Building the CO2 Value Chain: Is it Achievable?

1. Building the CO2 Value Chain – Is it Possible? Olav Kårstad Special Advisor CO2 British – Norwegian Workshop on CCS London 23rd April 2008

3. Build new international growth platforms Maximise value creation from the NCS Norway Global prod. avg. Re-fining LNG Extra heavy oil GTL Extra heavy oil incl. upgrad. StatoilHydro’s growth challenge is a climate gas emission challenge More CO2 intensive production in the pipeline – CCS necessary to reach targets CO2 emission [kg/tonne product]

4. Large Stationary Sources of CO2 – Global View Greater than 100 kt CO2/yr per facility Petrochemical Refineries Iron/steel Cement Oil power Coal power Gas power Data source: IPCC SRCCS (2005) and IPIECA

5. This is about 56% of fossil fuel related CO2 Number of sources or millions of tonnes/year * Larger than 0,1 million tonnes of CO2/yr from one source Data source: IPCC Special Report on CO2-capture and -storage

6. StatoilHydro’s CCS projectsPart-owner of 3 of 4* large-scale CCS project * The 4th project is Weyburn – Midale in Canada

7. Sleipner – 11 years of large scale CCS demo • Started in 1996 • CO2 from natural gas (Approx. 1 mill. tons CO2 annually) • Stored in saline aquifer – sandstone formation with water • Driver: CO2-tax (340 NOK/ton – $60/ton), corporate environmental strategy • Learning and confidence building through a series of large EU-wide R&D programmes

8. Snøhvit LNG; CO2-pipeline reel-out

9. The In Salah gas processing plant with CO2-capture facilities

10. Proof of concept through monitoring and R&D

11. What does it take?Simple economic rules will decide speed and volume of CCS roll-out Cost Cost of emitting • Low hanging fruits • Direct governm. investment • Technology development • CO2-EOR • Kyoto mechanisms Cost of removing/injecting • Environmental taxes • Under-supply of credits • Emission limitation Time

12. The low hanging fruits in CO2- capture

13. The low hanging fruits in CO2-transport and -storage

14. LNG production Ammonia plants Coal gasification plants Hydrogen production CCS low-hanging fruits – “cheap”, already concentrated CO2 more than 200 sites globally with CO2 > 100 000 tonnes/yr Natural gas purification

15. Snøhvit LNG Sleipner In Norway two low-hanging fruits has passed the point of profitability due to the high CO2 tax on petroleum activity • Low hanging fruits • Direct governm. investment • Technology development • CO2-EOR • Kyoto mechanisms • Environmental taxes • Under-supply of credits • Emission limitation

16. Mongstad Kårstø And two “high hanging” CCS-fruits (in connection with gas fired power plants) are planned to be built with state funding • Low hanging fruits • Direct governm. investment • Technology development • CO2-EOR • Kyoto mechanisms • Environmental taxes • Under-supply of credits • Emission limitation

17. CO2-EOR – profits from CO2 injection • Income from extra oil production to pay for CO2 infrastructure • Onshore applications to happen first • Free up natural gas resources by using CO2 as injection gas • Coexistence with storage necessary • Sensible natural resource exploitation CO2 EOR Graphics : EnCana

18. Regulation and acceptance – perception of riskWhat does it all come down to? TODAY – certain emission TOMORROW – safe storage

19. Summary: Building the CO2 Value Chain – Is it Possible? • Climate change is happening – CCS one of five important solutions • Making CCS happen is difficult under any circumstances, but in particular in today’s high cost construction market and uncertain long term cost of emitting CO2 to the atmosphere • Low-hanging CCS fruits are there to be picked  useful to prove storage and CO2-EOR as well as for gaining public enthusiasm • Power plant CO2-capture  A number of demo-projects must proceed to avoid delay in 2. and 3. generation deployment (technology lock-in of long life plants) • In the shorter time frame carrot and stick incentives are necessary to initiate industrial scale projects without which technology and frameworks will not develop