Australia assumes long-term responsibility for Gorgon CO2 capture

This is almost two weeks old (as are many of the things I'm hopefully about to post - I have a long backlog), but still stands as an interesting data point in the aspirational to capture and sequester CO2 emissions.

Largely overlooked amidst all the hoopla over the huge $37 billion Gorgon natural-gas deal in Australia was the thing that may have made it possible in the first place: The Australian government’s willingness to shoulder the long-term liability for storing carbon emissions underground.

That is, one of the reasons that Chevron, Exxon, and Shell finally went ahead with the massive Gorgon project is because they won’t be saddled for centuries with the worry some of the carbon-dioxide could escape, with potentially disastrous consequences.

Under the terms of the agreement, the companies will be responsible for the storage of the carbon-dioxide resulting from the natural-gas project during its operating lifetime and for 15 years afterward, Bloomberg reports. After that, the Australian national and state governments will be responsible.

Releasing companies from the generation-scale liability for stored greenhouse gases certainly makes the project more palatable from an investment point of view (not to mention a short-term political point of view). By the time that liability begins to bite - say 50 years down the road - and the economic benefits have largely been extracted, I doubt voters will look on it so kindly. But ultimately, I have a hard time seeing any carbon sequestration succeed on a commercial basis without the government (or maybe a massive reinsurance firm?) assuming the long tail of catastrophic risk in the scenario that the gas escapes - both environmental, and economic if the world half a century from now effectively measures and prices greenhouse gas emissions.

Also, don't miss Geoff Styles' informed reflections for an insider's perspective on Gorgon.

Lifecycle emissions of LNG

Geoff Styles incidentally tosses off an interesting lifecycle emissions comparison between LNG and gas moved via pipeline:

According to a recent study by Pace Consultants, the emissions from gas liquefaction, LNG transportation, and re-gasification at destination would effectively increase the lifecycle emissions from a combined-cycle power plant by roughly 22%, compared to one running on domestic (pipeline) gas. However, that result would still come in around 40% lower than the emissions from the best coal-fired power technology without CCS, and 60% less than typical coal-fired power plants.

The post is actually on the massive Gorgon gas project in Australia, which Geoff worked on in a previous life, and his comments on mega-projects are also worth reflecting on:

While a variety of factors contributed to Gorgon's requiring something like 33 years from discovery to first production, big energy projects aren't like building a supermarket or office park. Aside from the great patience these efforts require, large sums of money must be spent over a long span of time before the first dollar of revenue can be collected to recoup them. That requires the deepest of pockets and the most meticulous strategic and financial planning. Only governments and the very largest companies--with massive free cash-flow or debt capacity--can pull this off. Moreover, because of the numerous risks associated with geology, permitting and development, a project like this works best when that risk is shared by more than one party, each of which has a portfolio of sufficient size and diversity to absorb the delays that are inherent in such ventures. So while it's true that the oil Super Majors need big LNG projects to bolster reserve replacement and cash flows that are being pinched by the challenges of gaining access to large-scale oil projects in the current environment, the global supply of clean gas from such projects would be much lower, without companies on this scale to develop them.

It is a point well-taken for those who would demonize oil majors - without their ability to execute lengthy projects of incredible technical and economic complexity, our energy supplies would rapidly dwindle and Peak Oil would soon become a genuine concern.