Masdar to fast-track energy, carbon project

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Masdar is pressing ahead with its integrated hydrogen energy and carbon capture development, and plans to seek bids in October for the project’s main engineering, procurement and construction contracts.

Sultan al Jaber, the chief executive of the Abu Dhabi government-owned energy company, said the contracts for the US$2 billion (Dh7.34bn) development would be awarded by the third quarter of next year.

“We are looking for ways to adopt a fast-track approach,” he said. “We hope the project will be fully developed by the third quarter of 2014.”

The landmark energy project would be the first commercial power development in the world to be integrated with a scheme to capture carbon dioxide emissions and store them permanently underground. In this case, the gas will be put to work to squeeze more crude out of an ageing oilfield.

That makes the project strategic for Abu Dhabi and Masdar.
“Once this project is up and running in Abu Dhabi, it is the intellectual property that comes with it that is important. It will allow the development of similar projects around the world,” Dr al Jaber said.

The project partners, which also include the British energy group BP and the Anglo-Australian mining and metals company Rio Tinto, are expected to decide formally on whether to proceed with project construction later this year. They are planning to launch a corporation this year, probably in October or November, to own and operate the development, Dr al Jaber said.

Masdar would own 60 per cent of the new company, with Hydrogen Energy, a BP-Rio Tinto joint venture, holding the remaining 40 per cent.

The Hydrogen Power Abu Dhabi (HPAD) project, which was announced in January last year, has made progress on the ground as well as on paper.

Front-end engineering and design for the development will not be completed until May, but the first piece of large equipment for the power plant, a steam turbine, was ordered last month. The Government has granted land for the project near Abu Dhabi’s Shuweihat 1 power development, and environmental studies required for regulatory clearance are under way.

The construction decision has been rescheduled and is now expected at least six months later than originally planned, but Dr al Jaber said this was not material to the project’s overall progress.

“The success of the project does not only depend on Masdar and Hydrogen Energy. It also depends on the alignment of other stakeholders” such as Abu Dhabi National Oil Company (ADNOC) and the Abu Dhabi Water and Electricity Authority (ADWEA), he said.

The project plan calls for HPAD to buy natural gas from ADNOC, convert it to hydrogen and carbon dioxide in a hydrogen plant, then supply ADNOC with as much as 1.7 million tonnes per year of carbon dioxide captured from the plant to transport to an oilfield for injection into a reservoir. The hydrogen would be used as carbon-free fuel for electricity generation, with ADWEA buying the output from the 400 megawatt power plant.

“ADNOC and ADWEA are very much aligned, and committed to make the project happen,” Dr al Jaber said.

The project partners had not yet started to arrange financing for the development, but did not anticipate problems because their power purchase agreement with ADWEA would guarantee a return on investment, he said. And although carbon capture is expensive, it made economic sense for Abu Dhabi because the waste carbon dioxide not only could be used to boost oil production, but also to replace natural gas used in enhanced oil recovery, freeing the gas for other uses.

The emirate, like most Gulf states, is short of gas for electricity generation and industrial use. It imports some of its gas supply from Qatar.

The commercial application of carbon capture and storage (CCS) technology had been hampered in many parts of the world by a lack of markets that put a price on carbon, Dr al Jaber said. Compounding that problem, CCS has so far been excluded from the UN’s clean development mechanism, a programme that enables developing countries to be paid for reducing carbon emissions. But Dr Al Jaber said he expected that to change at an international climate-change summit later this year.