ccs – essential technology for a low carbon future · dick benschop became president director of...

CCS – essential technology for a low carbon future 7th Dutch CCS symposium7th Dutch CCS symposium7th Dutch CCS symposium7th Dutch CCS symposium

Dick Benschop President Director, Shell Netherlands June 19, 2014

CCS – Essential Technology for a low carbon fiber

Dick Benschop became President Director of Shell Netherlands and Vice President Gas Market Development for Shell world-wide on May 1, 2011. Born in Driebergen, Benschop studied History at the VU University in Amsterdam, and worked in various functions in the Dutch Parliament and in the Dutch Labour Party. In 1994 he founded his own consultancy firm. From 1998 to 2002 he was the deputy Minister for Foreign Affairs. Benschop joined Shell in 2003 and worked in Shell Energy Europe before moving to Kuala Lumpur in 2006 overseeing the Gas & Power business in Malaysia. In 2009 he took up the role of Vice President Strategy for Royal Dutch Shell. A Dutch citizen, Benschop lives in The Hague. He is married and has three children.


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Ladies and gentlemen, I am delighted to be here at the 7th Dutch CCS Symposium in Amsterdam. I will talk about the energy future and why it is vital to implement the Carbon Capture and Storage technology. Furthermore, I will zoom in on the Shell CCS portfolio and what needs to happen if we want to break with the current paralysis in especially Europe and achieve GHG emissions reductions targets in a safe and cost effective manner.

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Let’s start with the context. The world’s population is growing, and growing rapidly...rising from some 7 billion today to an estimated 9 billion by 2050. In combination with the process of urbanisation that is the equivalent of adding a city of 1.5 million... Every week. Hundreds of millions of people are leaving poverty behind, which can only be a good thing. That means that over the first half of the century energy demand is expected to double - even counting on a massive improvement in efficiency in what we do today. At Shell we believe that the rapid growth in energy demand will be met by a diverse mix of energy sources, with strong growth in natural gas and in renewables. The other message here is that the world is in two races at the same time. A race against poverty and a race against climate change. It is the twin-challenge of development and environment.



Turning to climate change. Shell is taking action in these four areas to manage CO2 emissions. We are outspoken in our advocacy of cleaner-burning natural gas. We are working hard to improve our energy-efficiency, for example with co-generation at refining and chemical plants. And Shell is helping to develop advanced biofuels. There is a clear position for the carbon capture and storage technology.


The case for CCS begins and ends with addressing the current climate change challenges. The signals are getting louder that the world needs more consistent action to achieve the long term target of limiting the global average temperature increase to 2°C - a level which the scientists tell us is likely to lead to irreversible climate change impacts. CCS is critical to address climate change because it is the only technology that tackles the absolute level – and that is key – of CO2 ‘stock’ in the atmosphere. Other technologies improve efficiency and help to slow down the rate, but not the total volume of CO2 in the atmosphere. This technology enables us to improve our emissions performance and lower the emissions of our customers in the power and transportation sectors. Without CCS decarbonisation costs are substantially higher. The case for action is clear and we should get on with demonstrating CCS to reduce emissions in order to get ready for such time that CCS will have to be commercially deployed at large scale, say by 2030.



The costs of not having CCS in the mix are substantial. Have a look at the 1 trillion dollar increase the International Energy Agency defined. Or that without CCS the costs to halve emissions by 2050 will be 40% higher. The Energy Technologies Institute found that without CCS the additional costs to run a decarbonised UK economy in 2050 will be £ 32 billion per annum. And let me also bring up the IPCC’s most recent Fifth Assessment Report stating that achieving the boundary of 450 parts per million of CO2 in the atmosphere without applying CCS, means an increase in mitigation costs of a staggering 138%.


The core three elements of CCS are not new in the game. In capturing and transport there is sufficient experience – over multiple decades. For more than 40 years we also use CO2 injection for natural gas storage or oil enhanced recovery in tight reservoirs where the oil is trapped. Of course it occurs sub-surface also in a natural way and on top of experience there are quite some studies of storing CO2.



World-wide there are currently 12 projects in operation - preventing some 25 million tons of CO2 per annum from reaching the atmosphere. Another 8 projects are under construction. This might come across as a significant effort, but in reality it is insufficient as...

� There are no projects under construction in Europe � There are still very few projects in the power sector � The overall project funnel has been shrinking over the past few years

This shortage reflects the lack of commerciality that impacts CCS in Europe. So although President Obama mentions CCS as a vital element in his new “The All-of-the-Above Energy strategy”, and China has made CCS a part of the Five Year Plan ... progress in especially Europe is patchy and slow.

CCS is at cross roads in Europe. The European Commission committed in 2007 to develop 12 large-scale demonstration projects by 2015. Deployment has fallen below this commitment - with the risk that failure increases the long term costs of deployment and therefore decarbonisation.



So, what will it take to demonstrate CCS at scale? And what is needed when we move from development or demonstration stage towards deployment of a series of installations? At Shell we believe it will require financial support and effective policies at the first two stages and especially a robust CO2 price in the deployment stage. In the long term a robust price on CO2 emissions should be sufficient, but we all know the outlook on that through the ETS lens does not look very promising.

So in the absence of a well-working ETS, CCS will need capital grant to support construction and Opex support to ensure the plant with CCS operates. And where CCS demonstration is kicking off globally, such elements are in place – for instance in Canada and the UK.



Turning to the CCS demonstration projects Shell is involved in. In our CCS portfolio we have several roles; sometimes we are the operator of a project, sometimes the Joint Venture partner. Our aim is always the same - to advance a range of different CCS technologies and so reduce costs and optimise efficiency.

Our portfolio includes:

a. The CO2 Technology Centre Mongstad (TCM) in Norway, testing post combustion capture technologies b. The Quest project in Canada, demonstrating CCS for Oil Sands c. The Peterhead project in the UK, which aims to demonstrate the feasibility of CCS for Gas Power d. And the world’s largest CCS project committed to date, Gorgon, in Australia, which will demonstrate storage

in a deep saline formation.

Through our capture technology provider, Shell Cansolv, we are also involved in the Boundary Dam CCS project in Saskatchewan, Canada, in which we have no equity. Let me take you in some more details through these projects...



Shell took the final investment decision for the Quest project in Canada in 2012. Quest will demonstrate CCS for our Oil Sands operations in Alberta. The construction is underway. Up and running it will potentially store more than 1 million tonnes of CO2 per year from the Scotford Upgrader. This is the equivalent of removing some 175,000 cars from the road. Storage will happen some 2 kilometres below surface - safely and permanently. There will be a rigorous monitoring programme in place to confirm that the CO2 remains securely underground.

Start of operations is foreseen from end of 2015 onwards. In total Quest will capture some 35% of the current CO2 emissions from the Scotford Upgrader, an installation where bitumen is turned into synthetic crude oil using hydrogen.


The Technology Centre Mongstad (TCM) is an important centre for us. This is the largest centre of its kind to test CO2 capture technologies. We test and demonstrate a variety of post-combustion capture technologies, supporting the reduction of capture costs over time. This will provide us with the opportunity to assess the relative merits of different technologies against an industrial available solution.

Currently, there are two capturing units fully operational – you’ll see these are on the picture bottom left corner. After 2 years of operations, there are a number of learning’s and there is a strong focus both internally within Shell, and externally to ensure that these are shared.



The Peterhead project aims to demonstrate the feasibility for the first industrial-scale CCS facility for a gas-fired power plant in the UK. The projects involve CO2 capture by Shell from one of the existing gas turbines at SSE’s Peterhead Power Station in Aberdeen. Peterhead will capture some 10 million tonnes of CO2 over 10 years. By doing so, the turbine will generate enough clean electricity to power the equivalent of half a million homes per year. The CO2 will be stored offshore in the depleted Goldeneye reservoir, some 100 kilometres from shore and 2.5 kilometres beneath the seabed. Injection here is the reverse of production. During production (2004-2011), natural gas was drawn from the rock and naturally replaced by salt water – injection of CO2 will drive the salt water back to the adjacent rock formations from where it came. The project is managed by Shell. It is now in the Front-End Engineering and Design phase that is expected to continue until 2015 after which final investment decision can be taken.



Gorgon is the world’s largest CCS project committed to date, for storage in a deep saline formation. At the Gorgon gas fields off the coast of Western Australia, natural gas will travel through undersea pipelines to a liquefied natural gas plant on nearby Barrow Island.

Once injection operations are at full capacity in 2015, 3-4 million tonnes a year of naturally occurring CO2 produced with the natural gas will be captured and injected into a deep sandstone formation around 2.5 kilometres beneath the island. Chevron is leading the Gorgon project, with Shell and ExxonMobil as partners.


Through our capture technology provider, Shell Cansolv, we are also involved in the coal-fired Boundary Dam CCS project in Saskatchewan, Canada (in which we have no equity). The retrofitted capture plant will capture 1 million tonnes per year of CO2 (or 95%) from one of Boundary Dam’s aging combustion units, which has a generating capacity of around 130MW. The total amount of CO2 produced, for all generating units at Boundary Dam Power station, is 5.5 to 6 million tonnes annually. Captured CO2 will be used for enhanced oil recovery and stored in deep saline aquifers. The plan for this CCS unit is to commence operations in the coming months.



Capability development is key for CCS, but there is more than the development of an actual demonstration programme. As you can see on this overview, there are quite some institutions and partners working hard on innovation and technology development in this area.

Shell is engaged in technology innovation through a focused R&D programme – for instance here in our Shell Technology Centre Amsterdam - covering CO2 capture and elements associated with storage. R&D is being carried out in Joint Industry Projects, in close collaboration with academia, or in-house for proprietary research.


Collaboration is another key element I want to underline. From our R&D and CCS projects we aim to extract insights and knowledge and share this with others. The insights we use to help shape CCS guidelines and standards. We also support studies such as on CCS costs - for instance carried out by ZEP – and we advice on regulations and policy development.

CCS development requires a team spirit, collaboration as in the early phases of development and demonstration there is a lot we can learn from each other.



For truly commercial deployment there are more needs. For Shell this is about a long-term signal that the technology has a role to play in Europe’s decarbonisation ... a commitment coupled with policy options to ensure that this should form an integral part of the 2030 framework. Secondly, capital support to drive upfront investment in demonstration projects. So there is a need to extend the NER 300 mechanism beyond 2015 coupled with a policy framework allowing technologies to move through the pre-commercial phase. The third element I want to mention here is operational support ensuring that projects are economically viable. For that we need a strengthened EU ETS which mobilises low carbon investments and enables energy technologies to compete on the basis of a meaningful carbon price.



In practice this means that there usually is capital support to build an installation and operate it in the demo phase – but beyond that there is no credit for cleaner energy, just extra costs. So the business case fails. This is one of the key aspects that could help to unlock the situation around the lack of demonstration projects in mainly Europe. There is no level playing field in the support for renewables and low carbon technologies such as CCS.

This needs to be addressed, if we’re serious about addressing climate change. The UK has made a step in this situation through the use of a contract-for-difference covering the additional ‘green’ costs - between the power price and the strike price.

Subsidising as a concept could have unintended consequences, but this approach with a contract-for-difference brings balance with renewable projects in the absence of the real stimulus: a decent CO2 price.



Discussing the case for CCS with an informed audience as we have here today, does not lead automatically to acceptance among society at large. We have learned this the hard way in the Netherlands where in 2007 the Government started a CCS tender. Shell put forward the Barendrecht field that was nearing end of field life. From a technical project point of view, Barendrecht was the ideal fit as a CO2 source was nearby, injection could start almost immediately, the field was relatively new meaning wells and production history was well known, and there was only 17 kilometres pipeline required whilst a pipeline corridor already existed. The Barendrecht residents however had quite a different perspective. The village had been subject to a number of infrastructural road and rail projects without significant local benefits. A serious train crash occurred at the time as well in the vicinity, so the question “What’s in it for me” could not be answered. Apart from their fear that the value of properties in the area would go down... The project needed an effective partnership between the Government and Shell on national and local stakeholder engagement. This was unsuccessful. Whilst the Government was not able to get the message across why CCS was vital for the energy future, Shell communicated too technically – and the tender conditions resulted in a schedule-driven approach that did not match with the societal need for more debate and delay of decisions.

We have learned from Barendrecht and apply learnings in other projects. Public acceptance should come from enhanced knowledge and transparency on options to reduce emissions, Government’s clear vision on the energy future and sufficient engagement of companies involved with fence line communities. And a range of successful demonstration projects that make the case this technology can be implemented safely.



Let me end this presentation with some key conclusions. CCS is essential to our response to the climate change challenge. Failing to deliver a demonstration programme in the EU will have implications ... on addressing the 2°C scenario, but also on decarbonisation costs. Apart from a single, new binding greenhouse gas reduction target to 2030, an ETS reform and the continuation of the NER 300 mechanism, there is not a level playing field between support for renewables and low carbon technologies such as CCS. This needs to be addressed. Hoping that everything will work out in the end is not an option. Or as Connie Hedegaard summarised the latest report by the IPCC Working Group III: “There is no Plan B, there is only Plan A - a collective action to reduce emissions now.'' I call upon parties involved – governments, EU, industry, science and societal players – to consider additional steps in CCS that will deliver over time cost-effective CO2 abatement, economic growth and protect industrial competitiveness at the same time.

Thank you

ccs – essential technology for a low carbon future · dick benschop became president director of...

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