The number of countries announcing the ambitious and challenging goal to achieve net-zero emissions over the coming decades continues to grow. This target cannot be achieved without the development of Carbon Capture and Storage (CCS) technology. CCS today is not yet economically convenient; however, the subject is of great interest and tens of pilot projects or experimental applications are on in the world. It could be convenient in the future in case of carbon tax in the order of 50-100 $/ton of CO2 or in case of a technological breakthrough that allows to drastically reduce the cost of the CO2 capture from flue gas.
Economics of CCS are performed with difficulties because of the numerosity of uncertain independent variables. We have developed a simplified methodology that calculates the economics of oil and gas field development with CCS; it is particularly suitable for feasibility studies and analysis of different scenarios. The economics are in terms of Internal Rate of Return (IRR). The independent variables are: capital expenditure CAPEX, duration of the project execution, exponential decline rate coefficient, reserves, duration of the production plateau (if any), duration of the production period, operational expenditure OPEX, total government take. The method has been successfully tested versus various cases of field development with economics calculated with sophisticated models.
During field development feasibility studies, the accuracy of cost estimations is around +/− 40%. Therefore, being extremely precise in economics evaluations in this phase is a non-sense; rather, it is worthwhile spending more effort to understand the impact on internal rate of return, IRR, of the most important independent variables (reserves, CAPEX, OPEX, oil price, tax) and also to rapidly evaluate different development architectures and technical choices.
The method here presented can be easily used by non-experts of economics and is particularly indicated for project managers, construction managers and operation managers. Main limitation of the method is that, as we will see later, OPEX and taxation are assumed constant. Besides, it holds for exponential rate decline. On the other hand, these assumptions are generally considered by the more sophisticated economics models.
