Australia’s largest Carbon Capture and Storage project has failed on all fronts. Is CCS simply a fraud, a sneaky way for the Coalition to subsidise its large fossil fuel donors with public money? Callum Foote reports on the Gorgon failure, the global failure of CCS and the latest government hand-outs for a technology which is not commercial.
A report by the International Energy Economics and Finance Agency reveals that the Gorgon LNG project on Barrow Island off Western Australia’s Pilbara coast, one of the largest gas projects in the world, carbon capture and storage project has been a failure.
The project’s owners – Chevron, ExxonMobil, Shell and three smaller Japanese gas producers – planned to use carbon capture and storage ostensibly to offset the emissions the project produces. Chevron has donated $1.1 million over the past 10 years to political parties and campaigners according to AEC donor returns.
The Gorgon CCS project was initially planned to capture and inject underground up to 4 million tonnes (MT) of reservoir CO2 each year from the extraction and production of reservoir gas. Instead, the project sequestered on average less than 1MT per year.
So what is it about CCS that doesn’t work?
CCS as a technology has been around for over 50 years, though most of that time it went by a different name: advanced oil recovery or EOR.
EOR is a method that American oil producers developed to pump captured CO2 back into depleted wells to get as much oil out as possible. According to the Global CCS Institute, about 73% of carbon capture globally is currently used for EOR projects, making any initial “carbon capture” negligible.
“Gorgon CCS failed to reach its pre-defined targets,” says report author LNG/gas analyst Bruce Robertson. “CCS technology has been operating for 50 years. If Chevron and its partners can’t get it to work these past five years at Gorgon, it’s not an effective technology for reducing carbon emissions.”
Moreover, attempting to use CCS to reduce the emissions from gas is very shortsighted. As noted by the National Energy Technology Laboratory, the majority of emissions from gas occur when the gas is burnt, not when it is produced.
These emissions, called Scope 3 emissions, are where the problem lies and where Australia has a significant impact on the warming climate.
According to the Climate Council’s Senior Researcher, Tim Baxter “over the past decade, CCS has remained extremely expensive. There are still no projects operating anywhere in the world that have delivered CCS on time, on budget, or in the quantities promised. CCS is simply an attempt to prolong the life of polluting fossil fuels”.
The price of carbon in Australia
Gorgon agreed to buy carbon credits to cover the shortfall from its unmet CO2 target of 5.23 million tonnes.
Before recent government changes to the Australian carbon market, these credits would have come at a cost of $US184 million to Gorgon.
However, in March this year the federal government proposed a policy change which allowed carbon farmers who were previously contracted to sell their carbon credits to the government at $12/tonne to sell on the open market.
This resulted in an influx of new carbon credits on the market which dramatically dropped prices. This in turn effectively made it cheaper for companies such as Gorgon, who have failed to meet their CO2 targets, to pollute.
It is estimated that Gorgon can offset its emissions shortfall by paying around $US100 million less, if it planned to source all the required offsets from the Australian market.
Still subsidising failed projects
Despite mounting evidence of the futility of CCS, the Australian government is still subsidising investments for CCS projects, labelling them as emission reduction solutions, and relying on them to not only boost its credentials in the election campaign but also as evidence of its pursuit of net zero emissions.
“When an energy technology is consistently shown not to work, but can attract subsidies, you can be sure there are lobbyists and greenwashing at play,” Robertson says. “The oil and gas industry are harvesting subsidies to prolong the life of their operations, not for emissions reduction.”
Just last week, the Coalition government declared they would spend $130 million in taxpayer dollars on CCS projects in the Northern Territory, as a part of a $300 million energy industry funding promise.
As reported by the ABC this money would be given to gas giants Inpex, Santos and Darwin LNG.
Many of these companies which are receiving taxpayer funding don’t pay company tax or royalties in the form of the Petroleum Resources Rent Tax (PRRT).
For instance, the Ichthys project run by Inpex will pay no PRRT in its lifetime according to a report produced by consultants ACIL Allen and reported by the West Australian.
In 2019-20 Ichthys LNG paid no income tax on $6.4 billion in revenue according to the latest ATO Corporate Tax Transparency report, nor did it pay any PRRT in line with the findings of the ACIL Allen report.
“The government is very good at doling out money, but very bad at collecting any revenue from these investments” says Robertson.