Investment in CO2 capture and storage combined with enhanced oil recovery in China: A case study of China's first megaton-scale project

Abstract

In recent years, China has accelerated the development of CCUS (CO2 capture, utilization and storage) technology and started construction of the first megaton-scale CCS-EOR (CO2 capture and storage combined with enhanced oil recovery) project. Taking China's first megaton-scale CCS-EOR project as an example, this study constructs a comprehensive evaluation method that integrates the decision rules of the real option approach and net present value approach to evaluate the economics and investment strategies of China's CCS-EOR projects under multiple uncertainties. The results show that the project investment in 2022 can create a profit of 2.94 million USD because of the introduction of a tax credit policy that will begin in 2030 with an initial amount of 10 USD/ton of CERs (certified emission reductions) and an annual increment of 2 USD/ton of CERs, but the optimal time to invest should be 2025. Without this incentive policy, the profit opportunity and ability of the case project will be greatly reduced. In addition, the decision-making of CCS-EOR project investment is extremely sensitive to capital cost, oil production, incentive policy start time, and incentive intensity. Therefore, China should formulate and implement tax credit incentives or similar policies with a high incentive intensity as soon as possible to improve the confidence of potential CCUS investors. Direct financial support for early CCS-EOR projects through government financial allocations should be an important addition. In addition, enterprises should strive to accurately calculate and forecast the capital cost and oil production.