California Resources Corp.’s (CRC) carbon management subsidiary Carbon TerraVault Holdings is on track for first CO2 injection in California’s first carbon capture and storage (CCS) project by year-end 2025, the company said, as it targets more projects.
Construction for the CCS project at the Elk Hills cryogenic gas plant is set to break ground in the second quarter, the company said. The project, in partnership with Brookfield, aims to capture up to 100,000 metric tons of CO2 annually from the Elk Hills cryogenic gas plant for injection and permanent storage in the 26R reservoir at CRC’s Elk Hills Field in Kern County.
It is the first of several projects in the works by the oil and gas producer as the company carries out its ambitions to lower emissions while unlocking business opportunities.
CCS involves capturing CO2 emissions from industrial processes or from the burning of fossil fuels in power generation. The greenhouse-gas deep is stored underground in a process considered promising for reducing emissions to combat climate change.
Fueled in part by favorable policies and incentives, the pipeline of CCS projects in the U.S. has grown in recent years; however, challenges involving permitting, costs and regulatory uncertainty remain.
“Through our carbon management business, we continue to build scale and expect new vaults and projects to be announced later this year,” California Resources President and CEO Francisco Leon said on the company’s May 7 earnings call with analysts. “We have a leading CO2 storage reservoir business in various stages of permitting with multiple CCS projects under consideration.”
(Source: California Resources)
Carbon TerraVault (CTV) currently has seven Class VI permit applications in the U.S. Environmental Protection Agency’s (EPA) queue, totaling about 287 million metric tons of storage. Having identified up to 1 billion metric tons of potential CO2 storage in California, the company said it plans to submit additional reservoirs to the EPA for Class VI permitting this year. The 26R Monterey Formation reservoir alone could store up to 1.46 million tonnes of CO2 annually for 26 years, according to CRC’s earnings presentations.
Power provider
Other CCS projects in the works include the CalCapture project, which intends to capture CO2 from the 550-megawatt Elk Hills natural gas combined-cycle power plant for injection and permanent underground sequestration. The company said it is in talks with several large-scale industrial customers for a power purchase agreement (PPA), including use of CTV’s CO2 storage reservoirs.
But as senior E&P analyst Kalei Akamine of Bank of America Merrill Lynch pointed out “carbon capture is a more expensive project than the cryo that you’re breaking ground on this quarter.” He sought comments on funding.
Leon said the final investment decision for the CalCapture project is connected to the PPA. The revenue stack includes clean energy incentives such as the 45Q tax credit for carbon sequestration, the Low Carbon Fuel Standard program that encourages fuels with lower carbon intensities and avoidance of a carbon tax in California.
“At the end of the day, we’re trying to unlock a completely new business model, which is baseload 24/7 natural gas-fired with carbon capture,” Leon said. “And that’s kind of the mission to be able to find the right partner, the right PPA for that. So, we’re advancing all fronts.”
In addition to examining funding for CalCapture, the company is also working on engineering and trying to optimize costs, he said. Hyperscalers, he added, are returning to the table.
Clio Crespy, who became CRC’s CFO in January, sees opportunity for a behind-the-meter partnership model. She previously served as senior managing director of investment banking, global energy and power at Guggenheim Securities, where she also led the sustainability practice. Prior to joining CRC, Crespy said she brokered and structured deals between the data center developers and power asset owners.
“That’s where really I recognized the significant potential of CRC’s power business and how that fit a clear market need and fit that very well. … Now I’ve got a more in-depth view of our operations of our assets and the market and so I’m even more confident in the strength of our value proposition to data centers and to large offtakers,” Crespy said. “Our offering really is not only differentiated, but it’s resonating strongly in ongoing discussions, and those are advancing constructively.”
Leon said the company’s supply of gas, speed to market, access to land, proximity to CCS and scalable infrastructure are key attributes of its portfolio.
“Big emitters need a solution. And if we can unlock this at Elk Hills, it should ultimately also scale to our northern reservoirs and create a further business opportunity there,” Leon said. “So, a lot of things to solve for, but we are making progress. We’re getting the land ready. We’re getting our permits in good shape so that when we finalize the details of a contract with a third-party, it will be something that really can unlock value for us.”
Earlier this year, CRC said the IRR from its CCS project at the Elk Hills cryogenic gas plant is expected to be at the high-end of its previously disclosed range of 10% to 30%.
