Analysis of the technical, microeconomic, and political impact of a carbon tax on carbon dioxide sequestration resulting from liquefied natural gas production

With increasing attention to the environmental impact of discharging greenhouse gases (GHG) in general, and CO₂ in particular, many are looking to carbon sequestration as an approach to reduce the carbon impact of stationary point sources of CO₂. Although much of the focus has historically been on capturing and sequestering post-combustion CO₂ from the burning of fossil fuels, there are many industrial processes that already require separation of CO₂ that also contribute to GHG emissions. This CO₂ can also be sequestered. One such process is the commercial production of liquefied natural gas, which necessitates the separation of CO₂ from the hydrocarbon for liquefaction; resulting in a relatively pure CO₂ stream which can be sequestered. The Gorgon project is one such commercial project. In the broader political environment of Australia’s carbon tax system and government grants to offset the capital investment in carbon abatement technologies, the economics of the Gorgon project can be analyzed to determine the technical and economic parameters that make the carbon sequestration more or less feasible for this self-contained project. These findings can then be applied to any such project where a pure CO₂ is a necessary by-product and a carbon tax is either in effect or being considered. This analysis is the primary objective of this article. In this context, a computer-based simulator was developed to analyze the impact of technical, market, and public policy factors on project economics. A base case was developed using the current project parameters and a number of alternative scenarios were then developed. Sensitivity analyses were conducted and a “best case” scenario was developed to look at what the appetite for investment could be to improve the sequestration of CO₂. The article demonstrates that CCS project competitiveness can be simulated to analyze the impact of key technological, market, and policy changes on the project.