1. Classification: Internal Status: Draft Building the CO 2 Value Chain – Is it Possible? Olav Kårstad Special Advisor CO 2 British – Norwegian Workshop on CCS London 23 rd April 2008

2. Classification: Internal Status: Draft

3. 3 StatoilHydro ’ s growth challenge is a climate gas emission challenge More CO 2 intensive production in the pipeline – CCS necessary to reach targets Build new international growth platforms Maximise value creation from the NCS NorwayGlobal prod. avg. Re- fining LNGExtra heavy oil GTL Extra heavy oil incl. upgrad. CO 2 emission [kg/tonne product]

4. 4 Data source: IPCC SRCCS (2005 ) and IPIECA Large Stationary Sources of CO 2 – Global View Greater than 100 kt CO2/yr per facility Coal power Gas power Oil power Cement Iron/steel Refineries Petrochemical

5. 5 Number of sources or millions of tonnes/year * Larger than 0,1 million tonnes of CO2/yr from one source Data source: IPCC Special Report on CO2-capture and -storage This is about 56% of fossil fuel related CO2

6. 6 StatoilHydro’s CCS projects Part-owner of 3 of 4* large-scale CCS project * The 4th project is Weyburn – Midale in Canada

7. 7 Sleipner – 11 years of large scale CCS demo Started in 1996 CO 2 from natural gas (Approx. 1 mill. tons CO 2 annually) Stored in saline aquifer – sandstone formation with water Driver: CO 2 -tax (340 NOK/ton – $60/ton), corporate environmental strategy Learning and confidence building through a series of large EU-wide R&D programmes

8. 8 Snøhvit LNG; CO 2 -pipeline reel-out

9. 9 The In Salah gas processing plant with CO 2 -capture facilities

10. 10 Proof of concept through monitoring and R&D

11. 11 What does it take? Simple economic rules will decide speed and volume of CCS roll-out Cost of removing/injecting Time Cost Cost of emitting Low hanging fruits Direct governm. investment Technology development CO 2 -EOR Kyoto mechanisms Environmental taxes Under-supply of credits Emission limitation

12. 12 The low hanging fruits in CO 2 - capture

13. 13 The low hanging fruits in CO 2 -transport and -storage

14. 14 CCS low-hanging fruits – “cheap”, already concentrated CO 2  more than 200 sites globally with CO2 > 100 000 tonnes/yr Ammonia plants Natural gas purification Coal gasification plants Hydrogen production LNG production

15. 15 In Norway two low-hanging fruits has passed the point of profitability due to the high CO 2 tax on petroleum activity Environmental taxes Under-supply of credits Emission limitation Sleipner Snøhvit LNG Low hanging fruits Direct governm. investment Technology development CO 2 -EOR Kyoto mechanisms

16. 16 And two “high hanging” CCS-fruits (in connection with gas fired power plants) are planned to be built with state funding Environmental taxes Under-supply of credits Emission limitation Mongstad Kårstø Low hanging fruits Direct governm. investment Technology development CO 2 -EOR Kyoto mechanisms

17. 17 CO 2 -EOR – profits from CO2 injection Income from extra oil production to pay for CO 2 infrastructure Onshore applications to happen first Free up natural gas resources by using CO 2 as injection gas Coexistence with storage necessary Sensible natural resource exploitation Graphics : EnCana CO 2 EOR

18. 18 Regulation and acceptance – perception of risk What does it all come down to? TODAY – certain emission TOMORROW – safe storage

19. 19 Summary: Building the CO 2 Value Chain – Is it Possible? Climate change is happening – CCS one of five important solutions Making CCS happen is difficult under any circumstances, but in particular in today’s high cost construction market and uncertain long term cost of emitting CO2 to the atmosphere Low-hanging CCS fruits are there to be picked  useful to prove storage and CO2- EOR as well as for gaining public enthusiasm Power plant CO2-capture  A number of demo-projects must proceed to avoid delay in 2. and 3. generation deployment (technology lock-in of long life plants) In the shorter time frame carrot and stick incentives are necessary to initiate industrial scale projects without which technology and frameworks will not develop