Economic Modeling of an Oil and Gas Project Involving Carbon Capture and Storage: Snohvit LNG Field (Barents Sea, Norway)
- Matei Negrescu (StatoilHydro)
- Document ID
- Society of Petroleum Engineers
- SPE Projects, Facilities & Construction
- Publication Date
- June 2008
- Document Type
- Journal Paper
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- 2008. Society of Petroleum Engineers
- 4.1.5 Processing Equipment, 7.1.9 Project Economic Analysis, 5.4 Enhanced Recovery, 6.5.3 Waste Management, 6.5.1 Air Emissions, 5.7.5 Economic Evaluations, 3.3 Well & Reservoir Surveillance and Monitoring, 4.1.6 Compressors, Engines and Turbines, 5.4.2 Gas Injection Methods, 7.1.10 Field Economic Analysis, 4.6 Natural Gas, 6.1.5 Human Resources, Competence and Training, 4.2 Pipelines, Flowlines and Risers, 5.8.8 Gas-condensate reservoirs, 6.5.7 Climate Change, 4.2.3 Materials and Corrosion, 4.3.1 Hydrates, 4.1.2 Separation and Treating, 4.6.2 Liquified Natural Gas (LNG)
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The Snøhvit Liquefied Natural Gas (LNG) project developed by StatoilHydro and partners in Norway is used as an example to describe how the carbon capture and storage (CCS) component of an oil and gas project can be isolated, modeled, and analyzed from an economic point of view. The Snøhvit development, which started production in late 2007, involved a CCS component from day one. Approximately 700,000 tons of CO2 captured from the liquefaction plant will be reinjected every year in an underground formation offshore. Furthermore, there are interesting alternatives for CO2 capture from the on-site power plant and for the use of CO2 for enhanced oil recovery (EOR) in a nearby oilfield, leading to several future development scenarios for CCS at Snøhvit.
Different development scenarios for CCS are analyzed to select the best development option. The economic modeling framework will also be used to assess the impact of the uncertainties on the project economics.
The analysis identifies that a key driver for the profitability of the project is the legislative setting for CCS. The involvement of the government is very important for the viability of the project, which needs a strong incentive, such as the current CO2 tax scheme or an emission trading scheme with strict allocation of emission targets. Under such conditions, a CCS project such as Snøhvit becomes a win-win situation: economically profitable for the operator and environmentally friendly.
From a broader perspective, addressing the economic and legislative uncertainty currently surrounding CCS projects for the oil and gas industry is crucial because this represents the main limiting factor for the further development of such projects. It is therefore essential that economic modeling tools such as the framework described in the present work become industry standards to ensure that projects which could be profitable for both the operator and the environment are not abandoned by pure lack of analysis ability.
Carbon dioxide has been used for EOR purposes in Texas since the 1970s. More recently, CCS projects involving the oil and gas industry have been started in Canada, Algeria, Norway, and the Netherlands, and several other projects are planned all over the world, particularly in the North Sea (Miller in the United Kingdom, several projects in Norway among which Snøhvit) (Metz et al. 2005).
However, even though CCS projects for the oil and gas industry are technically mature, there are still a certain number of barriers that act as a constraining factor for new CCS projects:
- The cost of CCS is still significant, even though there is sufficient room for improvement, especially in the capture component (Metz et al. 2005).
- Most importantly, there is a large amount of uncertainty related to the economic viability of CCS projects. This is mainly because of the fact that legislative issues concerning economic incentives and structures for CCS projects are currently in an experimental stage, and thus evolve constantly.
The main objective of this paper is therefore to address the uncertainty related to the economic viability of projects for the oil and gas industry involving CCS.
The Snøhvit LNG project will be used to illustrate how to isolate from an economic modeling point of view the component involved in CO2 capture and storage (hereafter called the CCS component) from the rest of the project. Indeed, the CCS component is complex enough to require separate modeling, and this practice is not currently an industry standard. It is therefore interesting to describe how this CCS component can be defined, with its boundaries and interactions with any external entities, and how all these issues can be modeled.
An economic analysis will be performed on the different development alternatives and scenarios that will be defined for the CCS component of the project.
|File Size||4 MB||Number of Pages||15|
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