Inside a company’s bid to make Alaska’s next big oil field lower-carbon

By Max Graham, Northern Journal - July 3, 2024
Santos’ Alaska headquarters building in downtown Anchorage. (Max Graham for Northern Journal)

Oil companies help stoke climate change by producing fuel that warms the earth when burned.

But the Australian company building one of Alaska’s huge new oil fields says the development, Pikka, will actually be climate-friendly.

Like many big businesses, Santos says it will counteract its emissions in part with offsets. Those are credits that companies can earn or buy from projects that lower the levels of heat-trapping carbon in the air, such as by planting trees.

Santos’ plan, though, also calls for something new to Alaska’s oil and gas industry. It wants to capture emissions from North Slope power plants and drill pads, and even to suck carbon dioxide directly out of the air — then inject the stuff into the ground where it can’t warm the planet.

The company’s focus on decarbonizing is part of a wider industry push across Alaska, and the globe: Companies are attempting to give oil, gas, and coal something of a climate makeover amid increasing pressure from investors, advocates and regulators.

ConocoPhillips, which is building the other big new North Slope project, Willow, says it’s  evaluating its own carbon capture and sequestration options, and it has targets for curbing emissions across all its operations.

ConocoPhillips’ Willow project on Alaska’s North Slope. (ConocoPhillips)

But Santos’ climate plan at Pikka, its first Alaska development, stands out as the highest-profile effort by a company to build a lower-carbon oil field on the North Slope — and, longer term, to address climate change through large-scale carbon capture.

In a state where elected leaders largely dismiss the need to reduce carbon emissions, it’s a different approach from Alaska’s established oil industry players — one that’s more aligned with European giants like BP and Shell, which face stringent government climate regulations and have invested billions in renewable energy.

“It’s clear these companies know which way the wind’s blowing — not just in terms of public perception and their social license to operate, but also in terms of the political economy of oil,” said Philip Wight, a historian at University of Alaska Fairbanks who studies Alaska’s energy industry.

With global economies pushing toward reduced emissions, some analysts warn that companies that don’t follow Santos’ example could be taking on financial risk.

Capture, storage and offset projects could help Alaska’s oil and gas industry survive in a lower-carbon future, according to Mark Foster, a financial analyst and former utility regulator based in Anchorage.

But those proposals remain fraught, Foster added, because of lingering uncertainty around their cost and performance.

Skeptics of the nascent carbon capture industry say that ending the use of fossil fuels entirely — not prolonging their extraction and combustion with new technology — is the best way to mitigate climate change. Santos itself has been the subject of allegations of greenwashing in Australian court over some of its climate-related claims.

The company’s target to make Pikka “net-zero” by 2026 applies only to the emissions generated by Santos in the process of producing oil in the Arctic. The pledge doesn’t apply to the far larger volumes of carbon emitted by consumers who will burn the 80,000 barrels of oil that the company plans to pump each day.

But the company could theoretically offset its consumers’ — and other companies’ —  emissions, too, with another new technology called direct air capture.

That idea, which has gained traction in the oil industry and among some scientists, calls for stripping carbon dioxide straight from the atmosphere and depositing it underground for storage.

With a new grant from the Biden administration, Santos and two partners are poised to be the first to study whether direct air capture could work in Alaska.

A hub in the Arctic?

Santos is still years away from capturing carbon in large quantities and injecting it back under the Arctic tundra.

But, in presentations to policymakers, the company has outlined its rough idea.

Santos’ North Slope hub could collect carbon in two ways.

It could pull the greenhouse gas directly from the air. And it could trap carbon emitted from oil field “point sources,” like power plants.

A sketch of the concept shared with policymakers shows an industrial network of carbon injection wells; pipelines; a direct air capture plant; and power plants fueled either by natural gas or a small nuclear reactor.

A diagram from a Santos presentation to Alaska legislators and staff earlier this year.

Ultimately, Santos’ aim isn’t just to trap and sequester its own emissions, and to remove carbon from the atmosphere. It also wants to offer its technology to other emitters on the slope — and potentially even for carbon that’s been captured and shipped from overseas.

Those ideas could help Santos shrink its carbon footprint in Alaska.

But the company hasn’t explained how much it plans to depend on carbon capture — compared to offsets — to achieve its “net-zero” target for Pikka.

In a recent presentation to state legislators, Santos officials broadly outlined a net-zero approach for the oil field that combines reduced methane flaring, energy-efficient infrastructure, carbon offsets, and eventually both point-source and direct air capture.

But an earlier company description of the Pikka net-zero plan makes no mention of carbon capture and storage.

Santos officials did not respond to a question about how the project would hit its target if carbon capture technology isn’t viable by the time the development is built.

A global hub for storage?

To advance its carbon capture hub idea, Santos formed a consortium in 2022 with two other industry players: Repsol, a minority partner in Pikka, and ASRC Energy Services, an oil- and gas-focused subsidiary of Alaska Native-owned Arctic Slope Regional Corporation.

Last year, the U.S. Department of Energy awarded $3 million to the consortium to study Alaska’s potential for direct air capture — one of an array of grants from the Biden administration aimed at advancing the industry nationwide.

The companies also plan to use the grant to study options to sequester carbon in Alaska’s Interior and in reservoirs in Cook Inlet, outside Anchorage.

But the North Slope stands out for the sheer size of its depleted oil reservoirs. Those could store some 9 million metric tons of carbon each year, according to a recent presentation by ASRC. That’s equivalent to roughly one-fourth of Alaska’s annual greenhouse gas emissions.

The companies’ vision took a step closer to reality last month when state legislators passed a bill to begin regulating carbon capture and storage, and to lease underground sites for injection — a step that GOP Gov. Mike Dunleavy’s administration said was needed for the industry’s development in Alaska.

Alaska GOP Gov. Mike Dunleavy speaks at his sustainable energy conference earlier this year. (Max Graham for Northern Journal)

Still, the consortium’s concept remains merely speculative.

In the next two to three years, the companies aim to analyze whether direct air capture technology is even feasible in the Arctic, with its harsh weather and high costs relative to other oil fields. A Santos executive said the company is looking for more money to study capturing North Slope emissions right at their sources.

But consortium members would not say how soon they might actually build a plant that scrubs carbon from Alaska air.

“More work will need to be completed in subsequent phases including detailed engineering, design and permitting,” Lauren Hendrix, an ASRC Energy spokesperson, wrote in an email.

Santos expects to begin producing oil at Pikka in 2026.

Critics warn of “greenwashing” 

As carbon capture has drawn growing interest from fossil fuel companies and politicians, it has also drawn skepticism.

Environmental groups and some climate researchers argue that oil companies will use the technology to justify extracting more crude over a longer period of time, rather than to slash emissions by slowing production.

Critics also have raised questions about the technology’s hefty costs and the potential risks of injecting carbon into the ground, including leaks, groundwater contamination, and earthquakes.

“When we’re talking about carbon capture and sequestration, it’s essentially perpetuating the fossil fuel industry,” said Rebecca Noblin, policy justice lead at Native Movement, an Indigenous-led advocacy group. “We’re really disappointed to see our state and federal government pursuing what we see as a false solution to climate change.”

An Australia-based activist shareholder group, the Australasian Centre for Corporate Responsibility, filed a lawsuit against Santos in 2021. It allegedthat the company was “greenwashing” and made misleading statements about its plan to achieve “net-zero” emissions by 2040.

Santos’ new Pikka development could add 80,000 barrels of crude a day to the trans-Alaska pipeline, pictured here. (Nathaniel Herz/Northern Journal)

Santos officials declined an interview request and did not respond to questions about the lawsuit. But Hendrix, the ASRC Energy spokesperson, noted that the United Nations’ climate change advisory panel calls carbon capture and storage an important tool to meet global climate goals.

Direct air capture in particular, Hendrix said, could help reduce the need for pipelines and other infrastructure needed to move carbon emissions from their sources to reservoirs where they could be stored. It also “creates the potential to clean up historic emissions,” she said.

Experts say a key question about carbon capture and storage is how it’s used. Some analysts argue that it only makes sense if the oil and gas industry uses it to reduce emissions below current levels, rather than to maintain the status quo.

Without curbing the use of fossil fuels, 32 billion metric tons of carbon would have to be captured each year to limit global warming to 1.5 degrees Celsius — the number at the heart of the landmark Paris climate deal. That’s according to a recent report by the International Energy Agency; it says capturing all those emissions would cost $3.5 trillion each year and consume more power than the entire world used in 2022.

Getting carbon out of the air isn’t cheap

One of the challenges for the Alaska consortium is that pulling carbon out of the atmosphere isn’t simple.

A number of different existing technologies can be used, according to Brad Crabtree, an assistant secretary at the Department of Energy. Some companies employ chemical solvents that bind to carbon dioxide and separate it from the atmosphere; others use membranes that act like filters. Temperature and humidity can affect how well they work.

Regardless of which technology is used, stripping away the 0.04% of air that’s carbon requires ample energy and cash. Each metric ton of carbon removed is estimated to cost up to $1,000, before applying for a federal tax credit: $180 for every ton stored using direct air capture.

Oil infrastructure at ConocoPhillips’ Kuparuk field on Alaska’s North Slope. (ConocoPhillips)

Companies are still trying to develop profitable uses for the captured carbon. Some sell it for use in fertilizer, or for carbonating beverages. As of 2022, just a few actually deposited it underground and sold associated credits to companies that have climate pledges, like Microsoft.

For all those reasons, analysts say the technology is hard to scale up. Only 27 direct air capture plants have been commissioned worldwide, many of which are small and still in testing phases, according to the International Energy Agency.

Together, those scrubbers capture just 10,000 metric tons of carbon dioxide each year. Global emissions were some 37 billion tons in 2022.

Development is further along and cheaper for equipment that captures emissions before they’re released, rather than pulling carbon from the atmosphere.  Some experts predict that costs will fall for both kinds of technology as investment increases and government policies — such as California’s lower-carbon fuel requirements — make capture more valuable.

Several Alaska carbon capture efforts have received support from the Biden administration, with much of it tied to the president’s infrastructure legislation. University of Alaska researchers secured $9 million from the Department of Energy last year to study a proposed coal plant outside Anchorage that would trap its emissions and inject them underground for storage.

The Biden administration also recently announced that it’s studyingwhether reservoirs in the same area could be used to lock up emissions captured in Asia and shipped across the Pacific.

“Over the next few years, I think we can expect to see a fairly significant technological revolution in capture technology — simply because the value of rolling out new types of more efficient technologies is so large, globally,” said Nicholas Fulford, an analyst at energy consulting company GaffneyCline who works on carbon management for Alaska’s state government.

Fulford predicted that Alaska could have its first operating carbon capture plant within two or three years, most likely on a small scale.

Others are less optimistic. Direct air capture, in particular, could be decades away from commercialization in Alaska, said Foster, the energy analyst. He called the idea a “research project” at this point, adding that high labor and transportation costs are extra hurdles in Alaska.

Santos plans to open its first carbon capture hub, in the Australian desert, later this year. It’s a $220 million project called Moomba, intended mainly to capture emissions from an existing natural gas plant.

The company also has been running direct air capture trials in Australia. But so far, the results have been modest: Last year, Santos removed just one-fourth of a metric ton of carbon from the air each day.

This article originally appeared in Northern Journal, a newsletter published by Nathaniel Herz. It was written by freelance contributor Max Graham. Subscribe by clicking on this link.