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Chevron fails to hit targets with giant CCS scheme at Gorgon LNG

Chevron flag flutters in the wind
Chevron

Chevron is receiving heavy flak and potential fines for failing to meet emissions reduction targets at its troubled carbon capture and storage (CCS) scheme that forms a crucial element of the Gorgon liquefied natural gas (LNG) export project in Australia. Its partners include Shell and ExxonMobil.

Yesterday, Chevron admitted that its CCS project, described by the US giant as the world’s largest, has failed to meet a five-year target for burying carbon dioxide (CO2) under Barrow Island off Western Australia. The Gorgon joint venture, which also includes Osaka Gas, Tokyo Gas and JERA, shipped its first LNG cargo in 2016.

The $3 billion CCS project, which started operating in 2019 and about three years late, has been beset by technical difficulties. Peter Milne, a Perth-based industry analyst at Boiling Cold, wrote that “Gorgon has been in production for 5.5 years, but there has not been a single day when all elements of Gorgon’s CO2 injection system have worked at the same time.”

Significantly, it is the world’s largest CCS project dedicated to cutting greenhouse gas emissions, not enhancing oil recovery. Worryingly, if Chevron, backed by Shell and ExxonMobil, cannot get CCS right more than a decade after the project was approved, then expectations of a massive global CCS rollout before 2050 look doubtful, warned Milne.

Chevron, which operates the Gorgon LNG development, has not met the official requirement to capture and store at least 80% of the emissions generated over the first five years of the project, or around 4 million tonnes per year. The emissions reduction target formed a key part of the environmental approval process.

The Western Australian environmental minister, Amber-Jade Sanderson, is now seeking an “explanation of how the company intends to address the issue.”

An analysis last year suggested Chevron could face a bill of more than A$100 million ($73 million) if it is required to offset all emissions that breached its approval requirements.

Chevron’s managing director in Australia, Mark Hatfield, said the company is working with the regulator on “making up the shortfall”, which he did not quantify. He added the company would release a public report on the issue later this year.

Analysts believe that the report will likely find that the project only captured 30% of what it was supposed to.

Ian Porter, a former oil and gas industry executive, who is chair of the advocacy group Sustainable Energy Now WA, said the report would be a “major test case for CCS technology” and described the CCS scheme as a “shocking failure of one of the world’s largest engineering projects.”

Still, to be fair to Chevron, they “made the decision to take the necessary time to start the system safely, meaning they were delayed in starting to inject CO2 and haven’t been able to catch-up in time to meet their agreed injection target,” a source close to the project told Energy Voice.

Chevron makes $4bn investment to keep pumping Gorgon LNG

Nevertheless, Chevron remains optimistic. “Like any pioneering endeavour, it takes time to optimise a new system to ensure it performs reliably over 40-plus years of operation,” Hatfield said in a statement yesterday.

Chevron said it has injected five million tonnes of greenhouse gas (carbon dioxide equivalent) since starting the system in August 2019. Much less than the 4 million tonnes per year of greenhouse gas it was supposed to capture.

Nevertheless, the “milestone represents the largest volume of injection achieved within this time frame by any environmental CCS system of comparable specifications,” the company said.

“The Gorgon carbon capture and storage (CCS) system is the biggest CCS system designed to capture carbon emissions and is demonstrating Australia’s world-leading capability in the area,” said Hatfield.

Once fully operational, the system will capture up to 4 million tonnes of CO2 annually and reduce greenhouse gas emissions by more than 100 million tonnes over the life of the injection project, said Chevron.

The system works by taking naturally occurring CO2 from offshore gas reservoirs and injecting it in a giant sandstone formation two kilometres under Barrow Island, where it remains trapped.

“The road hasn’t always been smooth, but the challenges we’ve faced – and overcome – make it easier for those who aspire to reduce their emissions through CCS,” added Hatfield.

“We’re committed to sharing the lessons we’ve learned with state and federal governments, research institutes and other energy producers to assist the deployment of CCS in Australia,” said Hatfield.

Understandably, Chevron is getting flak for failing to deliver the CCS as promised. It’s not a good look when most of the IOCs are talking up the transition to net zero. But the project on Barrow Island is a “pioneering endeavour” and hopefully Chevron will fix it. Crucially, the industry must learn from the mistakes to date.

Significantly, Australia’s competitive advantage in carbon storage could help it unlock its vast oil and gas resources as the world decarbonises.

Last month, Kevin Gallagher, chief executive of Australian producer Santos, warned oil and gas industry leaders that achieving net zero emissions will be crucial for the natural gas industry to avoid coal’s fate of being shunned by equity investors and lenders.

Santos urges Australia to develop into ‘carbon storage superpower’

“Australia needs large-scale carbon capture and storage (CCS) projects to make development of our oil and gas resources viable for investors, financiers and customers so that the wealth of these resources can be unlocked for the nation,” said Gallagher.

Crucially, Australian producers need to be at the forefront of carbon-neutral liquefied natural gas (LNG) or “green LNG” to remain competitive, energy research company Wood Mackenzie said last month. But progress is not fast enough.

Carbon-neutral LNG will be key for Australia to remain competitive

Meanwhile, natural gas with CCS is seen as a pathway to a large-scale clean hydrogen industry.

“Australia’s LNG export success means the Australian upstream oil and gas industry has the technology, expertise, commercial and trade relationships to further develop CCS and make hydrogen exports a reality,” said industry lobby group Australia Petroleum Production & Exploration Association (APPEA).

Ultimately, there is a lot of talk about the potential of CCS and its importance to the Australian natural gas industry. Now, it is time to see concrete action and results. Significant progress and success at Chevron’s Barrow Island project would be a step in the right direction.

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