The US energy sector may hold key advantages for developing carbon capture and storage (CCS), but its increasingly vocal oil company cheerleaders say they need further tax breaks to achieve the scale required.
ExxonMobil, which is championing a $100bn US Gulf coast CCS hub, says a key US tax break needs to be doubled for the technology to make a real difference in reducing emissions. The 45Q credit offers up to $50/t for CO2 stored in geologic formations and up to $35/t for CO2 used in enhanced oil recovery. But costs for CCS vary widely depending on CO2 concentrations and proximity to where the CO2 can be sequestered, according to ExxonMobil senior vice-president Neil Chapman, and the incentives are mostly inadequate.
"There has to be policy support at some stage to be able to get after the bulk of the CO2 emissions," Chapman told last week's Energy Intelligence Forum. "In that $100/t range, you could make a very significant impact, particularly where the heavy industry is in places like the Gulf coast."
CCS has been around for half a century, but has struggled to take off because of its high costs and technological complexity. But US bank Morgan Stanley says the US enjoys the right conditions to scale the technology, including ample access to sequestration capacity, an ability to build out CO2 hubs and a supportive policy backdrop. Congress last year extended the 45Q credit to the end of 2025. Democrats are seeking to extend the programme through to 2031 in their $3.5 trillion budget plan, amid speculation that the value of the credits could be increased. And the $1 trillion bipartisan infrastructure bill, awaiting a final vote in the House of Representatives, would provide $2.5bn in funding over the next four years for carbon capture demonstration projects.
Paris is always a good idea
ExxonMobil has said CCS is the initial focus of the low-carbon business it set up at the start of this year, describing it as "one of the critical technologies required to achieve net zero emissions" and meet the goals outlined in the Paris climate accord. It has floated a proposal for a CCS hub to capture CO2 emissions from refineries and industrial facilities along the Houston Ship Channel, offering the potential to capture and store 50mn t/yr of CO2 by 2030 and 100mn t/yr by 2040. Last month, US rival Chevron, independent refiner Phillips 66 and eight other companies with plants near Houston expressed interest in joining ExxonMobil in backing joint infrastructure for such a hub.
Separately, Chevron has earmarked $3bn of spending on the technology over the next few years and plans to increase carbon capture and offsets to 25mn t/yr by 2030 by developing regional hubs with others. Jeff Gustavson, president of Chevron's new low-carbon unit, says he is watching for any increase or extension in the tax credit, as well as for any extra support the administration can provide to help get projects up and running. "We'll need more of that going forward to really get to the scale that carbon capture has to offer," he told the FT Energy Transition Strategies Summit on 6 October.
Upstream independent Occidental Petroleum is taking a different tack, with plans to build the first large-scale direct air capture plant, which will suck 1mn t/yr of CO2 from the atmosphere and store it underground in the Permian. The first facility, expected to be operational by 2024, is ahead of schedule, chief executive Vicki Hollub says. The biggest game-changer for such technologies would be raising the value of tax credits and making them direct-pay to simplify the process for developers, she told the Energy Intelligence Forum. "If that could happen, then that accelerates direct air capture and other [CCS] projects in the US."
