Building the socio-economic case

The economic evaluation of projects, in which CO₂ geological storage forms an important element, is currently based on relatively straightforward, simple schemes. In such schemes, the system is pictured as a single chain, with CO₂ being passed on from source to geological reservoir. These economic evaluations calculate costs and benefits of capturing, transporting and storing CO₂, based on realistic average values for the different techniques. Such an approach ignores essential uncertainties regarding the properties of the deep subsurface reservoir rock, future credits for reduced CO₂ emissions, and infrastructure costs, for example. This results in large differences between modelled results and practice.

The improved methodology proposed in the ENOS project to predict more realistic costs for the complex CO₂ storage projects based on all uncertainties is the Real Option Analysis (ROA). The major challenge is to include the essential additional factors that come into play in real world projects, which may play an important role by improving or weakening the economic case: geological uncertainty and infrastructure costs. Uncertainty usually affects project decisions, because higher uncertainty on return requires a higher expected return. Positive financial investment decisions for CO₂ capture, transport and storage projects are therefore less likely to be taken.

Geological uncertainty is distinct from technological or economic uncertainties. Estimating the level of this uncertainty often requires in-depth regional (per country or basin) expertise. It will not resolve gradually over time, as is the case for most technical or socio-economic parameters, but requires a significant upfront investment for additional exploration. Reservoirs are also complex natural systems, and the residual uncertainty after exploration and pilot testing may remain relatively large. The other essential factor to be captured is project flexibility: the capacity to adjust a project as uncertainty is increasingly resolved while the project is ongoing which may result in a positive or negative impact on the project.
 When uncertainties are taken into account, project outlooks will generally be less favourable. When project flexibility is not taken into account, then the rigid theoretical outlooks will be pessimistic compared to projects in the real world. ROA meets those needs but has only rarely been used for assessing projects involving CO₂ geological storage and, when applied to these projects, not to the topic of temporary storage of CO₂ or onshore EOR.

In the ENOS project ROAs will be developed for the seasonal CO₂ buffer case (Q16-Maas field in the Netherlands) and the CO₂-EOR case (LBr-1 site in the Czech Republic). The results can be used in discussions with stakeholders to support the planning and setup of economically attractive CO₂ utilization and storage projects.

Outcomes


The market potential, economic viability, physical planning with synergies and conflicts, and legal and regulatory aspects specific to the identified integrated chains including CO₂storage will be evaluated. The business cases for the identified chains will be elaborated so that they can be used as a basis for investment decision making. Relevant stakeholders will be engaged in this process, and participation of the local inhabitants will be enabled via the project.