November 2011

2Co Energy – Don Valley Power Project Securing energy, supporting growth

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Heritage and Financial backing

Denbury Resources

•  1000 miles of pipelines, moving 20MT of CO2 for enhanced oil recovery

Hydrogen Energy

•  Developed three advanced CCS projects – Peterhead, Abu Dhabi and California

TPG Capital

•  One of the world’s largest private equity firms with almost $50bn invested

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Power with CCS is underway over here…

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We need to make it happen in Europe too

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The policy conflict

Balance sheet versus energy and climate goals

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Numerous UK and EU funding initiatives help, but aren’t enough

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1.  UK Competition

•  £1bn capital support

2.  European Energy Programme for Recovery (EEPR)

•  €180m capital support

3.  EU New Entrant Reserve 300 (NER300)

•  €100s of millions of operating support (possibly capital)

4.  UK ‘CCS Demonstration Programme’

•  Operating support

•  But challenged in current climate

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0  

5  

10  

15  

20  

25  

30  

35  

40  

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UK  N  Sea  Oil    Produ

c1on

 (Billion  ba

rrels)  

As in North America, EOR can bridge the divide

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25bn

8bn

3-8bn

Source: Produced, proven and probable – DECC ‘UK Oil Reserves and Estimated Ultimate Recovery 2011’. EOR estimate – Jon Gluyas, University of Durham

⇒ Revenue £150-£750bn

⇒ Deferred decommissioning £6-£24bn

⇒ 6,000 -16,000 direct jobs retained or created offshore

Already Produced

Proven and Probable Reserves

EOR

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EOR participation in the North Sea has historically been low but not for reasons of technical viability

That was then…… •  IOCs led UKCS exploration when it was a

‘frontier’ region with large reserves and large capex requirements

•  IOCs typically manage developments through plateau and into decline

•  Independents acquire fields to better manage costs in decline

•  Potential merits of CO2 EOR recognised from 1979, but securing supply non-core to IOCs and outside skill set of independents

…..this is now •  North Sea in steep decline, creating issues for govt: decommissioning liability / loss of jobs •  UK/EU governments investing to make large quantities of CO2 available for storage •  Forward oil-price scenarios can support higher cost EOR-derived oil •  Significant untapped resources remain – 15-20% increase in reserves thru EOR access •  Carbon capture and storage is a UK, European, and global priority, creating new supplies

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Finding the right CO2 source

The Don Valley Power Plant at Stainforth

•  Internationally important project and furthest advanced CCS project in UK

•  650MW (approx) pre-combustion capture IGCC power plant capturing up to 5mtpa CO2

•  Has received planning permission (‘Section 36’)

•  Major technology providers chosen

Leading project for Yorkshire/Humber cluster

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H2

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Power generation and CO2 capture process

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Coal l Gasifiers

2 units Quench

Fuel gas conditioning

Power

Air Separation

Unit

Coal preparation

Limestone Drying

2MTPA

O2

N2

CO2 Shift

Acid Gas Removal – Selexol

Combined Cycle Unit

Sulphur Recovery

Quench make-up

Slag handling

Slag Fly Ash Recycled Water

Sulphur

900MW gross 650MW net

CO2 drying and compression

Up to 5MTPA

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CO2  

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CO2 transport and storage with EOR

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Oil CO2 IGCC

90km Pipeline

Compression

Pumping

Up to 5MTPA dense phase CO2

300km Pipeline

Filtering Metering

Pumping

Deh

ydra

tion

& s

epar

atio

n

Water

Fuel Gas

CO2 -> Oil onshore offshore CO2 storage reservoir

Multi-stage separation

CO2

Oil

Gas

H2O

CO

2

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EOR with the DVPP project

•  More costly development than simple storage – a new platform, new injection and production wells and retrofit of the existing facilities = possibly more than £1bn capital cost

•  Production of up to 150 million barrels of oil from up to 5 million tonnes CO2 per year

•  More than £10 billion in incremental oil revenue, and billions in incremental taxation to government

•  Extends life of oil fields by 20 years, and safeguards up to 1000 jobs in the offshore sector

•  Lower cost transport and storage solution for DVPP than any alternative

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Together, the projects bridge the policy divide

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  Up to 5 MT per annum CO2 capture

  £3 bn capital cost for power plant and capture

  Low carbon power

  CO2 for EOR (tax revenue)

•  FEED complete

•  Awarded €180m grant under EEPR

•  NER application in place

•  Awaiting UK process

Central N Sea EOR

Don Valley Power Plant

CO2 Pumping

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Compelling economics

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0

20

40

60

80

100

120

140

160

180

200

Who

lesa

le

Pow

er P

rice

Ther

mal

w

ithou

t CC

S

CC

S

DVP

P ne

t of

EOR

taxe

s

Ons

hore

Win

d

Off

shor

e W

ind

Nuc

lear

Sola

r

£/M

Wh

Source: Mott Macdonald for DECC, UK Electricity Generation Costs Update June 2010

DECC 2013 cost of electricity forecasts

 DVPP is a catalyst

 De-risking EOR could enable subsequent projects to need no grant

 DVPP is UK’s fastest route to CCS feasibility

DVPP

Financing – getting the right capital structure

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500  

1000  

1500  

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3000  

3500  £  million  

EEPR

NER (as grant)

UK Govt (Backing NER

and up to £1bn)

Govt/Official debt - EIB, ECAs, HMG

Commercial debt

Equity

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Financing – value chain integration risks

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Key risks

•  Covers several Industries

•  Project on project confidence

•  Completion (cost and schedule)

•  Operation (availability and reliability)

•  Financing

•  Political

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www.donvalleypower.com www.2coenergy.com

The Don Valley CCS Project is co-financed by the European Union’s European Energy Programme for Recovery. The sole responsibility for this publication lies

with the author. The European Union is not responsible for any use that may be made of the information contained therein.