The Snøhvit Liquefied Natural Gas (LNG) project developed by StatoilHydro
and partners in Norway is used as an example to describe how the carbon capture
and storage (CCS) component of an oil and gas project can be isolated, modeled,
and analyzed from an economic point of view. The Snøhvit development, which
started production in late 2007, involved a CCS component from day one.
Approximately 700,000 tons of CO2 captured from the liquefaction
plant will be reinjected every year in an underground formation offshore.
Furthermore, there are interesting alternatives for CO2 capture from
the on-site power plant and for the use of CO2 for enhanced oil
recovery (EOR) in a nearby oilfield, leading to several future development
scenarios for CCS at Snøhvit.
Different development scenarios for CCS are analyzed to select the best
development option. The economic modeling framework will also be used to assess
the impact of the uncertainties on the project economics.
The analysis identifies that a key driver for the profitability of the
project is the legislative setting for CCS. The involvement of the government
is very important for the viability of the project, which needs a strong
incentive, such as the current CO2 tax scheme or an emission trading
scheme with strict allocation of emission targets. Under such conditions, a CCS
project such as Snøhvit becomes a win-win situation: economically profitable
for the operator and environmentally friendly.
From a broader perspective, addressing the economic and legislative
uncertainty currently surrounding CCS projects for the oil and gas industry is
crucial because this represents the main limiting factor for the further
development of such projects. It is therefore essential that economic modeling
tools such as the framework described in the present work become industry
standards to ensure that projects which could be profitable for both the
operator and the environment are not abandoned by pure lack of analysis
Carbon dioxide has been used for EOR purposes in Texas since the 1970s. More
recently, CCS projects involving the oil and gas industry have been started in
Canada, Algeria, Norway, and the Netherlands, and several other projects are
planned all over the world, particularly in the North Sea (Miller in the United
Kingdom, several projects in Norway among which Snøhvit) (Metz et al.
However, even though CCS projects for the oil and gas industry are
technically mature, there are still a certain number of barriers that act as a
constraining factor for new CCS projects:
- The cost of CCS is still significant, even though there is sufficient room
for improvement, especially in the capture component (Metz et al. 2005).
- Most importantly, there is a large amount of uncertainty related to the
economic viability of CCS projects. This is mainly because of the fact that
legislative issues concerning economic incentives and structures for CCS
projects are currently in an experimental stage, and thus evolve
The main objective of this paper is therefore to address the uncertainty
related to the economic viability of projects for the oil and gas industry
The Snøhvit LNG project will be used to illustrate how to isolate from an
economic modeling point of view the component involved in CO2
capture and storage (hereafter called the CCS component) from the rest of the
project. Indeed, the CCS component is complex enough to require separate
modeling, and this practice is not currently an industry standard. It is
therefore interesting to describe how this CCS component can be defined, with
its boundaries and interactions with any external entities, and how all these
issues can be modeled.
An economic analysis will be performed on the different development
alternatives and scenarios that will be defined for the CCS component of the
© 2008. Society of Petroleum Engineers
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- Original manuscript received:
14 February 2007
- Meeting paper published:
11 June 2007
- Revised manuscript received:
10 January 2008
- Manuscript approved:
23 January 2008
- Version of record:
15 June 2008