CO₂ transportation (Global CCS Institute 2023), Norway, France, Germany, Poland, and Sweden are taking steps to formalise agreements (Global CCS Institute 2023).

Conclusion

Developing large-scale CCS value chains underpinned by LCO₂ ship transportation is essential for resolving the key challenge of distance between the emission sources and geological storage sites and fully unlocking the potential to offer CCS to all industrial sectors.

Ongoing collaborative effort is needed among regulators, CO₂ Suppliers and CCS project proponents to address key technical, commercial, and regulatory considerations for enabling domestic and transboundary CCS value chains.

Data availability

The author confirms that the data supporting the findings of this study are available within the paper and references cited herein.

Conflicts of interest

The author works for deepC Store Pty Ltd, an Australian company that currently develops ‘CStore1,’ a commercial scale CCS project in offshore Australia that uses the LCO₂ ship transportation and the ‘Floating CCS Hub’ development concept.

Declaration of funding

This research did not receive any specific funding.

Acknowledgements

The author would like to acknowledge members of deepC Store Pty Ltd and members of deepC Store Pty Ltd’s partners (CStore1 Partners) for their input and support to co-develop the ‘Floating CCS Hub’ development concept for deployment in offshore Australia. The CStore1 Partners are (in alphabetical order) ABL Group, Commonwealth Scientific and Industrial Research Organisation, JX Nippon Oil & Gas Exploration Corporation, Kyushu Electric Power, Mitsui OSK Lines, Osaka Gas, Osaka Gas Australia, Technip Energies and Toho Gas. deepC Store Pty Ltd also thanks PGS ASA, Azuli International Ltd and Azuli (Australia) Pty Ltd for their support.

References

Association of International Energy Negotiators (2024), White Paper Carbon Capture, Use and Storage (CCUS) Opportunities and Implications for the AIEN. Available at https://www.aien.org/wp-content/uploads/2024/03/AIEN-CCUS-Whitepaper.pdf

Australian Government DCCEEW (2023) Carbon Capture, Use and Storage – Government Programs. Available at https://www.dcceew.gov.au/climate-change/emissions-reduction/carbon-capture-use-storage

Australian Government DISR (2023) Grant Opportunity Guidelines Carbon Capture Technologies Program. Available at https://business.gov.au/grants-and-programs/carbon-capture-technologies-program

deepC Store Pty Ltd (2023) deepC Store submits its CO₂ supply specification to the Australian Government to assist its review of the national Action List as per the London Protocol. Available at https://www.deepcstore.com/news/deepcstore-co2-supply-specification-australia-national-action-list-london-protocol

Gates B (2021) ‘How to Avoid a Climate Disaster.’ (Penguin Random House: UK)

Global CCS Institute (2021) Global Status of CCS 2021 – CCS Accelerated to Net Zero. Available at https://www.globalccsinstitute.com/wp-content/uploads/2021/10/2021-Global-Status-of-CCS-Report_Global_CCS_Institute.pdf

Global CCS Institute (2023) CCS Legal and Regulatory Indicator 2023. Available at https://www.globalccsinstitute.com/resources/publications-reports-research/ccs-legal-and-regulatory-indicator-2023/

International Energy Agency (2019) Putting CO₂ to Use – Creating Value from Emissions. Available at https://www.iea.org/reports/putting-co2-to-use

International Energy Agency (2023) CCUS Policies and Business Models. Available at https://www.iea.org/reports/ccus-policies-and-business-models-building-a-commercial-market

International Maritime Organization (2019) Resolution LP.5(14) on The Provisional Application of the 2009 Amendment to Article 6 of the London Protocol. Available at https://wwwcdn.imo.org/localresources/en/KnowledgeCentre/IndexofIMOResolutions/LCLPDocuments/LP.5(14).pdf [adopted 11 October 2019]

Japan’s Ministry of Economy, Trade & Industry (METI) (2022a) CCS Long-term CCS Roadmap Investigative Commission Interim Summary report. Available (in Japanese) at https://www.meti.go.jp/shingikai/energy_environment/ccs_choki_roadmap/20220527_report.html

Japan’s Ministry of Economy, Trade & Industry (METI) (2022b) “Japan’s CCUS policy” presentation at GCCI’s Japan CCS forum 2022. Available at https://jp.globalccsinstitute.com/japan-ccs-forum_en/

JOGMEC (2023) First Step to Launch Japanese CCS Project - JOGMEC selected 7 projects, starting CO₂ storage by FY2030. Available at https://www.jogmec.go.jp/english/news/release/news_10_00036.html

Biographies

With over 25 years of energy and resources industries experience and through senior roles for international business development, major capital project management, and commodity sales and trading at Tokyo Gas and Chevron, Daein Cha brings extensive expertise, experience and network to originate and develop multi-billion dollars industrial projects. Daein is currently the Director of Transborders Energy (mid-scale gas resource commercialisation company) and Managing Director of deepC Store (commercial scale CCS project developer). Daein received his Bachelor’s degree in management from the International Christian University (Japan), Master’s degree in business administration from the University of Virginia Darden School of Business, and qualification as Certified Cost Professional of AACE International. Daein is also a certified member of the Association of International Energy Negotiators and the Society of Decision Professionals.

Development of long-distance and large-scale carbon capture and storage (CCS) value chain using liquefied CO2 ship transportation

Abstract

Context

Key technical considerations

Liquefaction conditions

CO2 supply specifications

LCO2 ship parcel size

Key commercial considerations

Context

Risks and opportunities across the CCS value chain

Business models

Key policy and regulatory considerations

Key considerations for enabling transboundary CCS

Conclusion

Data availability

Conflicts of interest

Declaration of funding

Acknowledgements

References

Biographies

Development of long-distance and large-scale carbon capture and storage (CCS) value chain using liquefied CO₂ ship transportation

CO₂ supply specifications

LCO₂ ship parcel size