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Shell upbeat on CCS prospects in Asia

© Shutterstock / siam.pukkatoShell gas station logo with blue sky background during sunset in Thailand.
Shell gas station logo with blue sky background during sunset in Thailand.

Shell (LON:SHEL) is upbeat about the opportunities for carbon capture and storage (CCS) in Asia Pacific, as the supermajor explores various potential storage site options across its portfolio in the region, which includes Australia, Malaysia and Brunei.

Shell is taking a broad view of the region and will be looking to develop an Asia Pacific CCS business that can receive multiple sources of emissions and potentially match them to various storage locations across the region, Li P’ing Yu, general manager, CCS Asia at Shell, told Energy Voice. Moreover, Shell is seeing demand for storage of emissions, such as carbon dioxide (CO2), from customers in developed Asian economies, particularly Japan and South Korea.

Last week, Shell announced that it is working with Japanese liquefied natural gas (LNG) buyers Tokyo Gas and Osaka Gas to explore potential opportunities for decarbonisation, which underscores the opportunities for CCS in Asia Pacific.

Asia, driven by continued economic growth and rising standards of living, is the world’s largest and fastest expanding energy demand centre. Natural gas is expected to play an increasing role in the region’s energy mix as it transitions away from coal-fired power. As a result, CCS is seen as a crucial tool to help Asia decarbonise this rising use of natural gas in its energy transition pathway.

However, the development of regulations and policy in the region will be critical to enable CCS as a business in Asia Pacific, said Yu.

For now, the key driver behind CCS in most Asian nations is corporate decarbonisation goals, rather than policy or a push from governments, according to energy consultancy Rystad Energy.

For the CCS business to thrive there needs to be both market drivers, such as potential income from low-carbon products, as well as stable government-led carbon pricing mechanisms. When both government and market forces align, such as in Canada and Europe, it creates a “sweet spot” for CCS and low-carbon products enabled by CCS, Syrie Crouch, vice president CCS at Shell, told Energy Voice.

In Asia, there are very few policy drivers to incentivise carbon storage projects yet. Except in China, there are virtually no penalties for emitting CO2. Indonesia has a plan to implement carbon pricing, but it is expected to be very low at around $2/tonne. Except for Singapore, a carbon price is largely non-existent in the Southeast Asian market. The city state currently has a price of $5/t on carbon emissions, but this is planned to progressively rise to $50-80/t by 2030.

Scaling Up CCS As Fast As Possible

Nevertheless, Crouch, a geologist by background, said that the reason to develop CSC as an industrial hub solution is because it is important to scale it up as fast as possible to keep costs low. Leveraging the industry’s learnings from building the global liquefied natural (LNG) gas sector from scratch, such as shipping standardisation, will also help. But crucially, the CCS business will need to take these learnings and knowledge on board as fast as possible to meet climate targets, she said.

Significantly, the oil and gas industry have an innovation heritage, which can be applied to CCS. Indeed, Shell is no stranger to innovation, having developed the world’s first gas-to-liquids (GTL) plant in Malaysia 30 years ago.

Collaboration between companies will also be key with multi-user storage hubs, shared pipelines, and infrastructure. A “cookie cutter” approach to technology, such as the replication of technology and the standardisation of shipping, to scale-up transportation of captured emissions, will help accelerate development and lower costs, noted Crouch.

Learning from experience and sharing lessons across the industry will also be crucial, said Yu. Shell is a partner in the giant Gorgon CCS project operated by Chevron in Australia, which has been plagued with technical issues. Detractors of CCS often cite Gorgon’s failings, however, perhaps less well publicised are the successes in the nascent sector.

In Alberta, Canada, Shell operates Quest, a CCS facility that captures, transports and stores more than a million tonnes of CO2 every year from the Scotford Upgrader, that turns bitumen into synthetic crude oil using hydrogen. It started up on time and under budget in 2015. Since then, Quest has captured and safely stored over 7 million tonnes of CO2.

Of course, the fledgling sector will have to deal with numerous uncertainties until it matures. For instance, the subsurface was better than expected at Quest in Canada, but in other places, this may not be the case.

ExxonMobil eyes huge CCS potential in Southeast Asia

In contrast to their legacy business, upstream companies are effectively reversing the flow of molecules with CCS. Still, all the technological pieces of the puzzle already exist, they just need to be put together, said Crouch. “Capture technology has been around since the 1930s, the first pipeline moving carbon dioxide was developed in the 1970s, and there has been CO2 enhanced oil recovery (EOR) since the 1970s,” she noted. CCS involves permanent storage, but relies on the same geological principles and technologies already developed by oil and gas companies but combined in a slightly different way, she added.

Most climate scientists are clear that the world needs CCS technology if society is to achieve net zero emissions. Indeed, carbon capture, utilisation, and storage (CCUS) technologies are set to play an important role in supporting clean energy transitions in Southeast Asia, reported the International Energy Agency last year. 

Shell is currently investigating more CCS opportunities in the North Sea, Americas and Asia, and the company seeks to have access to 25 million tonnes of CO2 per year of CCS capacity by 2035. It is currently involved with two operating projects, one more under construction – Northern Lights in Norway – and is assessing nine more potential opportunities.

In APAC, Shell is evaluating potential sites in Malaysia, Indonesia, Thailand, India, and China, where depleted oil and gas reservoirs could offer storage potential.

However, in many countries across the world, there is not currently sufficient regulatory support or a clear business model for CCS. To address these challenges, Shell is advocating for policy mechanisms that drive deployment of CCS at scale, and industry partnerships to decarbonise hard-to-abate sectors.

Long-term policy support and frameworks that support carbon pricing will be vital to encourage CCS adoption in Asia Pacific too. The economics for CCS remain challenging without such support, executives at the Asia Pacific Energy Capital Assembly organised by the Energy Council in Singapore last week told Energy Voice.

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