Chevron says world's largest carbon capture project has 'a ways to go' to meet goals

© Reuters. FILE PHOTO: The Chevron logo is seen in Los Angeles, California, United States, April 12, 2016. REUTERS/Lucy Nicholson/File Photo

By Sonali Paul

MELBOURNE (Reuters) - Chevron Corp (NYSE:CVX)'s Gorgon carbon capture and storage (CCS) project in Australia is working at only half its capacity nearly three years after starting up and the company has no timeframe for delivering on targets it has so far failed to meet, a senior executive said.

The world's largest CCS project, which started up three years late, is being closely watched by the gas industry globally as carbon capture and storage is seen as essential for producers to meet net zero emissions targets by 2050.

Gorgon CCS had originally been slated to be fully operational by last year when the project faced its first five-year rolling assessment. Instead, it was forced to buy carbon credits for falling short of goals for burying emissions from the Gorgon liquefied natural gas (LNG) plant.

The project was designed to bury 4 million tonnes of carbon dioxide (CO2) annually but only managed 2.1 million tonnes last year.

"We've still got a ways to go to meet the commitment to what we have the injection system designed for," Chevron Australia's director of operations, Kory Judd, told Reuters in an interview ahead of the Australian Petroleum Production and Exploration Conference.

"What we're doing is trying to learn our way through how you inject CO2 into the reservoirs, how do they respond, then how do you do that reliably and how do you do that and get to the point to meeting the commitments that you've got."

The CO2 injection systems are working reliably, he said.

"It's just getting it to scale that we're working on."

Judd said the company would continue to work with the Western Australian government to offer offsets to make up for any shortfall assessed each year.

He did not say how much Chevron had spent on the 5 million greenhouse gas offsets surrendered on behalf of the Gorgon partners, which include fellow majors Exxon Mobil Corp (NYSE:XOM) and Shell (LON:RDSa).

Australian Carbon Credit Units soared to a high of A$57 a tonne in January when Chevron was buying offsets. At those prices, the offsets would cost more than A$250 million but not all the offsets were bought on the Australian market.

Despite the challenges faced by the A$3 billion ($2 billion) project off the coast of Western Australia, Chevron is looking for other CCS opportunities in Australia and elsewhere. In Southeast Asia alone BP plc (LON:BP), Indonesia's Pertamina and Malaysia's Petronas are working on CCS plans.

"There's no way you can get to the 2050 aspirations any place in the world without CCS being a component of it," Judd said.

($1 = 1.4489 Australian dollars)