Chevron says it failed to meet Western Australia’s target of capturing at least 80% of the CO2 that would otherwise be released at its Gorgon LNG project, The Guardian reports.
Australia’s only working carbon capture and storage project in Western Australia has failed to meet its target to lock away greenhouse gases from a major gas processing plant.
Chevron, an America-based multinational oil and gas company, was given a target by the WA government to capture at least 80% of the CO2 that would otherwise be released at its Gorgon LNG project.
But the company has said it fell short of the target by 5.23Mt and will buy the equivalent amount in carbon credits while also investing $40m in unspecified “low carbon energy projects” in the state.
Based on today’s prices for carbon offsets – which analysts say are rising – Chevron would have to pay between $78m and $194m.
Chevron announced last month it made more than $8bn profit in the most recent financial quarter.
The Morrison government is prioritizing CCS technology as a way to lower emissions, even though its impact after decades of promises and about $4bn in Australian taxpayer cash has been marginal.
Environmental campaigners said the shortfall in emissions reductions at Gorgon showed CCS should not be relied on as justification for allowing fossil fuel production to increase.
Chevron has not said what kind of accredited carbon offsets it will buy, but analysts told the Guardian the cost to Chevron could range from $15 per tonne for some overseas credits to as high as $37 per tonne for Australian credits.
Calculated over a five-year average with the clock starting in July 2016, Chevron said it had missed the 80% target because of technical problems that delayed the CO2 injection into geological formations under Barrow Island.
Since injection started in August 2019, the company says it had captured and stored 5.5Mt of CO2.
In the 2020/21 financial year, the report says there was 3.17Mt of CO2 available for capture and storage from its gas treatment plant under its agreement with the WA government, but only 2.17Mt – or 68% – had been injected.
Chevron owns 47% of the Gorgon LNG project together with other joint venture partners ExxonMobil (25%) and Shell (25%).
Chevron said the joint venture partners had collectively invested more than $3bn in the carbon dioxide injection scheme. As well as buying offsets, Chevron said it would invest $40m in “low carbon energy” projects in the state.
Mark Hatfield, managing director of Chevron Australia, said: “The package we have announced will see us make good on our commitment to offset the injection shortfall, and ensures we meet the expectations of the regulator, the community and those we place on ourselves as a leading energy producer in Australia.”
Piers Verstegen, policy director at Conservation Council of WA, said when the greenhouse gas emissions generated from extracting, processing and then the use of the gas from Chevron’s customers was added together “the CCS technology would have reduced overall pollution from Gorgon by less than 2%” in the past five years.
He said: “This shows very clearly that CCS cannot be relied upon as a technology to allow fossil fuel production to continue and increase.”
Chevron said in an environmental performance report released yesterday that it would buy the 5.23Mt of carbon offsets and then surrender them before 17 July 2020.
The report lists several different types of offsets it could purchase, including from the Australian government’s accredited market, or from other offset schemes worldwide.
The cheapest offsets – known as Certified Emissions Reductions or CERs – can cost as little as $2.20 per tonne on today’s market but a Chevron spokesman confirmed the company would not be purchasing those offsets to meet the shortfall.
Hugh Grossman, Reputex executive director, said other options open to Chevron would be international credits starting at about $15 per tonne or Australian carbon credit units (ACCUs) that were currently trading at $37 per tonne.
John Connor, the chief executive of the Carbon Market Institute, said Chevron would have to buy the offsets on the spot market. The price of ACCUs have boomed from $16.50 at the start of this year.
“This won’t be cheap for Chevron,” he said. “There’s a really tight market in Australia for those ACCUs with the spot price going up faster than house prices. It is important that [Chevron] gets high-quality offsets and work to deal with issues with the CCS technology.”
The volume of credits Chevron would need to buy is unlikely to be met entirely by ACCUs, Grossman said, because of a lack of supply.
“There would be question marks over the capacity of the Australian market to support that size of the transaction,” he said.
A spokesperson for Sanderson said she would “have regard to relevant international agreements for carbon offsets and integrity principles which ensure that carbon offsets represent genuine and credible emissions”.
Carbon capture technology has environmental critics. Some environmentalists believe this technology is being developed as an alternative to reducing carbon emissions, rather than as a additional method to curb global warming. You may read more here.