Chevron’s Project Gorgon located on the West coast of Australia, fitted with carbon capture and storage, managed to meet just around 30% of its initially planned CO2 sequestration target. As a result, the company would have to buy carbon credits to compensate for the difference that amounts to well over $250 million Australian dollars ($184 million).
Chevron, which owns 47.3% of the project, reported earlier this year that it has failed to bury 9.5 million tons of carbon dioxide in its first five years of operation. The goal was for a minimum of 80% of the CO2 emissions from the reservoirs feeding the Gorgon LNG plant to be captured in the first 5 years of its operation.
That means the carbon capture project was scheduled to store 4 million tons of carbon emissions per year, however, so far it has only managed to inject a total of 5 million tons of CO2.
Now, the West Australian government requires the owners to respond to the shortfall. Chevron and its partners agreed to purchase carbon credits to fulfill their obligations to the government.
The costs will be shared between Chevron (47.3%), Exxon Mobil Corp, Royal Dutch Shell, Japan’s Osaka Gas, Tokyo Gas, and JERA.
Chevron announced on Thursday it would buy 5.23 million tons of carbon offsets and invest $40 million in lower carbon projects in West Australia. Apart from purchasing offsets from the voluntary Australian spot market, Chevron would also use two international programs: the Gold Standard and the Verified Carbon Standard.
The proportion purchased from the Australian market “will depend on availability and impact on the Australian Carbon Credit Unit market,” said Chevron in the annual project Gorgon Environmental Performance Report. The company plans to “use reasonable endeavors” to purchase the offsets by July 2022.
Last week the Australian carbon credits hit a record high of $37 Australian dollars for a ton. 5.23 million offsets could cost at least $195 million Australian dollars ($142 million) for the company.