The Allam Cycle - a potential breakthrough in the energy transition
In a couple of recent blogs I’ve talked about the need for integral and cohesive action from governments, businesses, communities and citizens to act together to enable the energy transition. I’ve asserted that oil and particularly natural gas have a role to play in that transition and carbon capture and sequestration (CSS) can help reduce greenhouse gas emissions impact.
Hence I was intrigued by this little press release, dated November 8th 2018, that I found (serendipitously) on the website of Occidental Petroleum and which announces their investment in NET Power Inc, together with Exelon and others to support the development of a new power generation technology based on the Allam cycle, named after its designer, Rodney Allam. A small test plant using the concept has already been constructed in La Porte, Texas and as of May 2018 trials had commenced.
This technology presents an exciting possibility for power generation as it aims to be as cost effective and efficient as current leading gas turbines, but can use natural gas to generate electricity without any CO2 emissions nor NOX type pollution. The reader can find deeper explanations of the technology in several places including the website of McDermott, the engineering firm that is also a co-investor in NET Power, but the technology has two essential differences to current natural gas fired power generation. Firstly, instead of water/steam to drive the turbines, CO2 - a product of combustion - is used instead. The resultant stream of CO2 can be siphoned off without additional (and expensive) capture equipment. Secondly, the plant has an oxygen purification unit so burns natural gas with pure oxygen, hence removing the source of the NOXs (current plants use air). NET Power asserts Allam Cycle plants will be able to generate electricity at capital and operating expenditures competitive with current technology, and yet have no NOX emissions and have captured the CO2 product as part of the process ready for sequestration or some other use.
A simplified PFD for the new technology. Source: Power Technology
Why are Oxy jumping into the investment group that already includes some big names? It fits with their apparent desire to be part of the transition to a lower carbon economy. It also presents a business opportunity for which Oxy are in a competitive position. Through their CO2 Enhanced Oil Recovery projects in the Permian Basin, Oxy is the biggest injector of CO2 in the US to produce about half of their gross Permian production of over 300 Mbod. The unfortunate aspect of this EOR is that all the CO2 used comes from natural occurring “deposits” in New Mexico and Colorado and is produced from wells and piped to the Permian for injection. The better news for those those concerned about producing already naturally sequestered CO2 is that virtually all of the gas stays underground in the Permian reservoirs. The business opportunity I see, and suspect Oxy understand a whole lot better, is as follows. Oxy also produce a whole lot of natural gas in the Permian Basin - over 600 MMscfd - and that gas is currently sold at a discount to the Henry Hub benchmark. I haven’t done any detailed analysis but I suspect there is enough value to justify a power generation scheme local to the Permian which uses natural gas to generate electricity into the Texas grid, and produces a side stream of CO2 that essentially comes for free but attracts carbon tax credits as it pumped underground in the EOR process. Value also may come from replacing the imported CO2 supply with the local anthropogenic stuff and hence eliminate costs in production and pipelines. Denbury Resources are a mid-cap oil company based almost completely around C02 EOR. Again most of their CO2 is extracted from natural occurring reservoirs and transported by pipeline to their target old fields for EOR. They have however recently added two anthropogenic sources to their CO2 supply, in this case where CO2 is extracted by more conventional technology. There are a number of other examples emerging including the Petranova project in Texas, although is capturing CO2 from a coal-fired power plant.
There are plenty of other basins in the US that have both undeveloped gas resources and oil fields that have more recovery potential and represent opportunities to co-locate industrial use of natural gas, including power generation, with CCS to return the CO2 underground, whether or not it is adding to an EOR scheme. For example, for a state that imports 70% of its oil and 96% of its natural gas, and yet is well endowed in oil and gas, California would be a great place to adapt these technologies as part of the energy transition. I believe there is a good return on investment to made and make that return without adding significantly to the CO2 emissions. Truly an opportunity for an oil and gas company to have its cake and eat it!
I would be very interested in engaging a conversation with any oil and gas business interesting in appraising this concept. I have contacts that are familiar with the technologies, commercial process for carbon taxation and other aspects to be considered.