The Teesside Cluster and Industry CCS Prospects

Benefits of CCS to industry • Deployment of CCS provides a carbon

solution for both power and industrial needs

• For many industrial sectors CCS is the only way to significantly reduce CO2 emissions and meet climate change targets

• Increasing exposure to EU carbon taxes in a globally competitive world means potential loss of home based production without CCS

• The UK has targets for 34% and 80% reduction in CO2 emissions for 2020 and 2050 against a 1990 baseline.

• All regions must contribute to meeting CO2 reduction targets to ensure the targets can be met and at a reasonable cost.

• Despite good progress, the North East has consistently the largest carbon footprint of any UK region, at 12-13 t CO2/year/person.

• 63% of North East CO2 emissions (31 Mt CO2/year) are related to industry.

Reductions in North East emissions will be required

3

Breakdown of North East CO2 emissions (31 Mt CO2/year)

A CCS network in the North East could supply ca. 8% of the UK’s CO2 reduction

for 2030 • Up to 26 Mt CO2 could be

technically captured each year from 37 industrial and power sector emitters situated close to each other in the Tees Valley.

• This could reduce annual

CO2 emissions from the North East by 71%.

• Sources are in close proximity (see map).

• CO2 management is already a significant driver for Tees Valley industry, and will increase in importance over the next ten years.

• If the impacts of CO2 prices and regulation are not addressed it is unlikely that business will continue as usual for the process industries in the Tees Valley.

• Inaction will lead to reduced competitiveness, profitability and viability of heavy industry.

• Carbon intensive businesses employ ca. 7,000 people and contribute ca. £700m/year to regional GVA, with most jobs linked to a few large CO2 emitters.

• These businesses could relocate to countries with less stringent environmental legislation to reduce costs.

• This would significantly undermine both the local economy and the objective of climate mitigation policies.

Business as usual is not an option

5

• The UK currently (2011) has a trade deficit of £10bn a year, up £2bn from the previous year

• The chemical industry is the largest exporting sector in the UK . There are very few others.

• In 2011 the chemical industry exported £53bn worth of product, a £3bn increase

• But UK also imported £49bn of chemicals - up by £4bn – an opportunity

Sector Importance to the UK Economy

An Example - GrowHow UK Ltd • Last remaining UK fertiliser manufacturing for 70,000

British farmers.

• 25% of business is industrial chemicals for UK – Underpins the “Nitrogen cluster” on Teesside

• Largest industrial user of natural gas in the UK

– Energy intensive & Hydrocarbon dependent – Competitive global fertiliser market – At a high risk of imports due to zero or lower

Carbon taxes outside Europe

Ammonia Production

• Ammonia plants by design capture 2/3rd of carbon dioxide and are therefore “CCS ready”

• Carbon Dioxide is then – Purified and liquefied for food packaging and

drinks industry – Used to enrich glasshouse atmospheres for

growing salad vegetables – Excess vented back to air – Or used for CCS (and Enhanced Oil Recovery)?

Lowest carbon fertiliser in EU!

Before 2011: 1 tonne Nitrogen fertiliser produced 2.6 tonnes CO2e in manufacture

With CCS: 1 tonne Nitrogen fertiliser will produce 0.36 tonnes CO2e to manufacture

Now: 1 tonne Nitrogen fertiliser producing 1.15 tonnes CO2e in manufacture

CCS can remove 1million te/yr CO2 from UK farming!

UK produces 70% of its own food and fertiliser is essential

Industrial CCS will benefit everyone in the UK

• Permanent CO2 capture can be discounted from ammonia plant emissions under the EU ETS Phase 3 (2013-2020)

• Will prevent loss of UK fertiliser industry due to carbon taxes • Will increase the sustainability of food production • Will reduce food inflation

CCS is Crucially Important to Industry

A highly integrated industrial region & is well placed to deliver & benefit from a CO2 network.

• GrowHow is just one example

• SSI is Europe’s largest blast furnace – Recently re-started & planning expansion – >5000 (direct + indirect) jobs depend on it – Carbon intensive ~5 million tonnes CO2 annually

– EUETS represents a major threat – It is an excellent capture candidate

Existing H2 plants serving Huntsman, SABIC & Ineos emit CO2 This could be captured if pipeline & storage infrastructure were available Many other examples

Deliverability • CCS is deliverable using existing technologies.

– Millions of tonnes of CO2 are captured globally each year

• Such Capture facilities are routine business for Industrial companies; the technology is proven

• Comprehensive pipeline networks already exist across Teesside: A CO2 network is a deliverable extension

• CCS at Teesside is deliverable in a short timescale, – Construction of Teesside Low Carbon could be commenced

within 18 months

– Operating 3 ½ years later >>> delivering economic growth.

Koch Industries (USA),

1 Million tonnes CO2

each year since 2000

Dakota Gasification Co,

2.5 Million tonnes CO2

each year since 2000

Stakeholder survey suggests significant appetite to connect to a

CCS network if one is available.

14

-

5

10

15

20

25

30

2015 2020 2025 2030 2035 2040

Mt

CO

2 c

aptu

red

/yea

r

Year

Large

Medium

Anchor

• A stakeholder survey reveals that several large and medium sources expect they could connect to a CCS network if one was available.

• Nearly half of regional businesses interviewed believe that a CCS network at Tees Valley would be financially viable in the next 5-10 years.

Modelled uptake scenario

A range of onshore pipeline networks connecting multiple sources in the Tees Valley are technically feasible to suit overall ambition and risk appetite.

Network Options

15

Anchor Capacity 5 Mt CO2/year

5 km “One Large Source”

Medium Capacity 22 Mt CO2/year

22 km “All Large Sources”

Large Capacity 26 Mt CO2/year

37 km “All Large and Medium Sources”

Iron & Steel

Waste to energy

Tyre pyrolysis

Oil refinery

New ethylene user

Biomass CHP

Biomass power

Waste to chemicals

Waste to energy

Biomass to chemicals

Acrylic polymers

Potential New Emitters

Existing Teesside Power Plant

Network Benefits

• Networks vs. “A to B”

• x3-4 less costly than single emitter

• x30 for small emitters

• x60 for stranded/remote assets

• Network costs comparable to other studies

A CCS system based on the eight largest emitters has average cost below £50/t

CO2

18

CCS marginal abatement cost curve for selected emitters in Teesside.

Each bar corresponds to an individual emitter connected to a common transport and storage

network.

20

Description

(Network peak capacity)

Anchor

(5 Mt CO2/yr)

Medium

(22 Mt CO2/yr)

Large

(26 Mt CO2/yr)

Capital cost for onshore pipeline(s) £7.5 m £48 m £60 m

Capital cost for offshore pipelines £333 m £485 m £485 m

Combined capital cost for network

(onshore and offshore pipelines

and shoreline compression) £346 m £546 m £562 m

• With emitters in close proximity, the onshore network is likely to be as efficient as any potential UK CCS onshore pipeline network

Estimated Costs

Shipping • Import enables improved utilisation of a Tees

based CO2 pipeline into a storage site

• Removes flexibility/variance in flow rates through network

• Increases volume transported – reduces costs

• Export enables ship based export for EOR purposes

• Both require terminals and ship fleet • Terminal c. £150 million CAPEX

• Shipping is scenario dependent £170 – 270 million CAPEX

• Significant buffer storage c. 60,000 tonnes

• £5.9 – 7.3/tonne CO2

Carbon Capture & Storage Benefits

Safeguards existing industrial base threatened by

carbon leakage

Enables flexible & secure

low carbon energy supply

Facilitates inward investment

into UK for CO2 sensitive industries

- North Sea Oil - Export skills

Enables UK Growth &

International Leadership in

Reducing Carbon Emissions

How CCS could be delivered in the UK

• Early CCS Projects will not be delivered without support

• UK CCS Commercialisation Programme – Vital to facilitate this opportunity

• Ideal outcome is Full Chain Projects – Strategically located – Delivering clusters which can provide industrial & power

opportunities

• A Platform for Growth – Government needs to deliver on its promises for the CCS

programme

• The chemical industry is clustered in four discrete UK locations but a significant share of the UK’s chemical industry exists within Tees Valley

• The industry is being pressured by the EU ETS, which threatens 25,000 jobs in Tees Valley

• The chemical industry is essential to the UK low carbon

economy

• CCS infrastructure will provide a vital extra reason to locate a chemical/industrial investment in the UK

In Conclusion

Thank You