Carbon capture development in Australia is advanced thanks to the significant role energy companies play in the industry. Pilot Energy Limited – an ASX-listed energy company and partner Triangle Energy are developing a carbon capture and storage hub in Western Australia called the Cliff Head CCS project.
It involves the conversion of the Cliff Head oil field, located offshore Western Australia, from an oil production site to a carbon capture and storage facility. As Australia has quite a few CCS projects in the pipeline and the ones on the agenda are expected to be operational closer to 2030, the Cliff Head CCS project is scheduled to be capturing and storing CO2 as close as 2025/2026.
In addition, the project’s estimated storage potential comes to 50 million tons of CO2 and is expected to inject CO2 at a rate of 665,000 tons per year for about 15 years. We interviewed Pilot Energy Chairman Brad Lingo and he shared some interesting details on the current state of development of the project.
What is the Cliff Head CCS project?
The Cliff Head CCS project is an integral stage of Pilot’s Mid West Clean Energy project (MWCEP) which is targeting 1.2 million metric tonnes per annum (mtpa) low/zero carbon ammonia from 2027. Cliff Head CCS will be the first stage of the MWCEP and is expected to be operational by 2026.
The Cliff Head CCS Project aims to be the first operational carbon capture and storage facility located offshore in Australian Commonwealth Waters off the Mid-West Coast of Western Australia. The project is based on the conversion of the late-stage, mature Cliff Head Oil Field and its associated offshore and onshore infrastructure into a permanent CO2 storage facility.
The project aims to store over 1 million tonnes per year of supercritical CO2 starting in CY2026 and provide at least 50 million tonnes of permanent CO2 storage.
It intends to provide carbon capture and storage to third-party emitters as well as to support the development of the MWCEP. The clean ammonia will be produced from a combined green and blue hydrogen production facility with fully integrated carbon capture and storage delivering over 99% CO2 capture and over 95% capacity factor from the green hydrogen electrolyzer facility.
How did it start?
The Project started with the recognition of two key facts. Firstly, Pilot Energy recognized that the Cliff Head Oil Field had been developed and operated contemplating enhanced oil recovery from its inception in the early 2000s and was currently in the late stage of secondary waterflood.
Secondly, that new major gas discoveries with significant quantities of CO2 had been made and were being developed in close proximity (i.e., within 15 to 30 kms) to the Cliff Head Oil Field onshore production plant. The gas field developments were planning to process and vent over 500,000 tonnes of CO2 each year directly into the atmosphere. Pilot Energy also recognized that when aggregated with nearby industrial and mining operation CO2 emissions, the total emissions nearby were approaching 1 million tonnes per annum.
Why did you decide to develop this carbon capture and storage hub?
With the support of major shareholders in the company, in 2020 Pilot Energy undertook a comprehensive review of its traditional oil and gas business and identified that its core operations in the Mid-West Region of Western Australia were situated in one of the richest renewable resource regions of Australia. The area had been long identified as one of the top regions for CCS potential, renewable energy – offshore and onshore wind and solar – and clean hydrogen production.
Out of this comprehensive strategic review, Pilot determined to embark on transitioning its traditional oil & gas exploration and production operations business into the development, production, and supply of clean, sustainable, and cost-competitive energy building on three pillars – CCS, renewable energy, and sustainable hydrogen and clean ammonia for export.
Is the Cliff Head CCS project going to be used for enhanced oil recovery for the Cliff Head offshore oilfield?
No, the Cliff Head CCS Project is only focused on redevelopment into a permanent carbon capture and sequestration operation and is not intending any form of CO2-enhanced oil recovery. The CO2 will be injected into the Cliff Head CSS reservoirs for permanent storage and not to recover additional oil from the field.
How do you plan to market the blue and green hydrogen and clean ammonia that you will be producing?
Following undertaking detailed hydrogen and clean ammonia market study for the APAC region, in mid-CY2022, Pilot commenced engagement with prospective customers in the target markets identified in the study.
These discussions have highlighted a significant interest from large energy consumers that have traditionally sourced significant supplies of carbon energy sources from Australia now looking to Australian sources for new clean, zero-carbon energy.
What are the economics of the project – including metrics like annual profitability, costs, CO2 sequestered?
The economics of the Cliff Head CCS Project is set out in the company’s ASX releases of 28 March 2022 and 7 June 2022. They share details of the feasibility studies for the Cliff Head CCS Project and the overall Mid-West Clean Energy Project as well as a number of detailed corporate presentations following the completion and announcement of the results of these feasibility studies.
In summary, these feasibility studies show that based on an annual CO2 injection capacity of between 550,000 tpa to 1.1 mmtpa, the Cliff Head CCS project has a project CAPEX of approximately AUD 9-16/tonne and OPEX cost of approximately AUS 10/tonne delivering a pre-tax NPV of between AUD 110 to 210 million.
It has a project IRR of approximately 30 to 40% based on the Reputex central case forecast Australian Carbon Credit Unit price YE2025 of approximately AUD 50/tonne increasing to AUD 65/tonne by early 2030.
Do you think the project will uplift the Pilot Energy stock?
We expect that as the regulatory approvals for the Cliff Head CCS Project are received from the Commonwealth Government along with third-party CCS customer commitments to the project, they would have a material positive impact on Pilot’s business. Subject to market conditions this should translate into a positive impact on Pilot’s stock.
I understand you are looking for potential project partners and customers for CCS offtake, do you have any updates on that?
Pilot Energy is conducting a targeted engagement with prospective customers and development partners for both the Cliff Head CCS Project but also the overall Mid-West Clean Energy Project. Through this process Pilot anticipates locking in anchor customers and partners by the second half of CY2023.
Would you share more details on your partnership with 8 Rivers?
8Rivers has been a key technology provider throughout Pilot’s focus on the potential for blue hydrogen production throughout the Mid West Clean Energy Project feasibility study phase. The feasibility results clearly point to the ability to produce clean ammonia from blue hydrogen production utilizing 8Rivers 8RH2 technology on a commercially attractive and technically advanced and practical basis.
Based on them, Pilot has further engaged 8Rivers to undertake detailed pre-FEED studies for the blue hydrogen component of the Mid West Clean Energy Project. This pre-FEED work will focus on setting the final basis for the design of the blue hydrogen production facility but will also feed back into the FEED work for the Cliff Head CCS Project.
This will ensure that sufficient CCS capacity is installed from start-up to accommodate both third-party CO2 volumes along with the CCS needed to support the Mid West Clean Energy Project blue hydrogen production with full CCS insuring the lowest carbon and lowest cost clean ammonia production.