Abby L. Harvey
GHG Monitor
9/12/2014
As Occidental Petroleum moves forward with plans to spin off its California operations, it remains unclear if SCS Energy has continued with attempts to develop an agreement to sell captured carbon dioxide from the Hydrogen Energy California project for use in enhanced oil recovery in the Elk Hills oil field. The company had been working to develop a contract with Occidental Petroleum (Oxy) before Oxy announced early this year the planned spin-off, which is expected to be made official this quarter. There has so far been no mention of whether the newly formed California Resources Corporation (CRC) will continue consideration of the HECA contract. However, in an Aug. 20 filing with the Securities and Exchange Commission, CRC noted intentions to pursue EOR operations in a general sense. “In the near term, we intend to increase our capital spending and generate significant production and cash flow growth from proven [improved oil recovery] methods, such as waterflooding, and EOR methods, such as steamflooding,” the document says.
Tiffany Rau, spokeswoman for the HECA project, declined to comment on any commercial discussions with Oxy or CRC. She did note, though, an April memo from the California Energy Commission that said, “Applicant discussions continue with Occidental of Elk Hills regarding the latter’s continued participation in the project. Occidental’s Board of Directors has authorized Occidental California to become a separately traded company that will announce its management team in the third quarter 2014, which could impact the project schedule.”
Work Continues on Project
Regardless of the uncertainty surrounding the future of the CRC contract, Rau told GHG Monitor, work has not stopped on the new-build, pre-combustion 390 MW integrated gasification combined cycle CCS project. “HECA continues to work on a variety of fronts across permitting, engineering and commercial arrangements for project completion,” she said. “The HECA project schedule now shows permitting completion in early 2nd quarter 2015 and construction to begin early 3rd quarter 2015 with a commercial in-service date in 2020.”
The HECA project has experienced several delays since being proposed in 2009. At that time, the Department of Energy signed a $308 million cooperative agreement with HECA’s original developers, BP and Rio Tinto. The project was initially slated to produce hydrogen and utilize the facility’s captured CO2 for nearby enhanced oil recovery operations, with an estimated price tag of about $2.8 billion. But by spring 2011, after DOE and project partners spent roughly $75 million laying the groundwork for HECA, BP and Rio Tinto decided to abandon the project after they determined it was no longer economically viable. Massachusetts-based SCS Energy took over the project later that year and subsequently enacted several major changes to its design, adding a poly-generation component by incorporating urea fertilizer production in addition to the hydrogen, electricity and CO2. The number of changes made to the project by SCS increased the project’s price tag to nearly $4 billion. DOE later accepted the changes to HECA’s cooperative agreement, upping the government’s cost-share commitment to $408 million. At that time, SCS intended to begin construction in 2014. Since that time, legal attacks from the Sierra Club and regulatory approval issues have delayed construction.
