Global Economics

Algeria's Carbon-Capture Experiment


A venture by Algeria's Sonatrach, BP, and Norway's Statoil to strip CO2 out of natural gas and store it underground could help cut emissions

About 700 miles south of Algiers, the capital of Algeria, a monumental assemblage of pipes and cylinders rises from the bleak Sahara Desert. Not far away is a small airstrip and helicopter pad. And in a compound down the road, surrounded by a thick stand of trees to break the whistling winds, there are dormitories, tennis courts, even a mess hall, where a crew of chefs whips up hearty meals including lobster pie and potato tarts for several hundred people.

In a way, this oil industry camp represents an effort to turn the desert—or at least the natural gas Algeria exports to Europe—green. The plant, which is situated on a tiny oasis known as Krechba, is designed to strip out and cleanly dispose of the carbon dioxide contained in the gas produced by a vast network of seven distinct fields below the desert floor.

The gas in this part of gas-rich Algeria contains about 7% CO2, on average. That contaminant level must be reduced to about 0.3% before it is exported to Italy and other European countries. In the past, energy companies vented such unwanted CO2 into the atmosphere, adding to the greenhouse gas problem. But in this case, the partners, Sonatrach, the national oil and gas company, BP (BP), and, Norway's Statoil (STO) decided in the late 1990s to store the carbon dioxide underground.

Executives at the site say that the In Salah Gas Project, named for an oasis about 100 miles to the south, is the largest so-called carbon, capture and storage venture in existence. Accounting for about 12% of Algeria's gas output, it is an experiment—but a very large-scale and profitable one. Including military units intended to deter attacks by Islamic militants, who are still a serious threat in Algeria, there are some 2,000 people working on the vast undertaking.

Oil Industry Visitors

The companies say their project, which will produce gas for roughly 25 years, is preventing about 800,000 tons of CO2 from going into the atmosphere annually. That's comparable to taking 200,000 cars off the road, they say. While there are difficulties and questions, it looks like a promising step in the effort to reduce CO2 emissions from one large source: the oil and gas industry. Although not highly publicized, In Salah attracts visitors from within the industry who want to see if there are any lessons they can learn for their own oil and gas fields. Recent guests included a group from Abu Dhabi National Oil.

The added cost of disposing of the CO2 isn't huge. Mohamed Keddam, a Sonatrach executive who serves as vice-president of In Salah Gas, put the price tag at $100 million out of an overall $4 billion investment, or about 2.5%. That doesn't include daily operating costs. When the partners decided to move ahead with In Salah in the late 1990s, they were attracted by the opportunity to experiment with a new, possibly environmentally friendly technology. "We didn't feel it was right to vent the CO2 if we could do something else with it," says Michael Mossman, a BP executive who is also president of In Salah Gas.

Once the methane is purified at the Krechba plant to export-quality grade, it heads north in a buried export pipeline to join the Algerian gas network. The captured CO2 is pressurized by two giant compressors supplied by Mitsubishi Heavy Industries. The CO2 is then whisked along separate pipelines and pumped a mile into the ground into a body of water beneath the gas field. The companies figure that by the time the gas migrates up into the gas part of the reservoir, the project's life will have ended.

Contamination Questions

The big question is whether the CO2 will somehow escape into the atmosphere or, perhaps, contaminate important nearby water supplies. One In Salah executive said that the biggest danger is that the CO2 could somehow escape into an ancient aquifer that lies above the gas field. The companies, however, are confident that this reservoir, which has a thick layer of shale forming a seal on top, will prove impervious. Their thinking is that if it has held gas for thousands of years, that's good reason to think it can do so in the future.

Although the environmental bent of former BP CEO John Browne is said to have influenced BP's decision to go ahead with In Salah, the international companies and Sonatrach are not altruists. They see economic potential in what they are doing in In Salah. Both BP and Statoil are heavily invested in the growing business of supplying gas to Europe. Algeria is one of Europe's key gas sources, accounting for about 10% of European consumption.

With the European Union pressuring industry to reduce carbon emissions sharply, projects such as In Salah that cut CO2 could prove increasingly valuable to their owners. Sahnoun, who oversees Sonatrach's many joint ventures with international companies, says what's being done in In Salah is "likely to be generalized to the rest of the projects in the area." In particular, he says upcoming gas field developments with Gaz de France (GSZ.PA), Total (TOT), and Repsol (REP) look like good candidates for carbon capture and storage. It isn't yet clear, though, how the EU will consider gas from projects outside its borders, such as In Salah.

What's more, not all gas projects may be suitable for the technology being pioneered at In Salah. Some gas fields don't have high CO2 concentrations. And having the right type of reservoir, such as the one that lies beneath Krechba, also helps make the project viable economically. Keddam, the In Salah vice-president, pegs the total cost of carbon storage at In Salah at about $14 per ton—which he thinks is substantially below what the EU is likely to charge for CO2 emissions. In Salah alone is not going to save the world, but it could prove a step in the right direction.

With Mark Scott in London

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