Can carbon capture help Big Oil reach its net zero targets?

Extract from Majors’ CCUS benchmarking report

April 2021

Trusted Intelligence woodmac.com

Majors CCUS benchmarking 2021 woodmac.com

Under our -1.5º scenario, carbon removal becomes a trillion dollar industry
There is potential for the market to be larger if carbon prices are high. We forecast CCUS
growth will accelerate post-2030 as the market for carbon becomes more established
Potential carbon removal market size based on the cost of CO2 avoided

The abatement cost is the CO2 price that

900
would be required for two identical facilities,
one with CSS and one without, to have equal
800
NPVs. We assume an abatement cost range
of US$30-214 per tonne of removal in 2030.
700
600
US$ billion

500
400
300
200
100
0
2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

Series1 Series2 Series3 Series4 Power Industry DAC

Source: Wood Mackenzie Global ETS

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Majors CCUS benchmarking 2021 woodmac.com

A market price for carbon is needed for large-scale CCUS deployment

CCUS will need government support initially to allow the industry to scale up and drive costs
down
Cost of CO2 avoided (US$/tonne CO2) by capture industry
350
Costs will need to come down For CCUS to
300 enter the mainstream. ExxonMobil plans to
reduce costs by 30% this decade.
US$/t CO2

250
California Low Carbon Fuel Credit
200

150
Global price on carbon required to meet Wood Mackenzie’s 2°C scenario (AET-2)
100

50
Carbon tax ‘global average' US$22/t*** (end-2020)
0

Cost of CO2 avoided defined as the CO2 price that would be required for two identical facilities, one with CSS and one without, to have equal NPVs
Source: Wood Mackenzie & Global CCS Institute *NGCC (Natural gas combined cycle) ** IGCC (Integrated coal gasification combined cycle) ***covers only 20% of all Global emissions 3
Majors CCUS benchmarking 2021 woodmac.com

Several major economies have committed to CCUS deployment

Momentum behind CCUS is growing. We see the US, Canada, Australia and the UK as
important potential markets

The 45Q tax credit allows for US$35/ton for CO2 used
for EOR or natural gas recovery and US$50/ton for
CO2 stored in saline formations. The California Low
Carbon Fuel Standard (LCFS) allows transport fuels
whose life-cycle emissions have been reduced through
CCUS to become eligible for additional tax credits.
European Green deal, London Protocol and Cluster
funding have contributed to recent developments. UK
White Paper – will invest £1 billion in CCUS to facilitate
two clusters by 2025 and another two by 2030 with
ambition to capture 10 Mtpa of CO2 by 2030.

The Greenhouse Gas Pollution Pricing Act (GGPPA)

China has pledged to
taxes transportation and heating fuels, starting at
become carbon neutral by
CAD$20 /ton in 2019 and rising $10 each year to
2060 - CCUS is likely to be
CAD$50 in 2022. In 2020 Alberta launched the
part of the recommended
Industrial Energy Efficiency and CCUS Grant
actions.
Program as part of its economic recovery plan,
providing up to 75% of project expenses up to $20
million
Japan embedded CCUS in
its January 2020
Environmental Innovation
Strategy.

Singapore released its low-

emissions development
strategy in April 2020,
recognising the role of CCUS
in reaching its target

The Australian Government

has announced funding for
CCUS development ($2 bn)
and to establish a hydrogen
export hub.

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What is the Corporate New Energy Series?

This 11-report series is the result of collaboration between Wood Mackenzie experts from the corporate, energy
transition practice and carbon research teams and includes:

Corporate New Energy profiles
For Total, Shell, BP, Eni, Equinor and Repsol. The
profiles examine the companies’ new energy
strategies, business models and corporate targets and
ambitions, as well as forward looking energy
production, capacity, capex and cash flow projections.
This analysis will help other oil and gas companies, as
well financial institutions and regulators have a better
understanding of the depth and materiality of the
Majors’ diversification into clean energies.
Corporate benchmarking reports
The series includes four thematic technology
benchmarking reports for solar, offshore wind,
carbon capture utilisation and storage (CCUS)
and hydrogen. The reports will enable clients
put in a global context the Majors’
diversification efforts, illustrating the scale of
the challenge ahead.
Carbon benchmarking primer
A Carbon benchmarking primer for the
Majors is also included in the series. Which
provides clarity on the Majors’ commitments
to carbon reduction, including Scope 1, 2
and 3.

Designed to help you

• Understand current strategic positioning of the O&G Majors in New Energy: strategies, business models, investment and future cashflows from renewable portfolios.
• Have clarity on the Majors carbon targets, ambitions and methodologies used to calculate carbon emissions. Understand challenges associated with carbon footprint
measurements.
• Have a deeper understanding of key emerging technologies – solar, offshore wind, CCUS and hydrogen – including the state of the global market and the Majors’
positioning in each one of these themes.

Find out more

https://www.woodmac.com/research/products/global-energy-markets-trends/corporate-new-energy/
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