EMERGING MARKETS

EMERGING MARKETS

BY FELICITY LANDON

STOCKING THE CARBON STORES

Breakbulk to Support Nascent Capture Projects

Pipelines, storage tanks, giant compressors, processing equipment, ship-handling facilities – all this and more will be needed for the development and operation of successful carbon capture and storage, or CCS, operations.

It follows, then, that the specialists providing transport/shipping, handling, lifting and installation of such equipment will be in demand.

There is work ahead for project cargo specialists. But, it has to be said, in many cases “ahead” means a little bit beyond the near horizon. While new CCS projects are proliferating and some target start-up dates are relatively close, many projects are still in the study stage. Decisions on logistics requirements won’t be made until the technical and business model details are rather more firmed up.

Driven by pressures and targets to achieve net-zero emissions, global CCS capacity grew 33 percent worldwide last year, according to the Global CCS Institute’s 2020 report. A total of 65 commercial CCS facilities are in various stages of development globally. Twenty-six CCS facilities are in operation, capturing 40 million tonnes of CO2 per year. Many of these are related to CO2 use for enhancing oil recovery, said the institute.

The CCS project in Norway’s Sleipner field, which lays claim to being the world’s first CCS facility, has been injecting 1 million tonnes of CO2 a year for more than a quarter of a century. To give an idea of the magnitude of work ahead, the Global CCS Institute wants to see CCS capacity

Norway’s Sleipner field CCS project is the world’s first CCS facility and has been injecting 1 million tonnes of CO2 a year for more than 25 years.

CREDIT: KJETIL ALSVIK, EQUINOR STATOIL

increase more than a hundredfold by 2050.

CCS technology, and the interest in it, has moved forward rapidly in the past few years, said Chris Gent, policy manager at the Carbon Capture & Storage Association, or CCSA. “A few years ago, CCS was seen at a political level as a helpful tool to achieve climate targets. Now, especially in the UK, Netherlands and Norway, the conversations are about defining the commercial framework for a critical net-zero technology. Once projects have an understanding of the business models, they are ready to deploy at speed and scale,” he said. “A lot of people have been watching CCUS (carbon capture, utilization, and storage) with interest, but now the commitChris Gent ment to net zero Carbon Capture & and emergence of Storage Association CCUS clusters has really pressed down the accelerator.

“The implication of net zero means everyone has to decarbonize across the whole economy – and in some areas you have to go further, taking CO2 out of the biosphere. There is also now a lot of public support for net-zero targets and, as the Climate Change Committee has shown, investment in CCUS is one technology to help achieve net-zero. As such, many companies who have few decarbonization options can see that investing in CCUS and aligning with net-zero is a positive thing both commercially and socially.”

In the case of the Sleipner CCS, the driver was Norway’s carbon tax. CO2 is captured from the extracted natural gas, where otherwise it would have been vented to the atmosphere. Once separated, it is now stored safely deep in the rocks beneath the North Sea, Gent said. “This project has been a lynchpin of understanding potential CO2 storage reservoirs, and has been critical for finetuning processes and monitoring and modeling how CO2 behaves in the subsurface.”

LONGSHIP PROJECT

A project that is ahead of the pack in Europe is that of Heidelberg Cement in Norway. A full-scale carbon capture and storage facility at the company’s Norcem plant in Brevik, developed as part of the Longship project, was approved by the Norwegian government in December 2020. The first industrial-scale CCS project at a cement production plant in the world, its target is to capture 400,000 tonnes of CO2 a year. The cement industry is responsible for 6 percent to 8 percent of total CO2 emissions, said Per Brevik, Per Brevik sustainability manager at HeiHeidelberg Cement delberg Cement Northern Europe. “We are a really big emitter. However, to defend ourselves, part of these emissions are unavoidable because two-thirds are from the chemical process – therefore, carbon capture is an interesting measure.”

The plant is on the western side of the Oslo Fjord, 170 kilometers south of the capital. Work on this project started 10 years ago. “We started with desk studies and have taken it step by step, with feasibility study, concept study and then engineering and designs,” Brevik said. “After approval by parliament in December, our part of the project started in January.”

The first stage is demolition of old parts of the cement plant and moving other parts, to create the space to build a plant to enable capture, conditioning and intermediate storage of CO2.

“However, we are also producing cement at 100 percent of capacity, and that will be a key issue – production at the same time as building the new plant. This will definitely require a lot of scheduling and planning.”

The schedule will make maximum use of the plant’s annual three- to four-week winter repair shutdown. The clearance work will take place in 2021 and 2022. The capture plant itself is due to arrive early in 2023 and construction will move ahead. Commissioning is due to start in the second quarter of 2024, ready for the arrival of the first shipment with captured CO2 in June/July.

“This is a huge building project. To some degree the equipment will come by barge in modules, although most will be built at the plant,” Brevik said.

“The machines and compressor will come in as units to be connected to the rest.”

Carbon capture technology has to some degree developed in parallel with the offshore industries, he said. “Many of the companies we are involved in have experience in the offshore industry, and of course there you have a lot of good expertise with scheduling and so on.”

The project manager is a Norcem employee, and others will be involved in the project full time. However, much of the management is being outsourced, and Norcem is working closely with the main technology provider, Aker Carbon Capture, the supplier of the capture plant, and the Danish equipment supplier FL Smidth, responsible for integration between the capture plant and the cement plant.

About 1 kilometer of pipeline will be laid, linking the capture plant, intermediate storage and loading station. Norcem will be responsible for operations up to the point when the CO2 is in the tanks on the ships.

At that point, the responsibility shifts to the second partner in the Longship project. Northern Lights, whose partners include Equinor, Shell and Total, will build an open-access CO2 transport and storage infrastructure and transport the CO2 by tanker to a purpose-built receiving terminal. The facility will provide capacity above and beyond what is required by the Norcem site. Heidelberg Cement has eight CCS projects at different development points, with Brevik being the first.

UK CLUSTER PROJECTS

In November 2020, the UK government announced £1 billion of funding to support the development of four CCUS cluster projects by the end of the decade. The ambition is to have two clusters operational by the mid-2020s and two more by 2030, CCSA’s Gent said. Funding and government strategy is crucial, he added. CCS discussion in the past often struggled with the “chicken-and-egg” scenario. “Build the CO2 storage infrastructure without a guarantee of CO2 supply? Or capture the CO2 without a developed store to put it? This is why government support to help develop the whole value chain together in CCUS clusters is absolutely critical.”

Meanwhile, he said: “Something that is not perhaps deeply considered outside of the CCUS sector at the moment is how some of the port facilities involved are going to be able to accommodate building of the infrastructure while ships continue to use the port, especially as the UK looks to scale up offshore wind. There is an emerging discussion about coordination between users of the offshore and port facilities to ensure offshore energy projects can develop safely and don’t unintentionally prevent each other progressing. Net-zero will certainly involve a concerted logistics coordination effort.”

Norcem’s Brevik project is the first industrial-scale CCS project at a cement production plant in the world. Its target is to capture 400,000 tonnes of CO2 a year. CREDIT: NORCEM

Technology Centre Mongstad in Norway is the world’s largest technology center for development and testing of CO2 capture technology. It started operations in 2013 and is owned and operated by Gassnova, Equinor, Shell and Sasol.

CREDIT: HELGE HANSEN; EQUINOR

The CCSA is facilitating a supply chain group that is looking at the market and the potential UK opportunities ahead. “Within this, we have had a look at modularization. At a high level to what extent could you modularize or standardize components, and what does that mean in practice?” Larger projects often need bespoke solutions and the scale for some of these larger projects is substantial, involving construction of amine scrubbing towers of 50 to 60 meters high, the installation of large pipeline networks and the shipping of large gas compressors. Other projects may be suitable for a more modular approach, perhaps using road or rail solutions.

SCALING UP

In Sweden, the CinfraCap project aims to create joint infrastructure for the transport of liquefied CO2 extracted using CCS technology. The project’s partners, Göteborg Energi, Nordion Energi, Preem, St1, Renova, and Gothenburg Port Authority, are seeking the most effective way of approaching the industrial scale logistics system required to support CCS. The aim is to link it into other CCS projects and to create an open access system so that third parties can connect in the future.

A pre-study published in April 2021 noted that the volumes captured will increase in stages, with the plan being to expand the facility in modules as required. The number of vessels and ship calls would also increase gradually.

The intention is to start capturing CO2 in 2025, said Karin Lundqvist, business development manager at Preem. Discussions continue, including around the business model and permitting and construction issues.

“Regarding logistics [for the construction/installation], I would expect we will have physical construction and equipment one or two years before start-up. We are much too early in this project to start to look at logistics questions – we haven’t even decided who would do the design. Of course, there will be pipelines, storage tanks and other large equipment.”

The plan is to start small and then scale up, mindful that not all industries capturing CO2 will start at the same time. “Some will start in 2025, then it will be a gradual build-up to 2030. So we are thinking of building in a modular way to build up capacity,” Lundqvist said.

CinfraCap is not far behind Norway’s Longship project, aiming for opening in 2025 against Longship’s 2024 date.

There are third parties interested in connecting to CinfraCap, and Lundqvist recognized that it would be a waste if all companies try to build up storage capacity and pipelines on their own. But while CinfraCap has found a technical solution, there are still a lot of hurdles to overcome, including business models, who would own the infrastructure, permits, and so on. “It is usually said about CCS, it is not the technology that is the hardest bit – it is the rest.” Every part in the chain has to be ready at the same time, from actual capture through transport to the harbor and the storage facility, and that will inevitably include movers of breakbulk cargoes supporting global CCS ambitions. BB

Felicity Landon is an award-winning freelance journalist specializing in the ports, shipping, transport and logistics sectors.

Demise of Oil and Gas

Writing on the Rig for Fossil Fuel Demand

BY IAN DEXTER PALMER

Will the decline in oil and gas production due to climate change be slow or rapid? A gradual adjustment or a painful disruption? Some answers come by putting numbers on the U.S. greening of electricity and transportation, two of the largest uses of oil and gas.

President Biden’s goal is that U.S. electricity will be carbon-free by 2035. This means all 23 quadrillion BTU, or quads, of electricity now generated by coal and natural gas would have to go away, replaced by renewables like wind and solar.

There are very serious consequences. The demise of coal-fired power plants under this scenario is not unrealistic, as many of them have already gone away or have an end-of-life date before 2035. But the demise of gas-fired power plants by 2035 would be a major hit to the oil and gas industry. From where it is now, natural gas consumption would have to drop by 32 percent over 15 years to meet Biden’s goal.

Oil usage in U.S. transportation was 26 quads in 2018. Comprehensive modeling predicts that sales of electric vehicles, or EVs will be 50 percent of new cars sold by 2040. If this means one-third of all vehicles on the road are electric by 2040, then the decline of transportation oil will convert to a 24 percent decline in production of oil in the U.S. by 2040.

In the U.S., renewables would have to increase by five times their current production to reach the goals of replacing all power plants by renewable electricity by 2035 and reaching 50 percent of new EV sales by 2040.

In the U.S., if demand falls in electrical and transport sectors of energy consumption, then supply is likely to follow and the numbers roughly suggest a 32 percent drop in natural gas by 2035 and a 24 percent drop in crude oil production by 2040.

There would be a serious retraction, not expansion, in U.S. oil and gas infrastructure, and a correlated expansion in renewables’ infrastructure.

This picture becomes more likely because the U.S. federal government has raised climate change to a “crisis” stature and there is a groundswell for climate action among the U.S. population.

ATTITUDES TO FUTURE INFRASTRUCTURE

In the European Union and UK, oil and gas companies are proactive regarding climate change due to government, stockholders and public urgings. BP has led the way by committing to be 40 percent invested in renewables by 2030. Total has also shown an ability to pivot and prepare for a greener future through a US$2.5 billion buy-in of Adani Green Energy.

This lies in contrast with the U.S., where many companies have adopted a “wait and see” position because they are still basking in the sunshine of shale success.

But some big companies are being proactive: ExxonMobil has set up a new company called ExxonMobil Low Carbon Solutions that initially will promote carbon capture and storage. Occidental is building a huge wall of fans to capture CO2 from the air and then bury it underground. And across the globe, a “tsunami” of new renewables will supply the majority of electricity in Australia’s main grid by 2030, as the market share of coal and gas collapses. It can seem that change happens gradually, then, presumably, all at once. BB

Ian Dexter Palmer is an energy consultant, former fracking engineer, and author of The Shale Controversy.

Room for Americas Optimism

Government Recovery Stimulus Serves Projects Well

The U.S.’s long-awaited US$1.9 trillion fiscal stimulus package has done its job and spurred consumer spending and reversed the fortunes of the local shipping sector. Latest U.S. Census Bureau figures show that imports have surged 6.3 percent to a record US$274.5 billion. Among these, multipurpose-related cargo imports, such as capital goods and iron and steel products, have grown by 13 percent and 11 percent, respectively, in the first quarter of 2021, compared with last year. Consumer goods as well have seen first quarter growth of 25 percent, with imports from China up 49 percent to US$113 billion. Products shipped in containers and related commodities typically have a short lead time, so this growth has resulted in a sharp increase in cargo volumes and the sector is still coming to terms with it.

With the overheated container segment, the market is witnessing a lot of previously containerized cargo and commodities finding their way back to breakbulk-style shipments. This influx of cargo into the MPV segment has led to a capacity squeeze – with tonnage and space at a premium, a typical shipping scenario whenever there is a boom market. How long this will last remains to be seen. BlackRock Investment Institute has projected that U.S. consumer spending and underpinning fiscal support will grow until at least Q3 2022.

Despite such increased volumes in breakbulk and dry bulk commodities, the U.S. project cargo market is still flat across core verticals. The explanation for this is simple: general cargo, breakbulk and bulk is driven by consumer demand, the results of which are instantaneous and translate immediately into cargo. On the other hand, project and heavy-lift cargo is powered by complex industrial performance indicators and requires huge capital investment – both which take time to research, approve and see through to fruition.

TRUE IMPACT OF PANDEMIC

We are entering a unique lull where the production of project equipment and components postponed during the pandemic is only now becoming apparent – one year later. These are project modules and equipment that normally require a production lead time of six to 12 months. Therefore, cargo that should have been in production last year is not cargo-ready today, and there is little – or no more – project cargo in the water than this time last year. Nevertheless, we do expect things to pick up as U.S. capital markets get stronger and confidence grows. The perceived risk of greenlighting projects is lower than any time in the past year.

It is also expected that the Biden administration will make even greater effort in America’s ongoing fight against Covid-19. This could mean partial lockdowns in the short term and potential disruption to related port operations and scheduling. But this will improve the situation in the long term. With increasing vaccinations, we expect the U.S. will improve throughout 2021, both on a population health and investment health perspective. We believe this has already been priced in by the markets and we might see real optimism that results in positive final investment decisions on pending projects.

It is also worth noting that in current discussions about project cargo transport, shippers are reeling at the reality of a very different market and freight level compared with pre-Covid times. As the cost of transport today has significantly increased in comparison with when budgets may have originally been set, carriers and supply chain stakeholders need to work together to realign budget expectations.

With such solid market fundamentals, no immediate slowdown is expected in the burgeoning U.S. economy and consumer confidence. At the same time, some of its leading financial institutions, like the U.S. Federal Reserve, are advising against over-exuberance, and recommending caution and risk assessment just in case the pandemic takes a turn for the worse and derails the U.S. recovery. As a sector so sensitive and immediately impacted by sudden market changes, we would do well to listen. BB

Michael Morland heads AAL’s team and operations in the Americas from AAL’s regional hub office in Houston.

BY MICHAEL MORLAND

The 31,000 deadweighttons AAL Singapore sails into Port Miami with two 210-ton, 32 meter-long Spanishmade walkway bridges for a port infrastructure project.

CREDIT: AAL SHIPPING