Back in March of 2018, Axios reported on what they called the “oily path to tackling climate change.” For the article, reporter Amy Harder visited Petra Nova, a key carbon capture project on the outskirts of Houston where carbon was being captured and used to extract oil in a veritable ouroboros of a climate change solution. “Capturing carbon to extract oil seems counterintuitive to addressing climate change, but experts who have crunched the numbers say this technology is a necessary, if controversial, step that's helped along by these kinds of projects,” read the Axios report. At the time, Harder wrote that the cutting-edge project was “poised to reap hundreds of millions of dollars in new federal tax credits.”
The timing seemed perfect for Petra Nova and similar oil-based carbon capture programs (such as NET Power and a carbon capture program led by Occidental Petroleum) to take off running and never look back. The International Energy Agency was releasing a report detailing a new provision in the U.S. budget that would “drive a record amount of investment to carbon capture.”
“The twin incentives of extracting oil and the new federal subsidies provide a foundation for commercializing carbon capture. That’s important because the United Nations (among others) calls the technology essential to cutting emissions to the level scientists say is necessary,” Axios reported. What could possibly go wrong?
Related: Oil Market Contango Returns In A Sign Of New Glut The answer is ridiculously simple: cheap oil. Just this week, E&E News reported that, two years later, “Low oil prices [have forced] Petra Nova into 'mothball status'”. The project that had so recently been hailed as a game-changing solution to greenhouse gas emissions in the fossil fuel industry has officially been shelved. Like so many other economic sectors and businesses in the especially hard-hit global energy industry, Petra Nova is just one of the latest COVID-19 corporate casualties.
The Petra Nova plant’s model captured a small percentage of the overall carbon emissions from a neighboring coal plant, which were then repurposed to aid in oil extraction as part of a process called enhanced oil recovery. The process, though promising, is prohibitively expensive. With oil hovering at just around $40 a barrel, the Petra Nova business model just is no longer viable.
A new Axios article, written by the very same Amy Harder who had seen the promise of Petra Nova in person back in 2018, responds to the announcement: “The news is unsurprising but nonetheless emblematic of the complex relationship between climate policies and oil prices, which collapsed along with oil demand in the wake of the pandemic.”
Related: Oil Needs Strong Demand Recovery To Break Out Above $40
The sad story of Petra Nova exemplifies a key argument at the center of a debate around climate policies and oil prices. The two schools of thought, as summarized by Harder for Axios this week, are that A) “Oil (and natural gas) prices need to be high to force behavior change on behalf of businesses and consumers” and B) “Oil and gas prices should be low to allow the political room for all sides to compromise on big policy”. However, this is a tricky debate, as high oil prices “ often compels politicians into imminent crisis mode (price manipulation! Investigate OPEC!)” muscling climate concerns out of the limelight and way further down the list of priorities, whereas low oil prices make new technologies unable to compete. Hence the current situation with Petra Nova.
While Petra Nova has been shelved, however, it hasn’t been axed altogether. And calls for green energy and climate-smart post-COVID stimulus packages are growing around the world. In fact, even blue-chip companies like McDonald’s and Pepsi have written to the U.S. Congress to put clean energy at the heart of their economic recovery plans, as the Trump administration has so far been falling behind the rest of the world in terms of green stimulus plans. Maybe there is room for a resurrection of Petra Nova and other carbon capture ventures if politicians heed the call of experts such as those at the World Economic Forum who are urging world leaders to use this unprecedented interruption to business-as-usual to pave the way for a “new energy order” and a “great reset.”
By Haley Zaremba for Oilprice.com
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