Carbon Capture, Utilization, and Storage (CCUS) is emerging as a promising technological solution to help polluting industries decarbonize their operations and meet sustainability goals. Oil and gas, along with mining and construction, are among the most carbon-intensive sectors. These industries face increasing pressure to reduce their carbon footprint to help accelerate the global transition to net zero.
Today, the oil and gas industry only contributes 1% to total renewable energy investments globally, which is why there is such a massive push for decarbonization in the sector, with CCUS playing an important role. CCUS involves capturing CO2 from large point sources, such as power generation or industrial facilities, and utilizing or storing it safely underground. As mentioned in an S&P Global podcast with industry experts Derek Gonsuron and Hill Vaden, CCUS must be 10-25% of the greenhouse gas reduction mix by 2050 to hit climate goals across the board.
According to a report by the International Energy Agency (IEA), the oil and gas sector contributes significantly to GHG emissions, with upstream oil producing 45Mt of methane emissions in 2022 and upstream gas producing 25Mt. The oil and gas industry accounts for half of today’s energy supply but produces over 18 CO2 emissions, making it a catalyst for CCUS. The oil and gas industry encompasses a range of players, including Majors, Independent Operators, and International/National Oil Companies (INOCs/NOCs); however, (NOCs) account for more than half of global production and nearly 60% of the world’s oil and gas reserves.
CCUS in the US Upstream Oil and Gas Industry
While global efforts to deploy CCUS are significant, the United States has emerged as a leader in CCUS development and implementation in the upstream sector. The oil and gas industry has been an early adopter of CCUS technology, deploying it in North America since the 1970s. According to a report by Wood Mackenzie, global carbon capture capacity will reach 440 Mtpa by 2034, with storage capacity reaching 664 Mtpa, requiring a total investment of $196 billion (USD). Currently, the US leads this funding, contributing 50% of the total. Several factors drive this leadership:
- Government support: the US government has committed significant funding to CCUS initiatives. For example, the Infrastructure Investment and Jobs Act (IIJA) provides $12 billion to support CCUS technology through 2026.
- Regulatory Incentives: policies like the 45Q tax credit and the California Low Carbon Fuel Standard (LCFS) have created a favorable environment for CCUS projects, encouraging oil and gas companies to invest in carbon capture technologies.
- Technology: US companies and research institutions are leading the development of more efficient and cost-effective CCUS technologies, making implementation more feasible for upstream operations.
- Industry collaboration: Partnerships between oil and gas companies, technology providers, and academic institutions have accelerated CCUS innovation and deployment in the US upstream sector.
CCUS Technology Options and Applications
The oil and gas sector has become a driving force behind CCUS development globally, with several technologies becoming particularly relevant to the upstream market. The industry is involved in over 90% of operational CCUS capacity worldwide and has contributed to over 40% of CCUS investments since 2010. Many companies in the upstream sector are implementing these technologies, which are helping to reduce Scope 1 and 2 GHG emissions. Here is a list of the technologies being adopted:
Enhanced Oil Recovery (EOR)
Carbon dioxide (CO2) injection for enhanced oil recovery (EOR) is a well-established CCUS technique utilized for decades to increase oil production from mature fields. This method, also known as gas injection, involves pumping CO2 into oil reservoirs, dissolving and displacing oil residue trapped in rock pores. This process decreases oil viscosity, pressurizes it, and mobilizes it, creating a concentrated oil bank that’s swept to producing wells. According to the US Office of Fossil Energy and Carbon Management, the process can significantly extend the productive life of oilfields, potentially recovering 30-60% more of the original oil deposit. CO2 EOR accounts for nearly 6% of onshore oil production in the United States, notably in the Permian Basin. Globally, about 45Mt of CO2 is captured annually across 11 countries, with approximately three-quarters used for EOR.
While CO2 EOR primarily boosts oil extraction, it also offers a pathway for carbon sequestration. The injected CO2 can be permanently stored underground, contributing to carbon capture and storage (CCS) efforts. A report by the Global CCS Institute suggests that using anthropogenic CO2 for EOR could reduce the life-cycle carbon footprint of the produced oil by up to 50% compared to conventional methods.
Direct Air Capture (DAC)
In the upstream market, DAC is a promising avenue for achieving net-zero emissions goals and potentially offsetting hard-to-abate emissions from various industrial processes. The technology aligns with the industry's increasing focus on sustainability and carbon management strategies. DAC facilities can be integrated with existing oil and gas operations, providing opportunities for EOR or permanent carbon storage in geological formations.
Recent developments in the CCUS landscape underscore the growing importance of DAC technology. A significant milestone was reached in August 2023 when Occidental Petroleum, a major oil and gas player, announced the acquisition of Carbon Engineering Ltd., a leading DAC technology company, for approximately $1.1 billion.
Carbon Capture from Natural Gas Processing
In the upstream sector, natural gas deposits often contain large amounts of CO2, sometimes up to 90%. For technical and commercial reasons, this CO2 must be removed before the gas can be sold or processed for liquefied natural gas (LNG) production. Instead of venting this CO2 into the atmosphere, companies can use CCUS technology to reinject it into geological formations or use it for EOR.
An example is the Val Verde Natural Gas Plants in southern Texas, which pioneered a significant shift in CO2 management within the natural gas industry. Instead of venting the separated CO2, which can comprise 25% to 50% of the raw gas stream (e.g. carbon dioxide, nitrogen, hydrocarbons), the facility compresses it and transports it via a long-distance pipeline to a different oilfield. This CO2 is carried hundreds of kilometers to the SACROC Unit in the Kelly-Snyder Field of Scurry County, West Texas, where it's injected for EOR, potentially capturing approximately 1.3Mt per annum.
Electrification with CCUS
Some companies are exploring the combination of facility electrification with CCUS to reduce emissions from upstream operations further. This approach combines the benefits of electrification, which reduces direct emissions from fossil fuel-powered or hydrocarbon-powered equipment.
Electrification in the upstream sector involves replacing traditional gas turbines and engines with electric motors powered by renewable energy sources. This has been particularly prominent in offshore operations, where most drilling rigs rely on gas turbine-driven generators. By integrating renewable energy sources, such as offshore wind farms, into the power mix, companies can further decrease their carbon footprint.
Investments and Future Outlook
The CCUS market is poised for significant growth, with industry giant Exxon Mobil Corp. projecting that the global CCUS market could be worth $4 trillion by 2050. This forecast aligns with the urgent need to deploy over 2,000 large-scale CCUS facilities by 2050 to meet climate mitigation targets. These efforts are bound to produce a wealth of business and job opportunities across the industry to ensure sustained growth.
The Energy Transition and Decarbonization
CCUS plays a vital role in the energy transition strategy of many upstream oil and gas companies. It allows these firms to:
- Reduce scope 1 and 2 emissions from their operations
- Address the carbon footprint of their products (scope 3 emissions)
- Develop new business lines, such as hydrogen production and low-carbon fuel generation
However, challenges remain. While emissions intensity in the upstream sector has fallen by 12% since 2017, absolute emissions have plateaued due to increased production. This underscores the need for continued investment in and deployment of CCUS technologies to achieve meaningful decarbonization in the sector.
How Bedrock Can Support You
At Bedrock, we understand the evolving needs of the upstream oil and gas industry, including the growing importance of decarbonization technologies like CCUS. As industry leaders in the US shale market with over 10 years of dedicated experience, we provide expert contract support to help companies navigate these challenges. Our team of technical recruiters can assist your organization in finding the right talent in the oilfield market.
Contact us today to learn how we can support your upstream operations.