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UPDATE: 8 Rivers CCS project in $60m capital raise

UPDATE: 8 Rivers CCS project in $60m capital raise, drops bid for govt funds

(Adds GNS comment on NZ storage potential in 22nd paragraph, removes reference to NET Power in 19th.)

By Gavin Evans

Oct. 1 (BusinessDesk) - The promoter of a $4 billion carbon capture and storage project that would establish a New Zealand fertiliser export industry has abandoned its bid for government support and is raising $60 million privately to advance the initiative.

US-based 8 Rivers Capital says it is in talks to raise $60 million to advance the project through to a final investment decision in late 2021. The firm is working with Toshiba on a suitable turbine for the 360-megawatt power project and an annual gas supply of 40 petajoules is also being sought, 8 Rivers principal Cam Hosie said.

Interest in the capital raising has been positive and the firm can advance the Taranaki project without having the full $60 million committed, Hosie told BusinessDesk.

“The timeline is basically when we have decided we have got the appropriate amount to start,” Hosie said during the New Zealand Petroleum Conference in Queenstown.

8 Rivers had initially sought a show of government backing in principle with a bid to the Provincial Growth Fund for up to $20 million of feasibility funding. That has been abandoned with the government indicating no interest in supporting a fossil fuel-based project, even if it keeps carbon emissions out of the atmosphere by pumping it underground. Energy Minister Megan Woods made clear at the launch of the government’s hydrogen strategy last month that it would neither support nor stand in the way of such developments.

Hosie said there is “substantial offshore appetite” to fund the project, particularly from firms wanting to participate in the global roll-out of the technology.

“I’m cautiously optimistic. We’re here. We’re doing it.”

Dubbed Pouakai, the Taranaki project would use super-critical carbon dioxide to drive turbines to produce electricity before pumping the CO2 underground into depleted oil and gas fields - so-called carbon capture and storage.

That unit would be coupled with 8 Rivers’ low-cost hydrogen-making technology and an off-the-shelf urea plant for making fertiliser.

That combination would enable the plant to provide 170 MW of emissions-free gas-fired electricity generation and up to 2.1 million tonnes of emission-free urea annually.

“This plant can be a substantial contributor to the zero-carbon grid and the zero-carbon economy,” Hosie told conference delegates. At the same time, it would create an “enormous” export opportunity with the potential to ship up to 1.3 million tonnes of fertiliser annually.

Conference delegates earlier heard that global population growth and energy demand is still outstripping efforts to rein in emissions.

John Kidd, director of energy research house Enerlytica, said that coal-fired power generation is still growing and remains the world’s biggest climate challenge.

While global gas production will have to increase to replace that, so will every other lower-carbon options.

“Carbon capture and storage is a necessity. You have to do it. It is the only option you have to meet the demand curve that is coming at you for the next three decades,” he said.

“Nuclear has to happen. This is all part of the solution. There are no single silver bullets and there is no point ruling things out along the way because everything is going to be needed in the next three decades.”

8 Rivers develops potential “moon-shot” technologies it believes can be commercialised at scale to meet the sustainability challenges of the future.

It partnered with Toshiba, power generator Exelon and engineering giant McDermott International to build a US$160 million, 50 MW demonstration power plant in La Porte, Texas. The NET Power-operated plant was commissioned last year and is connected to the Texas grid. The venture has since been joined by Oxy Low Carbon Ventures, a unit of Occidental Petroleum.

Hosie says 8 Rivers now wants to test the hydrogen-making capability of the technology before proceeding to a global roll-out of the combined system.

The venture last year sought Provincial Growth Fund assistance for its feasibility work, but that did not eventuate. At the time, ministers were split on whether they should be backing hydrogen production made from gas rather than renewables, and on the technical feasibility of carbon capture and storage.

Environment Minister David Parker said in May that he thinks CCS can be consented under the existing planning regime but the sector is worried projects could face legal challenges by environmentalists without stronger policy support from government.

Rob Funnell, basins analysis team leader at GNS Science, told delegates that carbon capture and storage is a proven technology that has been used internationally for more than 40 years.

He said storage potential exists in several regions, but the aged gas fields in Taranaki, like Maui and Kapuni, are probably the country’s best short-term options, given the detailed data the industry has on those reservoirs.

Hosie said Pouakai is predicated on the existing consenting regime and emissions trading scheme. No government funding support is now being sought.

He said the project should be attractive to a gas supplier – particularly from high-CO2 fields – given its scale and predictable load. But he said the plant’s size can be scaled up or down to match the gas available. New Zealand used about 168 PJ of gas last year.

On the current schedule, commissioning could be possible during 2024.

Hosie said New Zealand is an ideal test location, given it has a developed electricity market with a long-term demand for peaking capacity and is a net fertiliser importer.

He said the project is essentially a chemicals plant “masquerading” as a power station, and achieves economies across its process and benefits from the revenue streams from the products made.

Its dispatch price for generation would be about $33/MWh, while its urea cost would also be about 25 percent lower than best-in-class rivals. New wind farms can produce power at a cost of $60-70/MWh.

Hosie said the plant will produce more than 200 million kilograms of hydrogen annually and capture about a million tonnes of CO2.

It would produce 1.2 million tonnes of ammonia, which would then make 2.1 million tonnes of urea. About 100,000 tonnes of argon would also be produced.

At that level of production, Hosie said the plant could replace the roughly 700,000 tonnes of fertiliser the country imports annually and export 1.2-1.3 million tonnes.

“We’re talking about the creation of an enormous export industry.”



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