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284 Int. J. Innovation and Learning, Vol. 13, No. 3, 2013

Copyright © 2013 Inderscience Enterprises Ltd.

Challenges and opportunities for the emerging carbon capture, utilisation and storage innovation system in the United Arab Emirates

Vijo Varkey Theeyattuparampil* and Georgeta Vidican Masdar Institute of Science and Technology, P.O. Box 54224, Abu Dhabi, UAE Fax: +971-2-6165275 E-mail: [email protected] E-mail: [email protected] *Corresponding author

Yasser Al-Saleh INSEAD, Innovation and Policy Initiative, P.O. Box 48049, Abu Dhabi, UAE E-mail: [email protected]

Abstract: Beginning 2006, the United Arab Emirates (UAE) has embarked on the carbon capture, utilisation and storage (CCUS) sector to enhance its oil production through enhanced oil recovery whilst sealing future carbon-dioxide emissions in geological formations. We apply the systems of innovation framework to assess the innovation related performance within the emerging CCUS sector in the UAE. We determine that the lack of CCUS related regulations, limited financial and human resources poses significant challenges for development of the CCUS sector. Findings from this study could offer policymakers relevant insights into how best to develop the CCUS sector in the GCC region.

Keywords: carbon capture, utilisation and storage; CCUS; innovation systems; functional analysis; Abu Dhabi; United Arab Emirates; UAE.

Reference to this paper should be made as follows: Theeyattuparampil, V.V., Vidican, G. and Al-Saleh, Y. (2013) ‘Challenges and opportunities for the emerging carbon capture, utilisation and storage innovation system in the United Arab Emirates’, Int. J. Innovation and Learning, Vol. 13, No. 3, pp.284–307.

Biographical notes: Vijo Varkey Theeyattuparampil is currently employed at the Siemens Energy-Oil and Gas and has a Masters in Operations Research and Industrial Engineering from the University of Texas at Austin. He obtained his second Masters in Engineering Systems and Management from the Masdar Institute of Science and Technology, Abu Dhabi, in 2011. His research interests include sustainability in oil and gas industry and carbon mitigation technologies.

Challenges and opportunities for the emerging carbon capture 285

Georgeta Vidican is an Assistant Professor at Masdar Institute of Science and Technology in Abu Dhabi and Senior Researcher at the German Development Institute in Bonn, Germany. She obtained her PhD in 2008 from Massachusetts Institute of Science and Technology, in International Economic Development. Her research interests are in the areas of innovation systems and policy for sustainable economic transformations in emerging and developing countries.

Yasser Al-Saleh obtained his PhD from the Manchester Institute of Innovation Research, University of Manchester, UK. Prior to Joining INSEAD Innovation and Policy Initiative, he worked as a Post-Doctoral Researcher at the Masdar Institute of Science and Technology. His current research interests include sustainable energy policy, sustainability transitions, foresight and innovation studies.

1 Introduction

The United Arab Emirates (UAE) is the fifth largest oil producer in the world (BP, 2010), and has been identified as one of the highest carbon emitter per capita (WWF, 2010) along with other countries in the Arabian Gulf. The fast economic growth, reliance on the oil and gas industry and an energy-intensive lifestyle has contributed to the high level of carbon dioxide (CO2) emissions per capita. As a result, Abu Dhabi, the capital of UAE and the emirate1 with the largest hydrocarbon reserves, has taken steps to follow a sustainable growth pathway as indicated by its stated commitment to expand the role of low-carbon technologies in its economy. Alongside with renewable and nuclear energy options, CCUS has been considered an option for reducing the CO2 emissions in the atmosphere.

The CCUS process involves the capture of CO2 from stationary sources and its subsequent transportation via pipelines or ships for injection into suitable deep rock formations for long-term storage (Freund et al., 2005). Alternatively, the captured CO2 could be used to enhance oil production (thereby replacing natural gas which has usually been used for this purpose). Given the potential opportunity to sustain future oil production and lower carbon emissions from point sources, CCUS is seen as an attractive option for the UAE and the wider Gulf region (Al-Saleh et al., 2011). In the UAE, it has been estimated that using CO2-enhanced oil recovery (EOR) can lead to freeing of around 40% of the 5 billion cubic feet of natural gas currently being produced daily (Al-Yafei, 2011).

When examining prospects for the successful emergence of new industrial clusters, innovation scholars have favoured considering ‘systemic failures’ as opposed to ‘market failures’ in order to arrive at suitable policy actions (Al-Saleh, 2010). Such systemic failures could include institutional and regulatory deficiencies which can lead to suboptimal investment in knowledge creation and other innovative activity (Van Cruysen and Hollanders, 2008). To assess the emergence of the CCUS sector in the UAE, finding existing systemic failures (i.e., barriers) and opportunities could enable us to gain an in-depth understanding of current sectoral development and analyse its performance. UAE policy-makers could benefit from a better understanding of the baseline conditions to successfully strategise the development of the CCUS sector. To this end, the innovation system framework has been widely used to assess the performance of nations,

286 V.V. Theeyattuparampil et al.

industries and regions. For instance, in the CCUS arena, Van Alphen et al. (2009) uses the systems of innovation framework, particularly the Technological Innovation System to examine the opportunities and challenges facing countries like Norway, Australia and Canada who are engaged in the CCUS developments, namely.

This paper aims to assess the emergence and performance of the CCUS sector in the UAE. We primarily focus on the existing political, economic and social factors that are influencing the early developments of a niche sector for a fossil-fuel dependent economy. Findings from this study would offer important lessons for other countries in the Arabian Gulf region, seeking to invest in CCUS as a way to reduce their carbon footprint and contribute to carbon mitigation.

The paper is organised as follows. In the next section, we briefly describe the importance of sectoral innovation system (SIS) analytical framework and how it can be used to assess the development of the CCUS sector in UAE. In Section 3, we explain the process for data collection. In Section 4, we discuss our main findings. Finally, we outline the potential policy recommendations emerging from this study as well as its implications, and the future scope of research.

2 The SIS and its application for the CCUS sector

For building a CCUS sector, technology pathway and development can be a fairly complex and an uncertain process. A well-structured sectoral development can encourage innovation resulting from cooperation, mutual dependence and trust between various stakeholders involved in the development of CCUS sector. To develop, deploy and commercialise low-emission technologies, transformation of ideas from research laboratories to the market-place is critical. Van Alphen et al. (2009) explains this period as “…a graveyard for technologies that can fail to negotiate various market and institutional barriers”. Failure to allocate the right resources for the development of a sector can lead to delays or cancellation in the sector development. For instance, Kamp (2002) describes the failure of a once successful Dutch wind energy system as a result of insufficient knowledge exchange between turbine industry and energy companies. By conducting a thorough analysis of existing policies that are driving and stalling the development of the CCUS sector, this study can assist policy-makers to help identify and introduce policies to trigger and support the emergence of a niche sector such as the CCUS.

The SIS approach has been proposed in the innovation systems context in order to gain insight into innovation activities within a particular industry or an emerging sector. Innovation is defined as the generation; acceptance and implementation of new ideas, products, processes or services (Markic, 2006). Breschi and Malerba (1997) define SIS as a system (group) of firms active in developing and making a sector’s product and in generating and utilising a sector’s technologies. Such a system can be composed of firms that are engaged in both market and non-market interactions and activities that contribute to sectoral development. The resultant output from the sector will be influenced by the interaction and co-evolution of various elements and interactions (Malerba, 2004). For such an analysis, Malerba further explains that the SIS framework consists of five structural constituents, namely: actors, institutions, networks, knowledge and technologies.


1 Actors: these include firms and other organisations that are involved in the production and sale of sectoral products along with the generation, adoption and use of new technologies (Malerba, 2004). Firms can consist of users and suppliers that could affect the innovation and productivity of a given sector. Relevant non-firm actors include universities, financial organisations, government agencies and local authorities that have an influence over the activities of the sector under consideration.

2 Institutions: Edquist and Johnson (1997) explain that institutions stipulate the various constraints (e.g., rules and norms) shaping and regulating the interaction between actors, as well as the behaviour and value base of various segments in a society. Institutions promote stable patterns of social interaction/transactions necessary for the performance of vital societal functions (Carlsson and Jacobsson, 1997). Institutions can either encourage or discourage the process of innovation and diffusion of technology. The relevance of institutions is highlighted as mitigating risks and uncertainties towards regulating a sector and/or technology deployment. An example of an institution is that of patent legislations which can influence the generation, development and utilisation of new ideas and solutions (Carlsson and Jacobsson, 1997).

3 Networks: these constitute important channels for interaction and cooperation between actors and the transfer of both tacit and explicit knowledge. Networks could also influence the actors’ perception of what is desirable and possible and hence could guide their decisions and images of the future (Al-Saleh, 2010).

4 Knowledge: according to Malerba (2005), knowledge is perceived to be an important structural component in the SIS conceptual framework. Knowledge can affect the type of learning and capabilities of actors and allow them to be in a competitive position. Furthermore, it can directly influence the rate and direction of technological change, production activities and firm’s performance.

5 Technologies: this component can be an important parameter that distinguishes one sector from another. For the CCUS sector, technologies as a SIS’s constituent encompasses both emerging and established technologies that are used for capturing CO2 from industrial sources as well as conducting CO2-EOR activities. The successful introduction of a new technology can allow a firm to gain a substantial leap in its relative competitiveness and could also eliminate less successful innovators from the market. With the development of an industry and eventual maturing of a technology, the competitive process of a technology can depend on economies of scale, learning curves, barriers to entry and availability of financial resources (Malerba, 2004).

Bergek et al. (2008) point out that examining the above mentioned structural elements alone would not sufficiently explain the innovation dynamics and underlying process. Therefore, there is a need to supplement the structural analysis with a functional-oriented evaluation in order to examine the functionality and dynamics of the respective innovation systems. Next, we explain seven functional elements that have recently been proposed in the literature:


1 Entrepreneurial activities: this function highlights the importance of entrepreneurs and is a prime indicator to assess the performance of an innovation system (Hekkert et al., 2007). Entrepreneurs are critical for undertaking high-risk experiments that take a concept and convert it into reality. Carlsson and Stankiewicz (1991, p.106) explains that an entrepreneur is one who is, “…can perceive the (future) need, identify the necessary ingredients, secure the resources that may be missing initially and communicate his vision to the relevant agents – capitalists, suppliers of raw materials, people with the required skills, etc”. Furthermore, Bjerke and Hultman (2003) explain the entrepreneur’s attitude towards growth, and appreciation of the impact of a successful growth is critical for an entities success. This system function is typically analysed by mapping the number of new entrants, the level of activity, diversification activities of incumbent actors, and the number of experiments with new technology (Hekkert et al., 2007).

2 Knowledge development: mechanisms for learning are considered to be at the heart of the innovation process. Lundvall (1992, p.1) suggests that “…the most fundamental resource in the modern economy is knowledge and accordingly, the most important process is learning”. It indicates that research and development (R&D) and knowledge development are prerequisites within the innovation system. This function entails ‘learning by searching’ and ‘learning by doing’. Indicators that could be used to map function knowledge development over time include R&D outputs, patents and investments in R&D (Hekkert et al., 2007).

3 Knowledge diffusion through networks: the diffusion of knowledge contributes to learning by interaction and the facilitation of information exchange. Edquist and Johnson (1997) suggest that policy decisions (both, short-term and long-term) should be consistent with the latest technological insights, and should encourage ‘learning by interacting’ and ‘learning by using’. This function could be mapped by determining the number of workshops and conferences devoted to a specific technology topic, and mapping network size and intensity over time (Hekkert et al., 2007).

4 Guidance of the search: this function represents the selection process necessary for the convergence of technology development. Hekkert et al. (2007) define guidance of the search as those activities within the innovation system that can positively affect the visibility and clarity of specific want among technology users. It should be emphasised that guidance for search is not just a matter of market or governmental influences. It also entails the interactive and cumulative process of idea exchanges between the various technology producers, technology users and other actors. This function is usually analysed by mapping specific targets set forward by the government or industries, or by mapping the number of articles in professional journals that raises expectations about new technological developments (Hekkert et al., 2007).

5 Market formation: the formation of niche markets can allow specific applications of a technology to be pursued and experimented with. Within such an environment, which could enjoy governmental support (e.g., favourable tax regimes), actors can learn about new technology and expectations can be developed (Hekkert et al.,


2007). This function is mapped by examining the number of niche markets that have been introduced, specific incentives set for new technologies and new environmental standards which can foster protected spaces and encourage the development of specific applications of technology (Hekkert et al., 2007).

6 Resources mobilisation: this refers to both financial and human capitals which are necessary inputs for carrying out activities within an innovations system (Hekkert et al., 2007). Insights to this function could be obtained by conducting interviews with key actors in order to determine the available resources and those that are constrained (Hekkert et al., 2007).

7 Creation of legitimacy: this system function describes activities that can influence the acceptance of a technology with respect to policy and society and how such technologies comply with legislations and relevant institutions in place. Parties with opposing vested interests will often resist new technology. Therefore, a new technology and its proponents need to be considered as acceptable or desirable by other actors in the system in order to acquire its legitimacy. This function can be analysed by mapping the rise and growth of interest groups and their lobby actions (Hekkert et al., 2007).

As a final note, it should be mentioned that while satisfying each of the above mentioned system functions is important, it is also important to consider the interactions between them. Positive reinforcement led by strengthening the impact of one function on another can lead to a virtuous cycle which can, for example, support technology deployment. On the other hand, vicious cycles would have a negative influence on technology development, resulting in a slow down or even a halt in the progress of a technology (Kamp et al., 2009). Thus, it is essential for system functions to complement and reinforce each other in order to successfully lead to the emergence of the CCUS innovations system.

3 Data

Data for this study has been collected primarily through semi-structured interviews and secondary resources like professional journals and documented policy reports. Between November 2010 and January 2011, we conducted a total of 12 interviews with CCUS professionals and policy-makers in the UAE (see Table 1). The interview questions (see Appendix) were generated after a thorough background study on the emerging CCUS developments in the UAE and supported by cross consultation with stakeholders working across the policy, financial and technical spectrums in the CCUS domain. During the interview process, we asked a series of open-ended questions under the following main themes: key stakeholders and their respective roles in executing UAE’s CCUS agenda; existing policy measures and the process of decision-making; driving and impeding these plans, technical and economic constraints facing the development of the CCUS sector in Abu Dhabi. To ensure that relevant questions were included, we carried out two pilot interviews, after which we revised the interview protocol. The interviews were then transcribed and the collected data systematically analysed using the SIS framework.


Table 1 Split of interviews conducted across various sectors

Organisation No. of interviews

Government agencies 3 Research institutes/universities 3 Private firms 2 Off-takers 4 Total 12

4 The CCUS sector in Abu Dhabi

4.1 Structural analysis

4.1.1 Actors

The stakeholders participating in the implementation of the CCUS sector in Abu Dhabi include government agencies and organisations, research institutes and universities, private firms, CO2 emitters, and, oil and gas operating companies, who are engaged in developing the CCUS sector for Abu Dhabi (see Table 2). By far, the government has the highest authority in decision-making. The UAE is a constitutional monarchy with a presidential system of government. The government is comprised of three branches, namely, the executive, the legislature and the judiciary body. The Executive Affairs Authority provides strategic advice to the Chairman of the Abu Dhabi Executive Council, and Crown Prince of Abu Dhabi. The Abu Dhabi Executive Council is a governmental body responsible for the development of strategic plans and policies, and has actual decision-making power.

In 2006, in order to combat the problem of carbon emissions, the Abu Dhabi Government launched the Masdar Initiative. Masdar Initiative is geared towards the advancement, development and commercialisation of renewable and alternate energy technologies, as part of the emirates’ aim to diversify its energy portfolio. Masdar is wholly owned by the Government of Abu Dhabi through the Mubadala Development Company. This is a public joint-stock company whose sole stakeholder is the Government of Abu Dhabi. It focuses on long-term, capital-intensive projects for the Emirate of Abu Dhabi, and aims at delivering strong financial returns, and tangible social benefits for Abu Dhabi. Masdar Initiative is comprised of five business units which include Masdar Capital, Masdar City, Masdar Carbon Management Unit (CMU), Masdar Institute (MI) of Science and Technology and Masdar Power. The main role of Masdar CMU is to develop carbon reduction projects. Through the Masdar initiative, CO2-EOR projects have been identified as one of the important strategic programmes launched by Abu Dhabi, leading to reduction of its carbon footprint (Nader, 2009). At present, the Masdar CMU has been endowed with the responsibility of project developer for the CCUS sector in Abu Dhabi. Their role includes coordinating with other stakeholders in matters related to technical, policy, and business development for the CCUS sector. For instance, Masdar CMU has partnered with a variety of local and international partners, including the Abu Dhabi National Oil Company (ADNOC) and its group of companies (the off-takers, in CCUS terminology), and local industrial and power generation facilities (the emitters) to match CO2 supplied from sources (e.g., industries) with sinks


(e.g., oilfields). ‘Off-takers’ here refer to the end-users of CO2 in the CCUS value chain who are responsible for injecting it into oilfields with the intention of enhancing oil production through EOR. Table 2 Current stakeholders in the development of CCUS sector

Category Organisations/firms

Government of Abu Dhabi Supreme Petroleum Council Department of Economic Development Environmental Agency-Abu Dhabi The Executive Affairs Authority Abu Dhabi Water and Electricity Authority Mubadala

Governmental agencies

Masdar Carbon Management Unit Masdar Institute of Science and Technology Petroleum Institute UAE University University of Oslo Norway Institute of Air Research United States Department of Energy Massachusetts Institute of Technology Herriot Watt-University Rice University Stanford University University of Texas at Austin

Research institutes/universities

National Energy and Water Research Center Siemens Statoil Praxair Industrial Gases LLC Mustang Engineering

Private firms

J C Penny Emirates Steel Industries Taweelah Asia Power Company Emirates Aluminium

CO2 emitters

Hydrogen Power Abu Dhabi Abu Dhabi National Oil Company Oil and gas operating companies Takreer Refinery Abu Dhabi Company for Onshore Oil Operations Abu Dhabi Gas Industries Ltd.

Off-takers

Habshan Oil Field

Note: Semi-structured interviews with stakeholders involved in the emerging CCUS sector in the UAE.


ADNOC, through its subsidiary Abu Dhabi Company for Onshore oil operations (ADCO), is responsible for acquiring the CO2 from Masdar CMU, and injecting it into mature oil reservoirs for EOR operations. The role of ADCO in CO2-EOR is to address the key technical risks and business uncertainties associated with CO2 injection into onshore oil reservoirs. Research findings show that, in the early developmental stages of CCUS in Abu Dhabi, the Government of Abu Dhabi through the Supreme Petroleum Council (SPC), is the entity responsible for executing critical decisions involving the CO2-EOR pilot-project. The SPC is a government entity that has the highest authority in matters related to petroleum affairs for the emirate of Abu Dhabi.

The Department of Economic Development (DED) is a governmental agency leading Abu Dhabi’s economic agenda towards a balanced, diversified and sustainable knowledge-based economy. This agency is responsible for setting up strategic partnerships with foreign governments for furthering CCUS related activities, such as knowledge-transfer in CCUS. The Environmental Agency-Abu Dhabi is another governmental agency committed to protecting and managing biodiversity and providing a clean environment. The agency has set rules and regulations that should be adhered to, for safeguarding the environment, while also setting up CCUS-based facilities. Furthermore, the National Energy and Water Research Centre (NEWRC) is leading the Abu Dhabi Water and Electricity Agency’s (ADWEA) efforts to secure energy and water for the future through research, development and deployment programmes. Its primary research focus is on renewable energy, water innovative technologies and water efficiency. Discussions between NEWRC and ADWEA include capture of CO2 from ADWEA facilities aimed at reducing CO2 emissions from ADWEA’s facilities.

As part of the ADNOC group of companies, the Takreer Refinery and Abu Dhabi Gas Industries Ltd. (GASCO) are involved in employing carbon reduction techniques. The Takreer refinery aims to capture previously flared gas streams at the Ruwais refinery at Takreer and compress the collected gas, which is then sent to fuel-gas systems in oil reservoirs to partially replace natural gas. Similarly, GASCO aims to recover the previously flared waste gases, generated from the gas processing complex at Habshan oilfield, and generate CO2 for the partial replacement of natural gas for oil production.

In order to develop a strong research base and encourage infrastructural development, multiple organisations and universities are engaged in the advancement of the CCUS sector in the UAE. This is considered to be a promising indicator since at the core of an innovation system are research universities and laboratories for generating knowledge, technologies, and industry standards. Presently the MI, established in 2007 in collaboration with the Massachusetts Institute of Technology (MIT), focuses on providing independent research-driven graduate programmes to develop human talent to advance the local clean energy industry. Furthermore, MI is seen to be the research arm of Masdar CMU and is currently involved with several CCUS-based research projects. International collaborations to deepen the local oil and gas industry knowledge of conducting EOR and CO2 sequestration have led to research partnership involving Petroleum Institute (in Abu Dhabi), University of Oslo, Stanford University and the University of Texas at Austin. In addition, the US Department of Energy (DOE) has entered into a strategic partnership with Masdar CMU to facilitate and encourage knowledge transfer in CCUS.

Amongst private sector organisations, Siemens, Statoil and the Norway Institute of Air Research have a partnered with Masdar to delve into technical research for mitigating risks, and uncertainties associated with CO2 capture technologies when deployed in the


local environment. Praxair Industrial Gases LLC supplies CO2 for the current pilot project carried out at Bab’s Rumaitha field in Abu Dhabi. Mustang Engineering and JC Penny were awarded the Front-End Engineering and Design contracts for pipeline network and CCUS facilities in Abu Dhabi, respectively.

As shown in Table 3, the capture of CO2 from industrial and energy-intensive sources includes a steel facility located at Mussafah in Abu Dhabi called the Emirates Steel Industries (ESI), an aluminium smelter, called Emirates Aluminium, and a power-generation facility called the Taweelah Asia Power Company. Another project, called ‘Hydrogen Power Abu Dhabi’ (HPAD) is planned to join the CCUS sector at a later stage. Table 3 Sites from where CO2 will be captured during Phase 1 of the CCUS project

Emitter plant Type Volume (MMcfd CO2)

Technology

Taweela Asia Power Company (TAPCO)

Boiler-based generation 90 Post combustion chemical absorption

Emirates steel industry (ESI)

Iron reduction plant 38 No CO2 capture required. dehydration and compression

Emirates aluminium (EMAL)

Combined cycle gas turbines-based power generation

132 Post combustion chemical absorption

Hydrogen power Abu Dhabi (HPAD)

Not available 90 –

Habshan oilfield Not available 30–32 –

Source: Al-Lamki (2010), Nader (2009) and Salma et al. (2010)

4.1.2 Institutions

At the outset, the role of the government in setting standards, granting funds, and leading industry coordination efforts is critical for the emergence of a sector. Globally, CCUS regulatory frameworks are in the formative stage. Our interviewees expressed views that favourable CCUS regulations and financial mechanisms should be developed to govern CCUS activities in Abu Dhabi. This can encourage increased participation of current and future stakeholders in CCUS developments in Abu Dhabi. In fact, though the CCUS activities in Abu Dhabi are in their early stages, some of the interviewees suggested that the absence of a regulatory framework questions the position of the government on expanding future CCUS activities in Abu Dhabi. At present, the Environmental Agency-Abu Dhabi has set guidelines for regulating the general effluent emissions from CO2 capture facilities. Such guidelines should be adhered to when designing CCUS facilities in Abu Dhabi.

The ongoing CO2-EOR pilot project conducted at the Rumaitha oilfield is the first of its kind in the Middle East. The pilot-study is undergoing its testing and reliability phase, and is governed by existing oil and gas industry regulations. However, ownership and liability of the injected CO2 in the long-run, as well as the long-term monitoring costs of the injected CO2, are some of the key regulatory aspects that the Abu Dhabi Government is yet to address. By passing the long-term liability of injected CO2 to investors or to the oil and gas industry, it can potentially discourage them from pursuing short-term EOR projects. Issues such as long-term ownership of CO2 can be risky and safety can be a


concern. Hence, a favourable regulatory framework will require careful balancing of short-term CO2 injection plans by the oil and gas companies with the risks associated with long-term responsibility of injected CO2 and reservoir property rights. The interviewees suggest that due to the nature of the governing structure in Abu Dhabi, public opinion does not influence decision making for oil and gas industry projects. As the role of public perception is negligible in making critical decisions, an interviewee expressed confidence in the project. It was suggested that the undertaking would be considered as “…another oil and gas project” that is not influenced by public perception.

On a broader context, ADCO has developed an EOR project roadmap detailing the procedures and protocols that are to be followed for conducting CO2-EOR activity. The roadmap illustrates the technical screening studies, laboratory fluid and rock core studies and computer simulation studies that have to be followed while conducting CO2-EOR. The development of this roadmap has encouraged other operating companies of ADNOC to launch similar CO2-EOR activities. Furthermore, ADCO launched the vision 20/20 whereby maximising oil recovery with minimum cost is placed as a high priority when conducting future operations.

4.1.3 Networks

Masdar CMU, currently taking the lead in the deployment of CCUS-based activities for Abu Dhabi, has made substantial progress in forging partnerships with local and international stakeholders in order to reduce the infrastructure gridlock and CCUS-based knowledge-gaps. Starting in 2006, CO2 emitters and CO2 off-takers have collaborated to address challenges across multiple facets of the CO2-EOR project. A number of interviewees supported the need for research institutions and universities to play a vital role in bringing together best practises and guidelines for developing CCUS related regulations and reducing technical knowledge-gaps in CCUS.

Additionally, Masdar CMU is a member of the Global Carbon Capture and Storage Institute established to share expertise amongst its member participants and ensure CCUS industries globally benefit from each other’s knowledge and support GHG emissions reduction. Annually, Abu Dhabi is the host of the World Future Energy Summit (WFES), which targets policy-makers, business investors, and technology experts in various clean energy sectors. Since its inception in 2008, WFES has had CCUS as one of its key focus areas, and has become a platform to discuss issues that relate to latest developments in terms of low-carbon related technology, business and policy.

4.1.4 Knowledge

Interviews suggest that there is a severe lack of a CCUS related knowledge-base in the UAE and Middle East. The CO2-EOR activity mechanism brings forth new sets of challenges for firms to find the right talent and human capital who can work in this sector. Attracting and retaining well-qualified engineers in the UAE, has been a challenge. As one interviewee mentions, “…if you want to bring experts here, they have to pay well. They have to provide good conditions otherwise people won’t leave their country, and come here… they have to provide good package so they can bring good minds to this country”. Currently several research oriented collaborations have been developed. Some of them have been mentioned earlier, but here we provide additional details.


Masdar CMU, MI and Siemens have set-up a research partnership aimed at establishing long-term strategic collaboration for developing CCUS technologies. The activities are oriented towards optimising technical performance and economic feasibility of post-combustion capture technology appropriate for industrial facilities in Abu Dhabi. A separate MOU’s signed with Canada and the UK, and facilitated by DED, have allowed Masdar CMU and other stakeholders to strengthen knowledge enhancement and encourage knowledge-sharing.

MIT, MI and Petroleum Institute have also engaged in joint research programmes addressing various CCUS challenges. These research collaborations have been conducted to address two primary reasons. First, to address technical issues relevant to the CCUS sector, and second, to build human capital for the emerging CCUS sector. One interviewee argues that “…the Government is doing the right thing by trying to partner with the best out there… the best in the world and bringing the knowledge”.

In undertaking such initiatives, Abu Dhabi aims to identify and develop a young pool of local talent and encourage their engagement in the emerging CCUS sector. Furthermore, local institutions like PI have begun setting-up CCUS related university-industry relations to advance technological knowledge among local students. The interviewees suggest that such research-driven programmes will stand to support the local energy industry and play a vital role in addressing high human capital demand. Additionally, various workshops, seminars and conferences held in Abu Dhabi are considered by most interviewees as positive factors to encourage knowledge sharing in CCUS between local and international stakeholders. Table 4 Current R&D projects for CO2-EOR and CO2 storage disposal

Focus area Projects

1 Herriot Watt University: carbonated water injection (CWI, phase 2).

2 Rice University-Mobility control for CO2-EOR in heterogeneous, high temperature, high salinity, carbonate reservoirs

3 Rice University: modelling asphaltene phase behaviour and deposition in crude oil systems

4 UAE University: Evaluation of mobilisation efficiency, in Improved Oil Recovery (IOR)/EOR floods for carbonate reservoirs.

CO

2-EO

R

Fundamentals understanding of CO2/rock and fluid interaction Sweep efficiency, recovery factor, injectivity and asphaltene deposition Surfactants and mobility control EOR-CO2 simulation modelling

5 University of Texas at Austin: EOR by CO2 injection

1 Petroleum Institute: Assessment of potential and options for large-scale, long-term geological CO2 storage in Abu Dhabi.

2 Massachusetts Institute of Technology: Integrated Science and implementation of geological storage of CO2 in Abu Dhabi.

C O

2 di

spos

al

CO2 capture, transportation and purity Site characterisation of permanent disposal Integrity Comprehensive monitoring programme Capacity estimate and risk assessment Modelling of CO2 sequestration Energy policy

3 Stanford University: Large-scale modelling of the physical process associated with sub-surface CO2 sequestration.

Source: Salma et al. (2010)


Finally, ADNOC, ADCO, PI, Rice University, and the University of Texas in Austin, have joined together to conduct collaborative research in the area of CO2-EOR. Agreements between ADCO, PI, MI, Masdar CMU, MIT, and Stanford University have been signed with the aim of addressing the issue of long-term storage disposal of CO2 in Abu Dhabi. Table 4 provides a summary of the current R&D projects led by various research institutions for CO2-EOR and CO2 storage disposal.

4.1.5 Technologies The technical challenges involved in the CO2-EOR pilot project need to be overcome before commencing a commercial scale development of CO2-EOR project. The need for thorough understanding of technical issues can lead to a lowering of risks and uncertainties associated with EOR. The interviewees suggest three challenges that have to be addressed in the CO2-EOR domain in Abu Dhabi include:

1 determining feasible CO2 capture process

2 effective utilisation of CO2 for EOR operations

3 long-term CO2 storage.

For the capture of CO2 from ESI, CO2 is obtained in a pure and separate form. Therefore, there are no requirements for CO2 capture facilities at ESI. During this phase, Siemens is involved in developing proprietary amino acids solvent capture technology which is tolerant to Abu Dhabi’s extreme temperature conditions. The other technology related research areas that will be investigated and addressed by Siemens include:

1 determining the specification of CO2 stream for pipeline transport, geological storage, and EOR in Abu Dhabi

2 evaluating the CO2 purification process for obtaining the required CO2 stream from post-capture processes

3 assessment of local regulations to incorporate and adopt measures for re-use, re-cycling and dispose of solid and liquid waste streams from post-capture solvent reclaiming system.

By using amine solvents at CO2 capture facilities, it can lead to the release of amines emissions to the atmosphere and pose risk to human health and natural environment. In order to enhance the study of this amine-based degradation, a joint research collaboration involving the University of Oslo, the Norwegian-based oil company, Statoil, the Norway Institute of Air Research and Masdar CMU has been formed. This project is called the Atmospheric Degradation of Amines (ADA) and commenced operations in 2009. The study investigates the atmospheric fate of amino ethanol, a by-product of CO2 capture. The success of ADA-2009 led the Masdar CMU to further extend research funding to 2010 and support further investigation of amine impact on the environment and human health. Currently, limited study has been conducted about amines emissions and its impact on the environment (Nielsen et al., 2010).


Table 5 Inducement and blocking mechanisms affecting the functionality of Abu Dhabi’s CCUS sector

Function Inducement mechanisms Blocking mechanisms

Entrepreneurial activities

• Ongoing CO2-EOR pilot project at Rumaitha oilfield conducted by ADCO

• Capital-intensive nature of CCUS activities

• Global financial downturn contributing to a risk-averse attitude of private firms

• Enforcement of intellectual property rights can hinder the technologies to be deployed in Abu Dhabi

Knowledge development

• Ongoing CCUS-based research involving PI and MI

• Masdar CMU playing a lead role in accumulating CCUS-based knowledge Abu Dhabi

• Only few local research laboratories for conducting CCUS-related research

• Lack of CO2 capture technology testing centres in Abu Dhabi

• Under developed CCUS knowledge capabilities

• Need to reply extensively on foreign expertise

Knowledge diffusion

• Partnerships and collaborations of Masdar CMU with leading research institutes, universities, organisations and forums to reduce technical, policy and business knowledge-gaps in CO2 capture and CO2-EOR processes

• Establishment of ‘carbon-lead’ steering committee to facilitate communication between ADNOC, ADCO and Masdar CMU

• Limited communication and collaboration between stakeholders of the CCUS network

Guidance of the search

• Roadmap for CO2-EOR launched by ADNOC/ADCO

• CO2 capture targets set by ADNOC/ADCO

• High potential of CCUS projects to reduce per capita CO2 emissions in Abu Dhabi

• Lack of CCUS roadmap for Abu Dhabi from the governmental-side

• Top-down approach for decision-making resulting in multiple layers of bureaucracy

• Lack of transparency in the decision-making process

• Lack of clarity by Abu Dhabi Government in how CCUS is expected to play a role in carbon abatement



Table 5 Inducement and blocking mechanisms affecting the functionality of Abu Dhabi’s CCUS sector (continued)

Function Inducement mechanisms Blocking mechanisms

Market creation

• High relevance of CCUS project to reduce future per capita emissions for Abu Dhabi

• Allowance of CCUS-based projects to be CDM certified can earn monetary benefits for CO2 storage and attract potential stakeholders

• Lack of incentives for supporting CCUS-based projects. e.g.: governmental loans

• Delays in executing decisions between governmental agencies and stakeholders for reaching critical decisions on time

Resource mobilisation

• Close proximity of CO2 sources and CO2 sinks in Abu Dhabi

• Access to funding by government-owned Mubadala and ADNOC to finance and develop the CCUS infrastructure

• Shortage of experts, scientists and skilled workforce to conduct surface and sub-surface CCUS-related experiments

• Lack of short-term financial incentives to support high costs of CCUS projects

Creation of legitimacy

• Strong governmental interest in establishing a ‘clean’ fossil-fuels-based economy for Abu Dhabi

• MOU signed with Canada, USA, UK, Siemens for partnership in CO2-EOR technology development and knowledge-sharing

• Creation of Masdar initiative to spearhead low-carbon projects including CCUS

• Non-existence of environmental NGOs or civil society lobby groups to oppose CCUS projects and activities

• Lack of CCUS awareness for potential new stakeholders (e.g., utilities)


4.2 Functional analysis

Having described the structural elements of the emerging CCUS innovation system in Abu Dhabi, the second phase of our analysis involves evaluating the performance of seven innovation system functions introduced in Section 2. The relevance of conducting a functional analysis is that it can help policy-makers to intervene at processes that directly affect the outcome of CCUS development. Bergek et al. (2008, p.409) explain that, “…it is these processes where policy-makers may need to intervene, not necessarily the set-up of the structural elements”. In doing so, we focus on the inducement and blocking mechanisms that are currently promoting and/or hindering the CCUS development in Abu Dhabi.


Table 5 provides a detailed illustration of the blocking and inducing mechanisms for each of the functions. This analysis allowed us to further explore possible reinforcing cycles that could lead to successful development of the CCUS sector. These virtuous cycles are discussed in the next section.

Given the governance system in the UAE, the likely approach to stimulate the development of the CCUS sector appears to be from governmental level, as critical decisions related to CCUS sectoral development are initiated by the government of Abu Dhabi. In the SIS framework, this is referred to as ‘Guidance of the Search’. We find that there is a lack of a concrete mandate or rules of how CCUS can play a critical role in mitigating carbon emissions in Abu Dhabi. For example, the target amount of CO2 that has to be captured or injected by the CCUS sector has not been set. Whilst ADNOC and ADCO have launched a roadmap for conducting their CO2-EOR-based activities, lack of commitment by the government can hinder market creation for the CCUS sector. This further impedes deployment of sufficient resources, creation of legitimacy, and knowledge diffusion. The CCUS sector is therefore likely to fail in coherently addressing the goals and objectives of how CCUS is set to cap future CO2 emissions.

Furthermore, resource mobilisation, which includes financial and human capital as well as, mandates set forth by the government to achieve the objectives of the CCUS sector, and CCUS knowledge diffused across the sector, can influence future CCUS market creation and expansion in Abu Dhabi. Ultimately, market creation is significantly supported by the presence of a hydrocarbon-based industry, which is the backbone of the Abu Dhabi economy.

Knowledge diffusion, generated through collaboration and partnership, enhances the CCUS knowledge-base in Abu Dhabi, and contributes to the legitimacy of CCUS adoption by the Abu Dhabi oil and gas industry, and affects the creation and expansion of the market. The launch of the first CO2-EOR-based pilot project required the skill-sets and resources of the existing oil and gas industry in Abu Dhabi, and the presence of stakeholders like Masdar CMU, emitters (Emirates aluminium), and off-takers (ADNOC) to support the CCUS-based activities in Abu Dhabi.

Figure 1 illustrates the potential ‘virtuous cycle’ indicating the dynamics between the various functional elements that can positively impact the development of the CCUS sector in Abu Dhabi. The representation of weak functions does not necessarily constitute a problem and neither should strong functions be considered as critical. In fact, such representation can indicate which function can be further enhanced by the introduction of appropriate policies. This can contribute to the progress of the CCUS sector by creating a conducive environment for technology deployment, policy implementation and an inviting business environment for CCUS sector development in Abu Dhabi. The resultant Figure 1 indicating the seven system functions and their dynamics was validated by the interviewees and approved. Furthermore, it was suggested that unless the economics in developing CCUS projects are found financially viable, drawing stakeholder support can be difficult to achieve. And this can impede the development of CCUS-based projects in the UAE.


Figure 1 Virtuous cycles that could stimulate the development of the CCUS sector in Abu Dhabi (see online version for colours)

Based on the interviews, it has been found that the functions ‘knowledge diffusion’ and ‘legitimacy creation’ are strong drivers at the moment for UAE’s CCUS sector. Important impediments that have to be immediately addressed include those affecting the function of entrepreneurial activities (e.g., lack of financial incentive for pursuing CCUS-based projects which leads to a risk-averse attitude from the private sector); knowledge development (e.g., under-developed CCUS-based capability); guidance of the search (lack of a transparent policy-making process); market creation (an absence of CCUS-based regulations); resources mobilisation (e.g., lack of CCUS skilled work-force). By addressing these impediments, positive interactions within the CCUS innovation system can be re-enforced to overcome the shortcomings facing CCUS sector developments in Abu Dhabi. Hence, from Figure 1, we can see that by strengthening weak function like ‘guidance of search’ could potentially impact other system functions like ‘market creation’, ‘resource mobilisation’, ‘entrepreneurial activities’ and ‘knowledge development’. For instance, availability of financial incentives to support early CCUS-based projects can encourage organisations to partake in CCUS-based activities.

When comparing the emergence of the UAE CCUS sector with other CCUS development worldwide, we see that the main driver stimulating the development for CCUS in the UAE is essentially the CO2-EOR. Moreover, one of the key challenges facing this sectoral development is the lack of prior CCUS-based experiences and dearth in skilled workforce which requires the UAE to depend on foreign expertise and firms to execute its CCUS plans. Additionally, the growing economic uncertainty worldwide has allowed the UAE to adopt a risk-averse approach for developing its CCUS sector, and has resulted in delay of its original CCUS plans. Van Alphen et al. (2010) points out in


their study that high costs in developing the CCUS sector along with the unavailability of short-term financial subsidies, as well as absence of CCUS-based regulations have been important factors that have stalled CCUS developments in countries such as the USA, Norway and Australia.

5 Concluding remarks

This analysis allowed us to identify three main areas of improvement that should be addressed to successfully develop the CCUS sector in Abu Dhabi. They are:

1 A regulatory framework governing CCUS activities: we find that developing a sound regulatory system is found to be the most important element for fast-tracking the development of the sector in Abu Dhabi. This is because uncertainties involving large-scale CCUS-based projects are being delayed unless design and implementation related regulations are in place. These regulations should govern the activities of CO2 capture, CO2 transportation, CO2 storage and CO2-EOR-based activities such that these activities are carried out in a safe manner. Additionally, the regulatory framework should address issues such as the requirements for selecting suitable sinks (site screening and selection process) and the chemical composition of CO2 that should be transported from source to sinks.

Regulations should particularly address which stakeholder should be responsible for the CO2 after CO2 is injected in the storage site (also known as post-injection phase). In such cases, policies to identify financial responsibilities of relevant stakeholders should be explicitly defined. Furthermore, in the event accidents that can lead to CO2 leakages in the future, it is critical to specify the stakeholders who will be responsible for the damage. Having a regulatory framework in place would encourage current and potential investors and stakeholders to gain confidence in the CCUS activities conducted in Abu Dhabi. Best practise from existing CCUS-based regulations, for example in the USA and Australia who have already developed a comprehensive regulatory framework, should be studied for understanding the specific nuances and details elated to CO2 transport and CO2 storage.

Furthermore, when CCUS is made a mandatory solution to combat climate change in UAE’s energy policy, it would help enhance the visibility in the public and private domain. Additionally, developing a technology roadmap for CCUS could promote awareness and knowledge of surface and sub-surface technologies and processes required for CCUS.

2 Financial support for CCUS projects: lack of funding support to balance the high cost of developing a CCUS sector can impede new projects from being pursued. The cost of CCUS project development which includes the capture, transport and injection of CO2 when shared between multiple stakeholders such as the Masdar CMU, ADNOC and utility companies, can help in the early development and execution of projects in the UAE. Furthermore, options for financing CCUS projects (such as, availability of loans and subsidies) should be provided for these projects in order to stimulate early learning and knowledge development. Lack of financial incentives can potentially discourage stakeholders to commit to long, expensive projects and impact investor confidence.


At the international arena, approval of CCUS-based project under clean development mechanism (CDM) has been a contentious issue. In order to encourage the development of early CCUS projects to reach commercialisation phase, it is necessary that CO2 stored underground through CCUS is CDM certified such that the carbon credits obtained are tradable in both domestic and international emissions market. This could bolster participating stakeholders to gain monetary assistance and assist in the development of CCUS projects.

3 Developing a CCUS knowledge-base: CCUS is a relatively new field involving advanced engineering products and processes. As a fast emerging option for carbon mitigation solutions, the sector is facing a dearth in expertise and human capital to support sectoral development. This shortage needs to be addressed in order to avoid further bottlenecks in project development.

To address this challenge, we recommend that graduate programmes, vocational training courses and university-industry collaborations should be introduced that focus on the nexus between engineering, economics, and policy studies. Experimental facilities should be built to encourage technological innovations. This build-up of expertise should be complemented by knowledge management and knowledge sharing to encourage product and process innovations in UAE’s CCUS sector (Liebowitz, 2003; Phusavat and Kess, 2008; Osatuyi et al., 2010).

5.1 Implications

The success of any industrial projects primarily depends on viable business case and complete understanding of project risks and uncertainties. Presence of CCUS-based policy guidelines as well as the availability of financial and human capital can bolster public and private sector participation. However, the absence of these support mechanisms could lead to unfavourable business environment for fostering CCUS developments in the UAE and could potentially stall or cancel existing and future plans for CCUS. Power generations facilities, refineries and the local oil and gas industries would continue to remain large contributors of carbon emissions to the atmosphere unless an effective CCUS development strategy is in place. Furthermore, lack of coherent policy mechanisms to stimulate CCUS development could seal UAE’s position as the highest per capita emitter when compared globally, and thus pave way towards unsustainable growth.

5.2 Future research

Future research that stems from conducting this study can include an in-depth analysis of the decision-making process and technology development for the case of Abu Dhabi. This would enable a clearer understanding of the roles and responsibilities of the participating stakeholders in the CCUS developments. Across the Arabian Gulf region, existing challenges and opportunities facing the CCUS sector developments when analysed in-depth, can help in developing niche sector targeted towards carbon reduction. Such studies can contribute to gaining a comprehensive and comparative understanding of policies leading to the emergence of CCUS sector worldwide.


Acknowledgements

This study was financially supported by the Masdar Institute of Science and Technology, Abu Dhabi, UAE. The authors would like to thank the interviewees who contributed towards this research study. The authors also thank the anonymous reviewers for their inputs that considerably improved the quality of the paper.

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Appendix

Interview protocol

1 Background information: • Can you briefly explain your personal background and the main tasks that you

are engaged with as part of your organisation? • Can you elaborate on the role of your organisation and how it contributes to the

overall goals of the CCUS sector?

2 Stakeholder involvement: • To the best of your knowledge, can you mention and explain the role of various

stakeholder organisation that are currently part of the CCUS sector in Abu Dhabi?

• What has motivated the stakeholder organisation to be part of the CCUS sector? How has the overall targets and time of launch of CCUS sector changed over the last few years with more organisations joining the sector?

• Can you comment on the barriers (in terms of risk attitude and commitments) that potential new entrants (like organisation) could face when becoming a part of the CCUS sector of Abu Dhabi?

3 Pilot projects: • Can you elaborate on the current status of the EOR pilot projects conducted in

Abu Dhabi? In what ways do these pilot projects contribute to the development of the CCUS sector for Abu Dhabi?

• Can you describe some of the challenges that were present before the start of the first project on CO2-EOR? a Financial challenges? b Regulatory challenges? c Technical challenges?

4 Research collaborations and partnerships: • How do collaborations and partnerships with research organisation (like

universities and technology firms) contribute to the knowledge development for the CCUS sector? Can you suggest how such collaborations can be further strengthened?

• Are there future plans of setting up R&D related activities in Abu Dhabi? Do you think there is a sufficient availability of resources (like human capital and physical infrastructures) in Abu Dhabi that can help in the growth of the CCUS sector? Can you suggest ways to improve any of these shortcomings?

• What are the different ways by which your organisation is able to diffuse knowledge about CCUS to other members in the CCUS sector in Abu Dhabi and internationally?


• Are research organisation (e.g. research laboratories and universities) currently involved in the development of CCUS sector in Abu Dhabi? If so, how can these channels of collaborations between your organisation and research organisation be further improved?

• On the role of these universities and research organisation, can you think of a few areas of partnerships currently undertaken that are of critical importance for the success of the CCUS sector for Abu Dhabi? a Which Universities? b Any specific research group? c What is the history of this relationship?

5 Finance: • Can you elaborate on how CCUS activities and projects in Abu Dhabi are

currently funded (publically or privately funded)? • Do you think currently there are financial constraints that your organisation is

facing for financing of CCUS projects? If so, can you explain how these financial constraints have changed your organisation’ overall deliverables towards the CCUS sector?

6 Public policy: • Can you mention some of the key challenges and barriers that can arise while

CCUS regulations are formulated for Abu Dhabi and how are such policy regulations different from the rest of the countries currently undertaking CCUS?

• Can you suggest ways how public policy can support the development of the sector? a incentives (upstream and downstream) b training of skilled human resource, c financing of R&D d promoting a knowledge cluster consisting of practitioners for the CCUS

sector • What type of incentives can governments offer in order to encourage new

entrants participate in the sector? • Do you think it is required to introduce policies in Abu Dhabi such that the

public can share the costs of CCUS developments? If so why or why not? a What policies can you recommend for lowering the costs of CCUS

developments? b Remove subsidies from fossil fuels

7 Private sector: • In which areas of CCUS do you feel the private sector can contribute or play an

active role for the overall development of the CCUS sector in Abu Dhabi? Till today, have they played a sufficient role for promoting CCUS developments in Abu Dhabi? Why or why not?


8 Overall perspective: • How does pursuing CCUS fit into the strategic interests for Abu Dhabi? How do

you visualise the progress and potential for the CCUS sector in Abu Dhabi for the coming years? What could slow down or stall the developments of this sector in Abu Dhabi?

• Can you think of key arguments of the stakeholders for and against the deployment of the CCUS sector in Abu Dhabi?

• In your view, what has been the public perception towards the launch of the CCUS sector for Abu Dhabi? Do you think this is important to consider for an emerging sector like CCUS in Abu Dhabi? Why or why not? And how is this developing sector portrayed by the media?

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