The great carbon capture and storage debate: can Santos make it work?

This article on Santos’ carbon capture and storage project first appeared in Cosmos Weekly on 22 October 2021.

When Sylvia Little fried her eggs at her Adelaide home one November morning in 1969, she became Santos’s first customer for natural gas from Moomba, 800 kilometres north in the Strzelecki Desert. Today, in subterranean reservoirs depleted by millions like Mrs Little since, the company plans to bury millions of tonnes of carbon dioxide.

It is doubtful Mrs Little would have known or cared that the natural gas originally contained CO₂ when it emerged from the ground – or that Santos stripped it out before piping methane to customers. Over the years the company has vented millions of tonnes of this greenhouse gas into the air, these days at a rate of about 1.7 million tonnes annually.

Now, in a world desperate to hit net zero greenhouse emissions by 2050, Santos is betting its future on being able to inject that CO₂ underground to reduce its carbon footprint through a technology known as carbon capture and storage (CCS).

But with critics claiming CCS is unreliable, and the recent failure of some of the world’s biggest oil and gas companies to make it work as promised, can Santos get it right?

Santos chief executive Kevin Gallagher is convinced, and keen to begin the $210 million operation at Moomba, planning a 2024 start, arguing that it can drive a lucrative global CO₂ business storing up to 20 million tonnes a year – and set Santos up to make “blue” hydrogen in future.

The world will be watching. CCS is one of the big hopes for achieving net zero emissions, with the International Energy Agency (IEA) pushing for a massive increase between now and 2050 – going from 40 million tonnes of CO₂ stored annually to 5.6 billion tonnes by 2050. That’s 70–100 new CCS projects a year.

Before injection underground, it’s transformed into supercritical CO₂, which is dense like a liquid but moves like a gas and totals just 0.0036% of the original volume.

IEA executive director Fatih Birol says CCS is “critical” and “without it, our energy and climate goals will become virtually impossible to reach”.

So far, Australia has just one commercial project – the world’s biggest – and it underlines the challenge. The massive Gorgon liquid natural gas (LNG) plant on WA’s Barrow Island conceded in July it had substantially failed to reach required targets. Run by Chevron, with partners ExxonMobil and Shell, the $US55 billion (about $73 billion) project is on a Class A nature reserve. It’s supposed to bury the carbon dioxide it separates from natural gas – up to 14% of the volume – into a siltstone and sandstone formation 2.3km under the island.

Before injection underground, it’s transformed into supercritical CO₂, which is dense like a liquid but moves like a gas and totals just 0.0036% of the original volume. It stays in this form in its destination due to the pressure and temperature below 800m.

Chevron claims it hit a “milestone” with 5 million tonnes of this CO₂ injected – but that amount was only half what it was required to do and followed a range of system failures.

CO₂ is also in natural gas extracted by Santos from its Cooper Basin wells. Why can Santos bury it better than Chevron? Santos declined to answer questions from Cosmos, but Dr Alan Finkel, Australia’s former chief scientist and now the federal government’s special adviser for low emission technologies, is positive.

While he says it won’t be easy, he believes the geological conditions for the Moomba project are “far superior” to those Chevron faces on Barrow Island. “They’re in a good position at Moomba,” he says. “The carbon dioxide is already there, and they’ve got sites to bury it in.”

Unlike Chevron, which had to use CCS to win permission to extract the gas, Santos is driven by shareholder pressure for a greener profile, new access to federal government subsidies in the form of tradeable carbon credit units for every tonne of CO₂ it buries, and a plan to pivot its fossil gas into touted future fuel hydrogen. Methane mixed with steam, under intense heat and pressure, “reforms” into hydrogen – along with carbon monoxide and CO₂. With those gasses buried, Santos would have “blue” hydrogen, a very low-emission fuel.

But billionaire miner and philanthropist Andrew Forrest claims CCS is a dud. He’s targeted Gorgon, without naming it.

“You know, in my own home state of Western Australia, we have some of the biggest gas developments in the world who’ve been granted permission to develop on carbon sequestration,” Forrest told the Good Will Hunters podcast this month.

“And it failed. And that’s quite normal around the world. So, to suddenly say, well, carbon sequestration, we’re going to wave a wand, it’s going to work reliably. Well, you know that, actually – if you’re a realist – is a bridge way too far. It’s good in a soundbite, but it doesn’t work in reality.”

Forrest, now backing several big “green” hydrogen projects, from which hydrogen is produced using only renewable energy, claimed CCS had failed “19 out of 20 times”. (He later told the ABC he’d revised that failure down to “nine out of 10 times”, after speaking with energy minister Angus Taylor.)

Finkel says it may have failed when applied to coal-fired power stations, because catching and separating CO₂ from flue gasses is difficult and expensive. But he says it has worked reliably for enhanced oil recovery in North America, where CO₂ is pumped underground to help release oil that is hard to access. It has also worked for decades at the Sleipner North Sea gas field off Norway, where Statoil (now Equinor) has been injecting CO₂ beneath the ocean floor since 1996.

Finkel says CCS is important, necessary, and not a nasty coal industry idea.

“Everybody recognises that we’re going to need carbon capture and storage,” he says, adding that net zero won’t mean no emissions – Australia might have 100 million tonnes it cannot avoid, and will need ways to mitigate that.

“It’s hard, it’s difficult, but we can do it,” Finkel says. He rejects “fear mongering” that CO₂ could leak. “It’s bullshit; it is going to be buried essentially for ever,” he says.

Santos has plans for three CCS projects, with another at the depleted Bayu-Undun gas field in the Timor Sea, using CO₂ from its Barossa gas project off Darwin, and a third in Western Australia. It is also developing direct airborne capture, or DAC – sucking CO₂ out of the air. That would give it another source of carbon to inject underground for credits.

Gallagher says Moomba would be the world’s second biggest CCS project, and the cheapest at under $30 a tonne over the life of the operation – which, balanced against carbon credit units selling for upwards of $26, may mean the company could make a profit if the unit price continues to rise.

He insists Forrest is wrong about CCS. “I don’t know of any true CCS project in a gas project that I’d describe as a failure,” he told an Australian Financial Review business conference last week. “We’ve been injecting gas and CO₂ into reservoirs for decades. Historically, that was used in the industry for… enhanced oil production. But the process of injecting into a reservoir is exactly the same. If it can flow out of a reservoir […] it can flow back into a reservoir.”

Finkel says it may have failed when applied to coal-fired power stations, because catching and separating CO₂ from flue gasses is difficult and expensive. But he says it has worked reliably for enhanced oil recovery in North America, where CO₂ is pumped underground.

Santos says with all three hubs it could store 30 million tonnes a year, equal to 6% of Australia’s emissions of just under 500 million tonnes. The repository is big, it claims, and it could attract companies from across Asia – although it is not clear how their CO₂ would be transported and Finkel, for one, is dubious about this claim.

Dr Matthias Raab, chief executive of Victorian-based CO2CRC, a research organisation into CCS supported by government, oil and gas companies and universities, says the technology is proven and that critics of Gorgon have been “nit-picking” on teething problems. It is one of the world’s largest-ever infrastructure developments, he says, and deserves credit for already sequestering millions of tonnes of CO₂.

The CO2CRC has been investigating and testing capture, separation, and storage technology at its Otway test centre since 2006 and its test field holds 100,000 tonnes of CO₂. Raab says there’s no question CCS works.

While Chevron hasn’t detailed its problems publicly, one reported issue was with the injection of CO₂. To make room for the gas between the grains in the sandstone, the salty water had to be extracted. But a lot of sand came up as well, damaging equipment. Raab argues that “sanding” is a common and fixable problem in the oil and gas industry. While there had been a delay, “the functionality of the CCS is working fine”.

But he says Santos has “definitely an easier proposition” at Moomba, with ready access to the CO₂ and storage in depleted oil and gas reservoirs. Given predicted low costs, and the rising price of the carbon credit units, “it’s almost at the sweet spot where not sequestering carbon is more expensive than actually doing it”.

He is hopeful Santos can now “really show the world” how CCS can be done, with best practice as an economic proposition and a benefit for society. That, he says could “accelerate the uptake of CCS” in Australia and globally.

Raab says CCS’s big selling point is that it can tackle CO₂ at speed and with scale. Billions of tonnes can be sequestered, allowing time to transition out of current energy sources over coming decades. And unlike planting trees, which can take decades to grow and absorb carbon, CCS can remove huge amounts quickly and permanently.

The Australian Government’s decision to grant CCS projects access to carbon credit units should also spur development, he says. America’s recent Section 45Q tax incentive provided companies with up to $US50 a ton return for direct geological carbon sequestration “and that has stimulated an enormous amount of activity in the US”.

But success by Santos would still only reduce a part of the emissions it creates. After all, the methane it sells, once burnt, creates more CO₂ in the atmosphere. Raab says any new gas-fired power stations can and should be fitted with carbon-capture technology. “So the next step needs to be decarbonising combustion,” he says. “That gives you the 95% capture rate at the electricity generation stage.”

Billions of tonnes can be sequestered, allowing time to transition out of current energy sources over coming decades.

Federal Energy and Emissions Reduction minister Angus Taylor recently gave $250 million in grants to design CCS hubs and support research and commercialisation of CCS technology, including identifying geological storage sites. Hubs are important, Raab says, because they can provide a central CCS repository to be shared by multiple industries, thus reducing individual company costs wanting to bury their emissions.

Dr John Kaldi, University of Adelaide emeritus professor and state chair of CCS, says the technology can work for many industries, but costs will generally be higher than for gas producers. “We are not only talking about oil and gas, coal or the power sector,” he says. “We are looking at industries like steel, aluminium, and cement.”

The biggest cost for companies is in capturing the CO₂, Kaldi says. Gas companies already do that to refine the methane as a fuel. But extracting flue gasses from coal-fired power stations is comparatively very expensive and not economic in Australia – although he thinks costs will go down.

CCS is not the silver bullet to fix climate change, Kaldi says, but “we will have to use the full portfolio of technical measures if we’re serious about reducing our emissions”.

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This article first appeared in Cosmos Weekly on 22 October 2021. To see more in-depth stories like this, subscribe today and get access to our weekly e-publication, plus access to all back issues of Cosmos Weekly.