May 03, 2021 • Paul Rodden • Season: 2021 • Episode: 8
Welcome to The Hydrogen Podcast!
In episode 008: There is alot going on with carbon capture, utilization, and storage and I thought I would dedicate a podcast to discussing this topic. I go over what CCUS is and how companies are using the tax credit. I also go into how Exxon is investing in CCUS and some amazing technology from a smaller player in the field that should have incredible upside for the future of CCUS.
Thank you for listening and I hope you enjoy the podcast. Please feel free to email me at info@thehydrogenpodcast.com with any questions. Also, if you wouldn’t mind subscribing to my podcast using your preferred platform… I would greatly appreciate it.
Respectfully,
Paul Rodden
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Transcript:
On today’s show, let’s talk about CCUS (carbon capture, utilization and storage). How does it work? What is one of the biggest oil and gas companies in the world doing with it? What are some of the economics around it? And I’ll also talk about a new startup with some very interesting technology to bring to the space.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen. And this podcast will give you the answers. My name is Paul Rodden and welcome to the hydrogen podcast.
Okay, just to start off, like I usually do a real high level introduction into the topic. Today, carbon capture, utilization and storage or if you’re talking to an engineer sequestration. So what CCUS is, is it’s a technology that captures carbon dioxide co2 from industrial processes, fuel combustion, hydrocracking hydrocarbons, and then it’s transported by either ship or pipeline, and then either used as a resource or permanently stored underground. So what does it mean for it to be used as a resource? Well, historically, co2 has been used for making dry ice or in fire extinguishers. And for those of you in oil and gas, you know that carbon dioxide can be used to be reinjected into reservoirs for enhanced oil recovery (EOR).
Now according to the IEA, there are plans for more than 30 new integrated CCUS facilities that have been announced since 2017. And while most of these projects are in the US, and Europe, projects are also being planned in Australia, China, Korea, and the Middle East. Now, if all of these projects were to proceed, the capacity for carbon capture would be up to 130 million tons a year. And while that’s all great for the environment, what are the economics around that? Well, if you’re here in the US, the biggest factor is the 45. q tax credit. So what is the 45 q tax credit?
Well, the National Law Review had a great webinar on this, and here are some of the high level takeaways from it. So the 45 Q is an important source of Predictable Revenue for carbon capture projects. The section 45 q credit was substantially expanded in 2018, and is worth up to $50 per metric tonne for carbon permanently sequestered and up to $35 per metric ton for carbon used as a tertiary injection in a connection with an enhanced oil or natural gas recovery project. So again, according to the National Law Review, there are currently about 32 strong contender carbon capture projects in the US market. About half of the carbon capture projects are traditionally power generation. And another third of the projects are ethanol projects with deep sailing formations representing almost 90% of carbon sequestration storage capacity with enhanced oil recovery representing most of the remaining storage capacity. And thirdly, tax equity investors, including banks, financial institutions and energy companies are closely monitoring and have expressed interest in carbon capture projects.
To date, there are no close transactions that include tax equity structures, rather, sponsors have claimed the section 45 q credit against their own tax liabilities. The recapture look back period was reduced from five to three years in the final section 45 q regulations, which may encourage tax equity investments. Now something to keep in mind is that there is now a bill to expand and extend the 45 q tax credit, which has been introduced in the House recently. The bill aims to make the 45 q tax credit permanent, it would also increase the value of the credit from 35 to $50 per ton for carbon sequestered for EOR. It would also increase other sequestered carbon from $50 to 85 per tonne. Now right now the payout term for the 45 q tax credit is 12 years. This new bill aims to make that 20 years.
Okay, so what is one of the largest oil and gas players in the world looking to do in CCUS? Well, Exxon Mobil is planning a CCUS project for the Gulf of Mexico. The project is estimated to total in at over $100 billion and take several years for the system to be operational. And well, it’s interesting to see companies like Exxon investing big in CCUS, the focus right now is really on smaller companies like Charm Industrial. According to an article in TechCrunch Charm Industrial just completed its first pilot project to test its technology through a contract with Stripe. The pilot project saw the company removed 416 tonnes of carbon dioxide.
And while that number isn’t huge, the technology behind it is very impressive, which effectively converts biomass into an oil like substance and then injects it underground, permanently sequestering the carbon dioxide. Eventually Charm said they would use its bio based oil equivalent to produce green hydrogen and replace pump or fracked hydrocarbons in the industries that may still require combustible fuel for their operations.
Now, while Charm is converting biomass into an oil equivalent and pumping it back into the ground, there are other companies like Carbon Cure, Blue Planet, Solidia, ForTerra, Carbicrete and Brimstone Energy, who are capturing carbon dioxide and fixing it in building materials. So as so much technology going into capturing carbon, it’s going to be very interesting in the next few years to see how it ultimately affects the economics. Well, that’s it for me everyone. If you have any questions or comments regarding carbon capture, utilization, or storage, visit my website at thehydrogenpodcast.com. And as always, take care. Stay safe. I’ll talk to you later.
Hey, this is Paul. I hope you liked this podcast. If you did want to hear more, I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.
