Special Report: Four Companies to Cash in on Capturing Carbon

The energy infrastructure of the world is getting an overhaul as we speak. Talk of climate change abounds, and decisions are being made now on what to do to stop its effects.

Now, it's likely that when you see this subject in the media, you hear the most about cutting coal use and building onto renewable energy capacity.

The problem here is that the world at large relies too much on cheap, reliable coal, oil, and natural gas for any of the fossil fuels to be entirely cut off all at once.

No matter how quickly renewable energies are installed, there will still be a long transition period before the world gives up on fossil fuels. But effort also has to be put into cutting back on the harmful emissions, CO2 especially, that come from their use.

Could there be a way to do both?


It's called carbon capture and storage (CCS), and it will one day be able to facilitate the continued — if reduced — use of fossil fuels, but with much cleaner results.

Carbon Capture Technology

Even bigger than emissions from industrial processes, the burning of coal, oil, and natural gas for energy produces massive carbon emissions every year. In 2014 alone, electricity production accounted for more than 2 billion metric tons of CO2.

As such, technologies are being developed right now that are geared toward preventing those emissions from ever reaching the air by capturing the carbon emissions first.

Carbon capture and storage is exactly what it sounds like: separating the carbon from such processes as energy production and industrial operations and storing it in underground wells of various types. This prevents the carbon from escaping into the atmosphere — permanently, in an ideal situation.

There are actually a few different processes under the name “carbon capture.”

The three main methods are:

  • Pre-combustion
  • Post-combustion
  • Oxyfuel combustion

Pre-combustion is the most difficult and expensive of the three. It requires the source fuel to be converted into a gas and made into a mixture of CO2 and hydrogen.

From there, the hydrogen is sent on to be burned — CO2-free — into energy.

Post-combustion involves burning the fuel as usual and capturing the CO2 produced after the fact. This requires some kind of filtering process to be done to separate the CO2 from the other byproducts.

One such process uses a liquid solvent to absorb the CO2, then burns it out of the liquid and into a separated gas. Others use solid filters that pull the carbon out of the air.

Oxyfuel combustion is another way of burning the fuel and capturing the CO2 after the fact. In this case, pure oxygen rather than regular air is used in the combustion process. This produces a straight mixture of water vapor and CO2 that can be easily filtered.

Currently available technologies can reduce a power plant's emissions output by 80–90%, according to the Environmental Protection Agency (EPA).

These methods are used not only in energy production, but also in capturing carbon from industrial processes like steel and cement manufacturing.

From there, the carbon can either be captured and stored or compressed and transported via pipeline, train, or truck to somewhere it can be put to work in other ways.

Taking Carbon to Market

The EPA offers this 2011 summary of captured CO2's commercial uses:

CO2 Uses

A small amount is used in food and beverage preparation. Sodas and other carbonated beverages create a pretty solid demand for about 6% of captured carbon dioxide.

However, as you can see, the vast majority of the captured carbon is used to enhance oil and gas recovery.

This may sound a little counterproductive — using carbon to extract more carbon-producing fossil fuels — but it becomes a form of carbon storage itself, and in the end, the benefits outweigh the carbon costs.

What's interesting about the use of carbon in natural gas extraction is that natural gas can be held in porous rock formations that cannot be entirely cleaned out by regular frac fluid injections.

However, injecting another gas instead of a fluid actually maximizes the amount of natural gas available for extraction.

What's more, once the process is done, the carbon is left in the ground; the shale formation becomes a storage site for the CO2.

CO2 can also be used to extract oil in a similar way, and the U.S. Department of Energy is even investigating ways to store carbon in saline formations, which offers the dual benefit of deep storage space and the opportunity to treat the brine water for other uses.

Here's a visual to help you wrap your mind around this one:

co2 brine

The brine water would be pushed to the surface, treated, and then sent out for commercial use. Meanwhile, the carbon would be trapped in its place and stored in the newly emptied formation.

Doesn't this seem like the emissions solution the world has been waiting for?

Unfortunately, as with many world-saving technologies, it just isn't that easy.

The Carbon Catch

Let's first start by dispelling one of the most common, misinformed concerns about carbon storage: that the gas will simply rise back up and escape again.

Generally, carbon is stored a mile or more underground and in porous rock formations covered by less porous — and thus less permeable — layers of rock.

And if that isn't enough reassurance, here's a visual of exactly how deep a normal storage injection can be found, according to the EPA:

carbon injection depth
(Click Image to Enlarge)

You'll also notice that despite all the available information on the subject, carbon capture isn't already a commercially viable technology. That's because, simply put, the technology is still new.

Though carbon capture and its use in oil and gas operations has been around for nearly 40 years, it has never been done to such a scale as the world needs to cut harmful emissions.

What's more, development has been slow because, due to the newness and small scale of current projects, it adds to the cost of oil and gas production. Companies, especially in the current volatile market conditions, cannot afford extra expenditures.

The way to solve this problem is to make emitting the CO2 more expensive than capturing it by instituting carbon taxes. Many places are working on such legislation right now, Canada chief among them, making this option a more viable one.

And the fact that both carbon taxes and carbon capture prices will make oil and gas operations more expensive actually negates the final argument against CSS: that it will help the oil and gas sector last longer.

In a way, it will. You see, companies have less incentive to reduce fossil fuel use if there are less environmental concerns surrounding it.

But the fact is that the world would have kept using them anyway. As of 2014, 39% of the energy produced all around the world still came from coal, though natural gas is stealing some of that capacity.

The point is that worldwide, humans still rely on cheap, reliable fossil fuels more than anything else. That's not going to change overnight.

So the best possible solution will be one that supports the continued — if reduced — use of fossil fuels while also reducing the harmful emissions from such ubiquitous operations.

“I think people would be surprised how aligned those interest can be,” says Cenovus Energy CEO Brian Ferguson, referring to the argument between continued fossil fuel use and emissions reduction.

Cenovus is one stellar example of how this technology can work: the company has reduced emissions from its oil sands and conventional oil operations by one-third since it began using CCS processes.

From the Ground Up

As of now, only 22 large-scale CCS projects are operational. There are 44 total, including those that are operating, under construction, or still being planned, according to the Global CCS Institute. You can check out an interactive map of the projects here.

The largest CO2 project in the world has already captured and stored about 27 million metric tons of carbon. And yet the DOE estimates that anywhere between 1,800 and 20,000 billion tons could be stored just in the U.S. if the technology can be brought to scale.

It may seem like quite a bit is being done, but it's not enough yet. The technology still has a long way to go before it's advanced enough to make the necessary impact on emissions levels worldwide.

But these are often the best kinds of opportunities for investors to claim a piece of. And with the push for lower emissions growing stronger every day, this technology has the potential to take off in a big way.

To get you started, here are a few of the most notable projects to keep an eye on in the coming years.

Royal Dutch Shell (NYSE: RDS.A) operates one of two large-scale CCS projects to have come online in 2015; the other is located in Saudi Arabia.

The project, called Quest, is operated by Shell Canada Energy but was developed as a joint effort between Shell, Chevron, and Marathon Oil.

Quest has a capacity of more than 1 million tonnes of CO2 per year, which can cut emissions from the involved Athabasca, Canada oil sands operations by about one-third.

The project also includes a 64-mile pipeline, which will transport the CO2 to its resting place in a saline formation, about 2 kilometers underground.

Chevron (NYSE: CVX) also has its own CCS plan in development: the Gorgon Carbon Dioxide Injection Project.

Much like Quest, the Gorgon project will be injecting CO2 about 2 kilometers deep into a large saline formation, though this one is off the coast of Australia rather than inland Canada.

Another major difference will be the source: Gorgon will be extracting CO2 from Australian LNG processing plants and will have a much larger capacity of between 3 and 4 million tonnes per year.

There's no set date for when this project will come online, but the Global CCS Institute has estimated that it will be operational in early 2017.

In the meantime, two more projects are expected to come online this year, both located in the southern U.S.

NRG Energy (NYSE: NRG) is working to cut emissions from its WA Parish power plant, one of the largest energy production plants in the U.S. The plant is fitted with four coal units and four natural gas units — all of which will now be reaping the benefits of post-combustion carbon capture.

NRG expects its Petra Nova Carbon Capture project to reduce the power plant's emissions by 90%, or about 1.4 million tonnes of CO2 per year.

The carbon will be transferred via pipeline and used to optimize production in the West Ranch oil field, in which NRG has a partial partnership.

Mississippi Power (NYSE: MP-D) will also be going after a form of coal energy production: pre-combustion of a kind of coal called lignite, or brown coal.

The project, named Kemper County Energy Facility, will be the first plant of its kind. It will take lignite from the nearby Liberty Fuels mine, put the substance through a gasification process, and separate the CO2 from there.

This process is expected to produce about 3 million tonnes of CO2 per year, and Mississippi Power will sell that gas for optimization of production from oil fields in Mississippi.

These are just a few of the projects and companies from which investors can expect to see some major growth as the world's need for an effective emissions solution comes to a head.

The world will need some way to cut emissions — despite our determination to keep fossil fuels burning. And CCS is the perfect compromise.

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