Clean coal project needs buyer for C02
Bruce Johnstone
The Leader-Post
Wednesday, May 28, 2008
SaskPower's proposed $1.4-billion clean coal project at Boundary Dam Power Station at Estevan needs a buyer for the captured carbon dioxide to be economically viable, according to the project's deputy manager.
Doug Daverne told a Saskatchewan Mining Week breakfast meeting Tuesday that oil industry buy-in is critical to the project, which would be the first commercial-scale, post-combustion, carbon capture and sequestration (CCS) demonstration project in the world.
"We don't think (the carbon capture and sequestration project) is economic right now unless we can receive some value from the CO2 created for EOR (enhanced oil recovery),'' Daverne said.
Of course, that could change if rising electricity and natural gas prices, carbon taxes or cap-and-trade systems make producing greenhouse gas emissions prohibitively expensive, he added.
In March, the federal government committed $240 million to SaskPower's proposed CCS project, which would involve retrofitting Unit 3 at Boundary Dam station to capture one million tonnes a year of CO2.
The captured CO2 would be compressed and injected in liquid form into oil reservoirs, which could then produce up to three million barrels of oil per year.
"With the carbon capture concept, we capture that CO2 and liquefy it and put it down into spent oil reservoirs,'' Daverne said. "As a result of that, additional oil is produced.
"That's what the Boundary Dam demonstration project is about ... That's what we think needs to be in place for carbon capture and sequestration to be cost-competitive."
Daverne, a senior engineer with SaskPower, explained the economics of carbon capture and storage to the meeting jointly sponsored by the Association of Professional Engineers and Geoscientists of Saskatchewan and Saskatchewan Chamber of Commerce.
Daverne said SaskPower's current benchmark for cost-effective electricity generation is the natural gas combined cycle (NGCC) plant. SaskPower is currently building 400 megawatts of electrical generation using NGCC plants at a cost of $525 million for operation starting in 2010.
The Shand 2 clean coal project, which utilizes the "oxyfuel" process that uses oxygen to remove CO2 from the flue gas produced from coal burning, was shelved last fall by SaskPower due to its projected $3.8 billion cost.
Another concern SaskPower had was that the amount of CO2 produced by the 300 MW Shand 2 plant might be more than the oil industry could use in enhanced oil recovery (EOR) projects, further escalating the cost of the project.
Daverne said the Boundary Dam demonstration project would be built in two phases, the first to be completed in 2013, which will reduce Unit 3's generating capacity from 139 MW to 120 MW and reduce the unit's greenhouse gas (GHG) emissions to that of a conventional NGCC plant.
The second phase to be completed by 2015 would further reduce the unit's output to 100 MW and reduce GHG and other emissions to "near zero.''
By phasing in the project, SaskPower would reduce the economic risk of bringing on all the captured CO2 onto the market at once. Oil companies would also have time to invest in the $400 million of infrastructure required to make use of one million tonnes of captured CO2 per year.
"They have significant capital costs as well. It's not simply a case of them buying CO2 and putting it into the ground.
"We need to get some recovery of dollars for the CO2 to make the electricity side of this (project) economic,'' Daverne added. "We think there is enough value between the EOR side and the plant side to make those (carbon capture costs) balance out."
As importantly, SaskPower would extend the life of Unit 3, which was built in the late 1960s and due for retirement in 2013., for another 20 or 30 years.
