CCS project integration CCS project integration from a project management perspective

Gerbert van der Weijde

Global CCS Institute / CSLF meeting on project integration

London, November 2011

Contents

• Introduction ROAD

• The importance of front-end loading

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• Status ROAD Project at end of define phase

• Experiences from the ROAD project: reflecting on the framework

• Recommendations

MPP3 location Capture Location: Maasvlakte Power Plant 3

• Output: 1070 MWe

• Efficiency: 46%

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• Operational: end 2012

• Capture ready

CO2 Capture Unit

• Technology: post-combustion

• Size: 250 MW equivalent

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• Capture rate: 90%

• CO2 capture:

1.1 mln tonne/yr

• Operational: 2015

CO2 Transport

• Pipeline length:

5km onshore, 20km offshore

• Diameter: 16”

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• Diameter: 16”

• Capacity:

• 1.5 mln tonne / year (gaseous)

• 5 mln tonne / year (dense)

• Design specs: 175 bar, 80 oC

• Pipeline insulated

CO2 Storage Location

• Depleted gas reservoir P18

• Operator: TAQA

• Depth: 3,500 m

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Depth: 3,500 m

• Capacity: 35 mln tonne

• Available: 2014

• Alternatives / future

expansion options are being

investigated (EOR)

Co-operating Partners ROAD

• Maasvlakte CCS Project C.V. is a joint venture of:

• E.ON Benelux

• Electrabel Nederland (GDF SUEZ Group)

• In co-operation with intended partners:

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• In co-operation with intended partners:

• TAQA Energy

• GDF SUEZ E&P

• With financial support of:

• European Commission (EU)

• Government of the Netherlands

• Global CCS Institute

Time Path and Milestones

14 July 2009 : EU project proposal submission

September 2009 : Project selection by EU

May 2010 : Grant decision by Government of the Netherlands

September 2010 : Publication starting note Environmental Impact Assessment

Q2 2011 : EIA and permit procedures

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Q2 2011 : EIA and permit procedures

Q4 2011 : Final Investment Decision

2014 : CCS chain mechanically complete

2015 : Integrated CCS chain operational

2015-2019 : Demonstration phase CCS chain

2020 : Start commercial operation

The Importance of Front-End Loading [1/3]

• Front-end of a project: phases of the project leading up to the final

investment decision (FID)

Appraise (FED1) Select (FED2) Define (FED3) OperateExecute

FID

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• Front-end loading (FEL): “Investing significantly in the front-end

development (FED) of a project”

• Front-end loading widely recognized as essential for eventual project

success

Appraise (FED1) Select (FED2) Define (FED3) OperateExecute

Front-End Development

The Importance of Front-End Loading [2/3]

Goal of front-end developmentDeveloping sufficiently complete image of the project, enabling owner

to decide to commit resources and address risks

To be developed during front-end development

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To be developed during front-end development

• Definition of business needs & objectives

• Concrete path chosen to meet these objectives

• Definition of project objectives

• Scope

• Definition of design basis

• Execution planning

• Project risk analysis

• Definition of required resources (financial / organizational)

How?

Where?

When?

What?

Why?

Who?

The Importance of Front-End Loading [3/3]

Flexibility early in the project should be used to…

• Create vision on the project

• Take into account stakeholder interests

• Define an effective strategy to deliver a valuable project

• Maximize use of opportunities to create value

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• Maximize use of opportunities to create value

During the front-end development of a project…

• Use a structured stage-gate process

• Apply value improving practices

• Build an integrated project team which is aligned around common goals

� Maximum value for the business

� Minimum need for costly and time consuming changes after FID

CCS Project Development Framework

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Status ROAD Project at end of define phase [1/3]Activity ROAD status during ‘define’ phase

Project Context and Opportunity Definition and Recommendation

Board Paper (incl. project status, strategic fit, organizational setup, costs & financial metrics, risks & risk mitigation, procurement, permitting, stakeholder management, execution planning) available.

Project Development Approach Project execution plans in place.

Site SelectionSite selection not applicable for ROAD (MPP3 already under construction). Soil investigation performed.

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Site Selection Soil investigation performed.Leasehold ready for signature.

Stakeholder and External Relations

Stakeholder management plan & team in place.Public engagement activities ongoing.

EnvironmentEnvironmental studies completed.Environmental Impact Assessment submitted to competent authorities. Permit applications submitted.

Health and Safety

Several risk assessments completed, including HAZID, HAZOP, maximum credible accident study and reliability assessment. A rough outline of timing of finalizing different H&S systems and documents has been prepared. A safety management team for construction and commissioning is still to be established, as are detailed procedures on site surveys. However, coordination risks on site are being investigated.

Status ROAD Project at end of define phase [2/3]

Activity ROAD status during ‘define’ phase

Fuel Supply Not applicable for ROAD (E.ON MPP3 scope).

Power Plant – Capture Facility

Power plant engineering not applicable (E.ON MPP3 scope).FEED study capture plant completed. Value engineering capture plant completed. Detailed engineering started.Basic design interfaces completed.

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CO2 Product

CO2 specification is fixed, including impurities, pressures and temperaturesCompressor and dehydration process and design has been assessed in FEEDCO2 transport pipeline has been specified

Infrastructure Not applicable for ROAD (E.ON MPP3 scope).

Project Delivery EPC contract capture plant supplier ready for signature. Contract with storage partner ready for signature.

Capital / Operating Costs Cost estimates (+/- 10-15%) available.

Operations Investigation performed on location of control room, combine with MPP3 or separate. Operation will be possible from both locations

Revenue and Trading (CO2Product Only)

Utilities agreement (incl. power, steam and utilities supply, ETS compensation, operating/dispatch principles) with E.ON in place.

Status ROAD Project at end of define phase [3/3]

Activity ROAD status during ‘define’ phase

Management Systems Allocation of the responsibilities along the entire CCS chain agreed.Partner agreements ready for signature.

Ownership and Legal Project ownership and governance structure in place.

IP Management IP system has been set up to share info on E.ON power plant with ROADIP of capture supplier covered in EPC contract and license agreement.

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IP Management IP system has been set up to share info on E.ON power plant with ROADIP of capture supplier covered in EPC contract and license agreement.

Financial Analysis Detailed discounted cash-flow model in place.

RiskRisk workshops held with all disciplines in project team.Risk register (incl. cost/schedule impact, mitigating measures, residual risk) in place.

Funding Funding agreements with European Commission, Government of the Netherlands and Global CCS Institute in place.

Future Work Plan Project execution plans in place.

Status of Studies Various technical studies on all parts of the CCS value chain completed.Pre-FID project review by specialized GDF SUEZ subsidiary performed.

Experiences from the ROAD project: [1/3]reflecting on the framework

ROAD “skipped” parts of identify / evaluate stage, e.g.:

• E.ON and GDF SUEZ power plants at Maasvlakte under construction

• Dutch political pressure against unabated coal

� Strong push to demonstrate CCS at Maasvlakte; no site selection capture

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� Strong push to demonstrate CCS at Maasvlakte; no site selection capture

� Retrofit only technical option for capture

• P18 fields, suitable for CO2 storage, operated by TAQA, nearby

• TAQA developing Bergermeer gas storage project (permitting)

� P18 selected: lowest cost solution with supportive partner

Different business drivers and local circumstances

���� different development approach / FED activities

Experiences from the ROAD project: [2/3]reflecting on the framework

Strong tension between resolving key issues (funding, permits, sink), and managing cost and schedule, e.g.:

• Ideal approach would be to first secure sink and only then do capture FEED

• EEPR funding: costs over period of 5 years eligible and operation by 2015 required

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• EEPR funding: costs over period of 5 years eligible and operation by 2015 required

� No time to first secure sink and only then start with capture FEED

• At this point in time (various capture technologies, environmental scrutiny),

supplier selection has to be made before permit application

• Selecting capture supplier releases competitive pressure and increases cost (risk)

Tension between key issues, cost and schedule

���� challenge to sequence FED activities to achieve optimum result

Experiences from the ROAD project: [3/3]reflecting on the framework

• CCS Project Development Framework: required steps, logical sequence

• However: individual CCS projects face unique circumstances that

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• However: individual CCS projects face unique circumstances that

make direct application of the framework difficult

• Challenge: how to make the framework customizable for individual projects?

• Which activities are required?

• In which sequence should activities be performed?

Recommendations

• Using the CCS Project Development Framework...

• Base development approach on business drivers and local circumstances

• Focus front-end development on what is required at FID, e.g.:

• Funding, permits, sink to be secured

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• Funding, permits, sink to be secured

• Capture (highest cost, after FID on critical path)

� Contracts “ready for signature”

� Engineer for high cost certainty

• Transport (costs project dependent but good price indices, little engineering)

� Engineer for permits, focus on special points (e.g. shipping lane crossings)

• Storage (low costs, several technical critical issues)

� Tackle critical issues (secure? volume? injectivity? commercial conditions?)

� Engineer for permits, not for cost certainty

Maasvlakte CCS Project C.V.

Parallelweg 1

3112 NA Schiedam

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3112 NA Schiedam

www.road2020.nl