The high road to net zero: How CCUS can speed up India's transition plan

Carbon capture utilisation technology can play a crucial role in reducing CO2 emissions, provided the government shapes a workable regulatory framework first

What is clear, so far, is that India, the world’s third largest emitter of CO2, needs a “thali” treatment — of renewables, electric vehicles (EVs), hydrogen, and carbon capture utilisation and storage (CCUS) — to meet net-zero commitments. The question is, where does carbon capture fit in this mix?

So far, the Modi government had ignored CCUS — a technology used to capture the odourless, greenhouse gas from factory exhausts and store it — while encouraging other emerging technologies — a Rs 19,500-crore package for green hydrogen, Rs 18,100 crore for battery chemistry, and a draft policy for hydroelectric storage.

So it came as a relief when New Delhi recently included carbon capture as one of the 13 activities that qualify for carbon credits in India’s upcoming carbon trading market. The decision to award carbon certificates, an instrument that rewards reduction in emissions, for CCUS may help state-run explorer ONGC and refiner IOC pioneer the climate mitigation technology in India.

“CCUS is likely to play a crucial role in achieving India’s goal to reduce CO2 emission by 50 per cent by 2050,” said Pranav Master, director, consulting, Crisil Market Intelligence. “In order to decarbonise the hard-to-abate industries such as steel, cement and petrochemicals, CCUS can enable scalable and profitable conversion of emitted gases, especially CO2. Manufacturing, construction and industry together emit around 662 million tonnes (MT) of CO2.

But as Shelly Abraham, head of renewables, at state refiner BPCL, pointed out, “There are huge challenges in case of CCUS, because in terms of the technology, in terms of the cost, in terms of the usage of carbon dioxide, what you do with the carbon dioxide.” ONGC will use some of the captured CO2 to extract more oil from mature fields. The gas can also be utilised to make green urea, beverages, building materials and polymers.

But CCUS is no walk in the park. It’s expensive, risky, and carries a burden of costly failures in its 50-year history.

For starters, power plants need twice the space to install carbon capture facilities. Imagine attaching a small chemical unit with amine pouring at the exhaust, reactors, pipelines, tank farms, compressor stations and storage, explained Deepesh Nanda, CEO, GE Gas Power, South Asia.

These don’t come cheap. It would account for 60-70 per cent of the total capital expenditure incurred in a combined cycle power plant. Moreover, the process of capture consumes energy. However, if we put together the space, cost and energy consumption into a financial model the levelised cost of electricity — or the average cost of building and operating a plant per unit of total electricity generated over an assumed lifetime — increases only by 30 per cent, Nanda added. These calculations remain on paper, however, since no such projects operate in India yet.

But there are examples elsewhere. Bruce Robertson, an analyst at the Institute for Energy Economics and Financial Analysis (IEEFA) who co-authored a report on CCS last year, cited the example of a $3.1-billion Gorgon project off the North West Shelf of Australia, which has underperformed by about 50 per cent. “It arguably has access to the best petroleum engineers on the planet, and it can’t seem to operate the CCUS plant successfully,” he added. Gorgon is operated by Chevron, with Exxon and Shell as partners.

Of the over 34 billion tonnes of CO2e (carbon dioxide equivalent) emitted from burning fossil fuels globally, only 39 MT are captured using CCUS. Most of the captured carbon is injected back into the ground to extract more oil, with only 27 per cent stored, according to IEEFA.

But Norway’s Equinor, with which state-run ONGC seeks to collaborate, has enjoyed success sequestering CO2 at Sleipner and Snøhvit. This is mostly due to Norway’s unique regulatory environment for oil and gas companies, said Milad Mousavian, co-author of the September 2022 CCUS report. The same Equinor could not replicate its success at the $2.7-billion In Salah CCS project in Algeria, where operations were suspended in 2011, after storing 3.8 MT of CO2 in the Krechba Formation during its seven-year lifetime, Robertson said.

CCUS, then, is country-specific and needs a strong regulatory framework, said Aslak Hellestø, business advisor, Northern Lights, the transport and storage component of Longship, Oslo’s $2.7-billion large-scale CCUS project, offering industrial polluters in Europe an option to store CO2 for a fee. The Norwegian government is funding nearly 70 per cent of the project.

CCUS works better in developed nations where emissions have peaked, said R R Rashmi, programme director, TERI, which is organising the World Sustainable Development Summit in Delhi this week.

But, Master said, CCUS has high potential in large-scale implementations to decarbonise “hard-to-abate” sectors in developing countries also, such as in steel, cement and petrochemicals. The technology can also help in the production of blue hydrogen, said Swapan Mehra, CEO, Iora Ecological Solutions, a climate consultancy. Blue hydrogen, derived from fossil fuels after storing the discharged CO2, may be a less expensive bridge on the road to cheap green hydrogen production.

Despite such polarised views, ONGC sees a future for the technology, and is taking the lead to adapt it for India, said Sushma Rawat, exploration director, ONGC, which has collaborated with both Shell and Equinor to study the technology.

Norway wants to be a catalyst for large-scale CCUS projects globally, Aslak said. The first phase of Northern Lights, expected by 2024, involves collecting 1.5 MT of CO2 from industrial emitters, transporting, injecting and permanently storing carbon at 2,500 metres below the seabed in the North Sea; phase 2 will near quadruple CO2 capturing capacity, and project partners Equinor, Shell and Total are already in discussions with potential customers around Europe, representing 48 MT of CO2 per year, more than is currently stored worldwide. Shell and Aker are providing the capture technology, Aslak said.

“I think around 30 per cent of our solution has to come from the carbon capture itself,” Abraham said. “Otherwise it will be difficult for us to meet net zero.”

So, if India seeks carbon neutrality by 2070 it needs to find a way to make it work, locally.

ONGC is in talks for a CCUS project with IOC’s Koyali refinery to capture the gas and transport it for use in incremental oil recovery, Rawat said. Right now, CCUS is cost-intensive, she added, but at $25 a tonne of CO2 it can become viable. The closest India came to a carbon tax is the Rs 400 a tonne it levies on coal. That is 5 per cent of what it costs to sequester CO2. So, industries are financially better off polluting than paying ONGC to capture carbon.

The key drivers that enabled Norway’s success in CCUS were the CO2 tax and climate quota obligation, introduced by the Norwegian government in 1991 and 2005, respectively. The Indian government should come up with incentives for carbon capture, and a carbon pricing mechanism, Nanda said. There is also a lack of clear regulations in place for CCUS technology, making it difficult for companies to invest, Master said.

New Delhi may have to take a leaf out of Oslo’s playbook if it wants to put India in the global CCUS map.