Australians have little cause to be familiar with the tiny town of Weyburn, Saskatchewan in Canada's prairies. For most Canadians, even, it is barely more than a speck on the map in a part of the country dotted with tiny, little-known farming communities.
But at the moment, Weyburn, with a massive carbon capture and storage facility operating there, is among eight operational large-scale CCS projects underpinning the much-talked-about viability of the technology.
The Weyburn project stores nearly three million tonnes of CO2 captured annually from a coal gasification plant in North Dakota and transported by pipeline to Weyburn where the CO2 is injected into the ground to boost oil production – a process called Enhanced Oil Recovery.
The fact that CCS projects like Weyburn, able to incorporate EOR, can treat CO2 as a revenue-generating commodity rather than a waste gives such projects a significant edge over projects focused only on CO2 storage, and in the early stages of the technology's development can leave countries – like Australia – lacking EOR potential at a disadvantage.
"In the long term, all countries, including the US and Canada, will have to look beyond EOR to deep saline storage,” said Barry Jones, general manager, policy and membership at the Canberra-based Global CCS Institute. "We see EOR as a way to earn a bit of revenue, but it's not a long-term solution. Ultimately, EOR cannot accommodate the demand for carbon storage.”
The tone of the CCS debate in Canada is different than that in Australia, where, for instance, the multi-billion dollar CCS operation being developed at the Chevron-led Gorgon project – which would be the largest carbon dioxide sequestration operation in the world – faces uncertainty, even though Resources Minister Martin Ferguson recently insisted the project is on track to begin injections in 2015, with plans to inject 3.5 million tonnes of CO2 into the ground each year.
The Gorgon CCS project will go a long way towards dictating further investment in CCS technology, which is seen as a key determinant in whether Australia can meet its target of reducing greenhouse gas emissions by at least five per cent below 2000 levels by 2020 and 80 per cent below 2000 levels by 2050.
But for anyone doubting whether the Gorgon CCS project has any success stories elsewhere in the world to draw on for best practices, they could turn their attention to Canada, where projects at Weyburn and elsewhere have fed optimism about the technology's future.
The fact that Canada has been able to experience initial success by exploiting EOR potential has spurred the federal and provincial governments to invest deeply in the technology, jump-starting efforts to expand beyond EOR to storage-only projects.
In September, a consortium led by Royal Dutch Shell PLC (the consortium also includes Chevron) announced the Quest CCS project in Canada's oil sands. The project will be a pure CO2 storage project, offering hope that Canada may be using its success with oil recovery-focused CCS to join Australia and other countries pushing to strengthen the storage-only model that will dictate the long-term potential of CCS.
But the companies involved in the Quest project have taken little financial risk. Of the project's expected cost of $C1.35 billion ($A1.30 billion), Canadian governments have contributed about $C865 million. In addition, the Alberta government has granted Quest a two-for-one credit on every tonne of carbon it buries (Canada has no national price on carbon, but the province of Alberta's carbon price is currently set at $15, with some talk of raising it to $30 a tonne).
Based on two-for-one carbon credits, the consortium would be left with a price tag of only $155 million for the project's first decade. If Alberta's carbon price were to rise to $30, the Quest partners could even find themselves turning a modest profit.
All of which goes to show the extent to which heavy government subsidies and EOR capability have so far been key to determining the viability of the CCS business model.
The success at Weyburn has prompted the Saskatchewan provincial government to commit more than a billion dollars to build one of the world's first commercial power plants designed to capture carbon dioxide emissions. Like Victoria, Saskatchewan is largely dependent on burning coal for its power. Saskatchewan hopes the new project, scheduled to begin operations in 2014, will generate about three per cent of the province's power needs while reducing greenhouse gas emissions by one million tonnes.
"We are going to remain reliant on coal – our task is to make sure we clean that up,” Saskatchawan's energy minister said in announcing the project.
Saskatchewan is adamant that government-led projects now will make the technology commercially viable with time. The province's energy company has said any subsequent CCS power plants would cost 30 per cent less due to efficiencies, scale and lessons learned.
Various levels of Canadian governments have committed more than $US3 billion to carbon capture and storage initiatives, with Weyburn, and eventually Quest, among the country's flagship projects.
The CCS potential in North America is significant. A joint survey by the US Department of Energy, Natural Resources Canada and Mexico's Energy Ministry released in May 2012 estimated that North America has enough underground capacity in its depleted oil and gas fields, uneconomic coal seams and saline aquifers to store all its carbon dioxide emissions for the next 600 years. Pumping CO2 into depleted oil fields to help boost oil recovery already accounts for five per cent of all US oil production.
But so long as many CCS "success stories” are dependent on matching up emissions with oil fields, the sector's growth potential is handcuffed.
In that sense, despite much uncertainty, controversy and doubts, CCS advocates are counting on Gorgon and Alberta's Quest projects to be among those that cut CCS free from EOR – which will only be achievable early on so long as the deep government subsidies continue.