Billion Dollar Petra Nova Coal Carbon Capture Project a Financial Success But Unclear If It Can Be Replicated

NRG Energy and JX Nippon’s joint venture Petra Nova project, the world’s largest operating post-combustion carbon dioxide (CO2) capture system, is set to receive another big boost from ongoing bipartisan enthusiasm for “clean coal.” The U.S. budget bill passed by Congress in early February included the FUTURE Act (S.1535) that extends tax credits for carbon capture, utilization, and storage (CCUS) projects and raises the credit from $10 to $35 per ton used for enhanced oil recovery. This certainly raises the prospects for further investment in an expensive and nascent technology.

The Petra Nova system has been operating since January 2017 on the retrofitted coal-fired Unit #8 at W.A. Parish Generating Station southwest of Houston, Texas. The 610 MW unit produces about 25% of the plant’s total output and CO2 emissions. A portion of the emissions, equivalent to that of a 240 MW unit, are routed to the carbon capture system that cools the gas, binds the CO2 with a solvent, vents the remaining nitrogen gas, and then reheats the mixture to break the CO2 bonds. The CO2 is cooled and compressed to a supercritical liquid that then enters an 81-mile pipeline to the West Ranch Oil Field where it is pumped 5,000 feet underground into the Frio Formation and combines with the oil, lowering its density. Extracted oil is processed through a CO2 separator that returns the gas back to the formation. An industry rule of thumb estimates an extra two barrels of oil is extracted for every ton of CO2 injected, which has so far increased production from 300 barrels to more than 4,000 barrels per day and may reach as high as 15,000.

Source: Petra Nova, a joint venture between NRG Energy and JX Nippon Oil & Gas Exploration
Source: Petra Nova, a joint venture between NRG Energy and JX Nippon Oil & Gas Exploration

Key Details

  • The $1 billion project was completed on time and on budget, where others have famously failed; possibly due to the project management approach that required at least 20% of the project engineering completed during the estimate phase before the project could proceed
  • NRG and JX Nippon each invested $300 million, receiving 25% stakes in the oil extracted
  • The project broke even financially at startup when the Brent Crude oil futures price hovered around $50/barrel and clearly is delivering a greater upside as the futures price has risen above $63/barrel[1]
  • In addition to the joint venture between NRG and JX Nippon, a great deal of international, federal, and state support was necessary to making the project a success, including:

  • Favorable oil prices and the newly increased tax credits may encourage NRG to replicate the project at its Big Cajun plant in New Roads, LA that has similar proximity to an older oilfield that would benefit from EOR
  • The carbon capture system has reduced 2017 CO2 emissions intensity of Unit #8 by 25% from the previous year (lbs. of CO2 emitted divided by MWh generated)
  • However, considering the emissions of the gas-fired turbine that powers the carbon capture system and the emissions from the additional petroleum products resulting from EOR, the total impact of the carbon capture system is actually an estimated 2% increase in CO2 emissions

Implications

Petra Nova has proved that carbon capture, used in conjunction with revitalizing oil field production, could provide a positive financial return. Though opportunities to replicate this project are inherently limited by geology and proximity to oil and gas production, the CCUS tax credit may lead to the development of more projects like Petra Nova. However, some environmental groups and businesses, including Exxon Mobil and Duke Power, support a carbon tax, seeing it as a more efficient way to encourage private investment in decisions that will reduce CO2 emissions.

More Information

National Energy Technology Laboratory: Recovery Act: Petra Nova Parish Holdings: W.A. Parish Post-Combustion CO2 Capture and Sequestration Project

Greentech Media: Can Updated Tax Credits Bring Carbon Capture into the Mainstream?

E&E News: After Petra Nova, What’s Next for NRG and Carbon Capture?

POWER Magazine: Capturing Carbon and Seizing Innovation: Petra Nova Is POWER’s Plant of the Year

This report is part of ScottMadden’s Fossil Minute series. To view all featured Fossil Minutes, please click here.

Additional Contributing Author: Jonathan Aronoff

[1] Market price for Brent Crude futures (CO1:COM), https://www.bloomberg.com/quote/CO1:COM, retrieved March 1, 2018

View More

Contributing Authors

Harold Lewis Manager

Welcome to ScottMadden!

Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.