11/11/2010 - 00:00

LNG bonanza fuels carbon conundrum

11/11/2010 - 00:00

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With the LNG industry gearing up for a $150bn investment bonanza, questions are being asked about how it will deal with the millions of tonnes of carbon dioxide that will be produced.

LNG bonanza fuels carbon conundrum

SHELL Australia chief Ann Pickard will not be the only nervous observer this Friday, when Environment Minister Tony Burke is due to decide whether Shell’s $5 billion Prelude floating liquefied natural gas project off the Kimberley coast can proceed.

Mr Burke’s handling of Prelude – just one of the $150 billion-plus in prospective LNG developments planned off WA for the next few years – will have major implications for the rest of the sector as Australia heads inexorably towards putting a price on carbon.

Since gas exports from the North West Shelf began in 1989, LNG has become one of the state’s fastest growing exports on the back of Asia’s insatiable appetite for energy.

But it is also one of WA’s biggest sources of carbon emissions, with the NWS estimated to have contributed 6.3 million tonnes, over 8 per cent, of the 75.9mt of CO2 vented into the WA atmosphere in 2008.

With at least seven additional LNG projects either under way or in the advanced planning stages, carbon emissions from the LNG sector are set to top 73mtpa over the next decade as LNG production climbs 350 per cent to about 70mtpa.

WA Greens Senator Scott Ludlam argues that means all proponents “must come clean” about their plans to deal with CO2 emissions, and publicly release detailed and comprehensive CO2 management plans as part of the approvals process.

Yet surprisingly, only Chevron’s giant $43 billion Gorgon LNG venture on Barrow Island has a definitive public strategy to shrink its carbon footprint. It plans to reduce carbon emission via its controversial plan to capture more than half of Gorgon’s CO2 emissions, or 3.4mtpa, and inject the carbon deep into saline reservoirs two kilometres below the island.

The process is known as geo-sequestration, with the CO2 expected to slowly dissolve into the brine over thousands of years, and remain trapped by overlying layers of impermeable rock.

Though commonly used to boost flagging oil recovery, geo-sequestration has only been used as a permanent storage option at three overseas fields at a third of the scale proposed at Gorgon.

Most other WA LNG proponents have publicly put their faith in less prescriptive carbon offset initiatives, such as tree planting, as the most practical management option.

Such programs may improve the environment’s ability to absorb added CO2, but do not physically reduce the amount of carbon being released into the atmosphere upfront.

But LNG producers also argue they should be credited for the beneficial greenhouse reductions in customer nations, estimating every tonne of CO2 produced by burning LNG displaces 5-9t of CO2 that would have otherwise been generated from coal to generate the same amount of electricity.

Chevron has already ruled out geo-sequestration as an option for its $25 billion Wheatstone project near Onslow because the lack of a suitable storage site nearby means “it is not economically attractive”.

Wheatstone is initially expected to produce about 3.7mtpa of CO2 from startup in 2016, rising to over 10mtpa once it reaches its ultimate LNG target capacity of 25mtpa.

Similarly, Woodside has announced a $100 million, 50-year tree planting exercise over 23,000 hectares, as its primary means of offsetting the 1.8mtpa of carbon produced when its new $13 billion Pluto LNG project starts production next year.

But how it will deal with the CO2 produced as it trebles Pluto production to 14mtpa remains unclear.

Similarly, proponents in the Kimberley’s Browse Basin, where CO2 levels typically average 7-12 per cent, three times more than Pluto, are also primarily focused on carbon offsets.

Japan’s Inpex Petroleum’s primary initiative has been a $5 million tree planting scheme to offset some of the 7mtpa of CO2 expected from its Ichthys LNG venture, largely because no suitable sequestration sites have been found within economic reach of its Darwin LNG plant.

Meanwhile, Shell argues the relatively small scale and floating design of its Prelude venture mean it will produce far less CO2 than an equivalent land-based development.

It therefore intends to manage CO2 emissions from Prelude by buying permits under an emissions trading scheme, which it expects will be in place by 2016.

Woodside’s only comment about its proposed $30 billion Browse LNG venture at James Price Point is that it is currently assessing a number of options to deal with the 7.1mtpa of CO2 emissions expected by the WA government.

Sequestration is one of those options, provided a suitable reservoir can be identified, with the Canberra-based Global Carbon Capture & Storage Institute estimating Browse LNG could store up to 3mt of carbon annually.

Desktop studies by the CO2CRC industry-government research body have so far identified nine potentially suitable sites in the Browse Basin; these are primarily on the Leveque Shelf, located about 100km south-east of the Browse fields.

The CRC’s modelling estimates the most prospective site could feasibly receive up to 8mtpa of carbon for 50 years, and keep it there for at least 2,000 years.

CO2CRC chief scientist John Kaldi said the next key step would be drilling to determine the sites’ geotechnical suitability.

Nonetheless, Woodside’s own enthusiasm for sequestration is clearly waning.

It has already withdrawn as one of the sponsors of the CO2CRC and is understood to believe the cost of sequestering CO2 from James Price Point will likely be prohibitive.

Senator Ludlam said that underlined the urgent need for government and industry to provide real direction on CO2 management.

“It’s time for industry to put its money where its mouth is,” he said.

“Offsets are not sufficient, and if industry can’t prove that (sequestration) works, then some of that gas may have to stay in the ground.’’

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