Carbon Capture and Utilization Projects Run by Oil and Gas Companies: A Case Study from Russia

Abstract

As oil and gas companies are one of the major greenhouse gas emitters, they face increasing responsibility to address climate challenges. This highlights the necessity of integrating decarbonization options into their operations to meet global climate objectives. While progress in technologies for capturing, utilizing, and storing CO₂ (CCUS technologies) is often attributed to oil and gas companies, CCUS projects in the sector predominantly focus on carbon storage, namely CO₂ injection for enhanced oil recovery, which presents limited possibilities. Meanwhile, carbon capture and utilization (CCU) technologies offer a promising avenue for producing valuable products from CO₂, a potential that has been underexplored in theory and practice within the oil and gas sector. This study analyzes the development of the full CCU cycle by oil and gas companies, assessing the economic viability of such projects. It includes a content analysis of research materials on CCU deployment and a case study modeling the economic viability of producing methanol from CO₂ in Russia. The findings indicate that the estimated minimum price for CO₂-based methanol to achieve project payback is USD 1128 per ton, compared to approximately USD 400 per ton for traditional methanol. This price gap underscores the need to foster the development of low-carbon technologies, markets, and measures to support these projects. In the domain of CCU projects, cost-reduction measures could be more applicable, while regulatory measures, such as carbon taxes, currently have a limited impact on the economic viability of these projects.

1. Introduction

In recent decades, the global development of energy and industry has become closely intertwined with the challenge of climate change, primarily due to the significant contribution of these two sectors to greenhouse gas (GHG) emissions, particularly CO₂, released into the atmosphere [1,2]. In the current phase of global economic evolution, curtailing CO₂ emissions hinges on decarbonizing the most carbon-intensive sectors, notably energy generation, industry, and transport [3].

As the principal supplier of energy resources, the oil and gas industry accounts for approximately 14% of global energy-related CO₂ emissions, totaling 5.1 GT CO₂ in 2022 [4], within a total mass of 37.1 Gt/year [5]. This assessment considers solely corporate direct emissions associated with primary production and its energy supply (Scopes 1 and 2). When factoring in emissions from oil and gas products (Scope 3), this proportion reaches roughly 42% [6]. Given the key role of hydrocarbons in the global energy mix and the impracticality of phasing them out swiftly, it is obvious that it is the oil and gas sector and related industries that need to be decarbonized [7], especially considering the fact that oil and gas companies are bestowed with a distinct responsibility in achieving established global climate goals.

Presently, oil and gas companies are advancing their decarbonization efforts through better energy efficiency, the implementation of renewable energy initiatives, hydrogen utilization, and the development of CO₂ capture, utilization, and storage (CCUS) technologies [8,9]. What distinguishes CCUS options is their emphasis on preventing the release of GHG emissions into the atmosphere and their adaptability to existing production infrastructures without major facility restructuring [10].

CCUS technologies are decarbonization tools designed to stop CO₂ emissions reaching the atmosphere, facilitating a gradual transition towards carbon neutrality without necessitating radical alterations in industrial and energy processes. Generally, CCUS comprises the following three sequential stages:

• Capturing CO₂ at emission sources or directly from the atmosphere (the latter known as DAC, or direct air capture);
• Transporting CO₂ via various methods such as pipelines, ships, or road transport;
• Utilizing CO₂ or injecting it for long-term geological storage.

CCUS stands as a crucial component in global efforts to achieve carbon neutrality, as emphasized in numerous agency forecasts and the academic literature [11]. The deployment of CO₂ capture technologies holds the potential to address several challenges simultaneously, including the following:

• Reducing emissions produced by existing industrial and energy companies by capturing them before release into the atmosphere;
• Reducing emissions in energy-intensive industries where emission reduction via alternative means is challenging (e.g., cement, iron and steel, chemical industries) [12];
• Facilitating the continued operation of existing facilities, thereby averting premature retirement of valuable assets [13,14];
• Decreasing CO₂ concentration through DAC or Bioenergy with Carbon Capture and Storage (BECCS) projects [15], paving the way for carbon-negative initiatives in the future;
• Enabling the production of carbon-neutral blue hydrogen (H₂) as an alternative to fossil fuels;
• Facilitating a gradual and smoother energy transition.

However, while the potential benefits of CO₂ capture are evident, subsequent stages involving utilization or geological storage remain contentious and pose challenges on several fronts.

Progress in CCUS technologies is directly associated with the oil and gas industry, even though in this sector they are mainly presented in the form of carbon storage options. Most CO₂ geological storage projects are implemented through CO₂ injection into oil and gas fields to enhance oil recovery (CO₂-EOR). However, despite the spread of this method in the U.S. and some other countries, CO₂-EOR faces various limitations. The security of such solutions remains under study and is a subject of public concern in regions where such initiatives are underway [16]. Additionally, linking CCUS chains to oil fields poses challenges, as it is not always feasible. Moreover, there is often a lack of genuine demand for CO₂ from oil and gas companies. CCUS projects, by their nature, are indirectly linked to revenue generation, and in cases where dedicated storage is the sole objective, income may be absent. Furthermore, the legislative framework for long-term CO₂ storage underground is still nascent in many countries. While CO₂-EOR projects can offset some CCUS costs through increased oil production, global experience indicates that they are primarily implemented in countries with government support. In regions lacking adequate regulation, the current CCUS costs do not align with the potential benefits.

Another promising approach in the CCUS sphere is the production of CO₂-based products through CCU initiatives. Such projects perceive CO₂ not as a mere byproduct but as a valuable resource. In this context, CCU implementation not only yields emission reduction benefits but also offers revenue-generating opportunities capable of offsetting a portion of CCU costs and even generating profits under favorable conditions with due technological advancement and well-developed institutional frameworks.

Issues surrounding CO₂ utilization are actively debated within the scientific community. Technically, the challenge lies in the underdevelopment of technologies and their lack of readiness for large-scale implementation [17,18]. To incentivize further progress in this field, numerous awards for technology development in the sphere of CO₂ utilization are offered by both commercial and governmental organizations [19,20,21]. Studies investigating the organizational and economic facets of CCU implementation highlight significant implementation costs and underscore the necessity of establishing suitable institutional frameworks to foster development [22,23,24,25].

Given the high costs, the lack of technologies, and their limitations, as well as emerging government support for low-carbon initiatives in most of the world, the authors suppose that CCU projects can be initiated based on large corporations, particularly oil and gas companies. Our analysis of the academic literature showed that some works discuss specific CCU options linked to oil and gas companies as emission sources [26,27]. However, studies examining the modeling and economic feasibility of full CCU chains based on oil and gas companies remain scarce. Our article aims to fill this research gap.

The goal of this study is to identify the opportunities and concerns of a full CCU chain deployment based on oil and gas companies and assess the economic viability of such projects. To achieve this goal, the authors formulated the following research questions:

• What is the projected role of CCU in industrial decarbonization?
• What are the most promising technologies for CO₂ utilization?
• What is the current CCUS experience of oil and gas companies?
• What is the economic viability of CCU projects run by oil and gas companies?

It is important to note that the study focuses on modeling and evaluating a full CCU chain implemented by an oil and gas company in Russia, a country with conventional energy and industrial systems. When analyzing the current experience of oil and gas companies, attention was paid to both international and Russian companies, which made it possible to assess the context of implementing CCU projects in the Russian oil and gas sector. However, the case presented in the study is only theoretical in nature.

The study contributes to the development of ideas about the possibilities and constraints of implementing CCU technologies in the oil and gas sector as projects aimed at reducing CO₂ emissions. It also presents a set of policy recommendations aimed at making progress in this sphere.

2. Materials and Methods

The research materials consist of open data from various sources, including the following:

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Reports and publications from organizations addressing key aspects of climate change and the development of CCUS technologies, such as the International Energy Agency (IEA), the World Resources Institute (WRI), the Intergovernmental Panel on Climate Change (IPCC), the United Nations Economic Commission for Europe (UN ECE), the National Academies of Sciences, Engineering, and Medicine (NASEM), and the Center for Climate and Energy Solutions (C2ES), among others;

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Reports and materials published by specialized think tanks like the Global CCS Institute, along with data provided by the CCS Database;

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Sustainability reports issued by both Russian and global oil and gas companies;

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Official websites of ongoing CCUS projects and organizations spearheading these initiatives, such as Chevron’s Gorgon CCS (Australia), Equinor’s Sleipner CCS (Norway), and Carbon Recycling International’s George Olah methanol plant (Iceland), among others.

The study’s logical framework is based on the deductive method, transitioning from broader inquiries concerning CCU (including forecasts, established technologies, and potential products) to more specific studies and evaluations regarding the implementation of particular CCU chains.

To produce the results presented in Section 3.1 and Section 3.2, the research employed content analysis of analytical materials and scholarly publications focusing on CCU technology development, the primary avenues of CO₂ utilization, and the compilation and analysis of expert forecasts and assessments regarding CCU’s future evolution. This analysis involved synthesizing key utilization technologies and resulting CO₂-based products, employing methods such as critical analysis and cause-and-effect analysis.

For the results detailed in Section 3.3, the primary method utilized was content analysis of sustainability reports issued by global and Russian oil and gas companies. The selection of global companies for analysis was based on the rankings compiled by the Carbon Disclosure Project (CDP), with further details provided in a referenced article [28]. This sample was supplemented by the six largest oil and gas companies in Russia. The analysis of CCUS-related activities among global and Russian businesses was conducted using the checklist method.

To derive the results presented in Section 3.4, the research employed conceptual and economic modeling techniques along with the analogy method. The authors followed the following method when modeling the case in Russian conditions:

• Determining the technology and product derived from CO₂;
• Selecting the emission source for capture;
• Choosing the energy source (renewable energy sources or fossil fuels);
• Determining the capacity of the projected facility;
• Accurate selection of alternative products to determine the costs.

The average level of CO₂ emissions per ton of product was calculated using the methodology presented in the IEA Greenhouse Gas Research and Development Programme [29]. It was confirmed by data published by the company considered in the case [30]. Capital costs were calculated using figures for alternative production, taking into account the capacity found according to Equation (1). Operating expenses were calculated based on the average natural consumption of raw materials and energy according to the methodology presented by the National Petroleum Council [31]. Price assumptions were made using Russian information sources, with rubles converted into US dollars at the average exchange rate for the year 2023 (84.66 USD/RUB).

$$C_A=C_B{\left({\displaystyle \frac{Q_A}{Q_B}}\right)}^n$$

(1)

$C_{A,B}$—capital investments in projects A and B, respectively, (monetary units).

$Q_{A,B}$—capacity of CO₂ capture units in projects A and B, respectively, (tons).

$n$—a parameter varying from 0.6 (one unit) to 0.8 (several parallel units).

The results obtained were based on standard approaches to feasibility studies, including modeling discounted cash flows of the project, as well as using the scenario modeling method to conduct an assessment taking into account the GHG tax in force in the region. The minimum price of a CO₂-based product that ensures investment returns was found using reverse calculation by means of VBA coding in Excel. Additionally, sensitivity analysis was employed to analyze the factors affecting the cost of the project.

Throughout the study’s various stages, methods such as decomposition, grouping, analysis and synthesis, critical and comparative analysis, as well as the compilation of analytical tables to organize initial data and present analysis outcomes, were employed. Graphical methods were also utilized for data visualization purposes.

3. Results

3.1. CCU Deployment in the Decarbonization Agenda: Prospects and Concerns

CCU technologies involve the production of raw materials and products with economic value, rendering them more appealing due to their potential for self-sustainability with appropriate technology development and scaling. However, not all CCS models prevent emissions and achieve carbon neutrality for the entire process, including the associated process. Achieving carbon neutrality across the full CCU life cycle depends on several factors, including the following:

• The source of CO₂ used;
• Energy consumption and energy sources used in CO₂ capture and production processes;
• The applications and duration of product use.

According to the National Academies of Sciences, Engineering, and Medicine [32], CO₂-based products capable of permanently storing CO₂ (with lifespans exceeding 100 years) aid in achieving carbon neutrality when utilizing CO₂ captured from industrial sources. Conversely, products with shorter lifespans are carbon neutral only when produced from CO₂ captured with DAC or other biogenic sources. A study by Garcia–Garcia [33] suggests that the production and use of short-life products like methanol, methane, and other light hydrocarbons can reduce emissions compared to traditional production methods, provided renewable energy sources are employed in production. Assessing such impacts typically requires recourse to life cycle assessment (LCA), although there is a lack of harmony among approaches in the CCU sphere [33], and the methodology is still evolving.

Despite differing visions regarding CCU technologies and the carbon footprint associated with producing various CO₂-based products, CCU deployment offers several advantages. Firstly, CO₂-based products can result in fewer emissions compared to the production of their traditional counterparts. Secondly, developing production technologies based on CO₂ as a raw material can diminish the dependence on fossil-based raw materials [33]. Thirdly, advancing CCU can shift CO₂ from a waste category to a raw material, aligning with modern concepts such as resource conservation, circular economy, and low-carbon circular economy [12]. Finally, implementing CCU projects involving new product creation can contribute to the low-carbon diversification of initiating companies. Technological advancements, government support measures, and market development will collectively foster various CO₂ management schemes, ultimately reducing associated costs.

Despite frequent mentions of CO₂ utilization technologies in the academic literature and reports from international agencies addressing climate change issues, quantitative forecasts regarding the long-term development of CCU are rarely encountered in studies [34,35]. This scarcity can be attributed primarily to the direct relationship between the pace of technological development and the cost of renewable energy sources. Moreover, existing models simulating various CCU options are often low-granularity models [36]. Experts and researchers providing quantitative forecasts for the volume of CO₂ capture for manufacturing typically base their assessments on CO₂ demand, partly derived from the volume of markets for analogous goods made from fossil fuels, with limited consideration given to the pace of CCU technology development and other influencing factors (Figure 1).

For instance, Biniek (2020) predicted the technical potential of CCU, excluding CO₂-EOR and biochar, to be approximately 13,900 Mt CO₂ per year, while The Center for Climate and Energy Solutions (C2ES) estimated it to be around 10,800 Mt CO₂ in 2019. However, more realistic forecasts for 2050 tend to be at or below the levels projected for 2030. Detz (2019) assessed the potential for major categories of CO₂-based products at around 13,600 Mt CO₂ per year, while Galimova’s work (2022) indicated that global demand for CO₂ would reach 6076 Mt CO₂ annually by 2050. Hepburn (2019) presented utilization potential in 2050 ranging from 1700 to 7100 Mt CO₂ per year, with the latter figure considered to more accurately reflect real forecast values based on historical data and current CCU development trends.

The substantial gap between current and predicted capacities is a common trend observed in low-carbon technologies overall, mirroring forecasts for the development of CCS capacity [7]. Even under the most conservative forecast values, CCU capacity must increase by more than five times by 2050, presenting a formidable challenge. Notably, major analytical agencies like the IEA only consider CCU’s contribution to climate goals in the scenario, assuming a slowdown in the proliferation of CO₂ disposal projects. Even then, projected CO₂ use values will only reach 620 Mt CO₂ by 2060 [41].

3.2. CO₂ Utilization: Current Experience and Developments

The utilization of carbon dioxide as a raw material is a conventional practice in certain industries. Potential CO₂ utilization methods include both its direct consumption and its conversion into products with high added value. Presently, CO₂ finds commercial application not only in CO₂-EOR but also in various other sectors, including the food industry (as a refrigerant), carbonated drink production, fire extinguishing systems, mechanical engineering, medicine, and agriculture [42]. However, it is important to note that in most of these applications, CO₂ is not isolated from the Earth’s carbon cycle due to the short lifespan of the product [32].

Industrial processes that utilize carbon dioxide as a raw material include urea synthesis, dimethyl carbonate synthesis, and salicylic acid production (Figure 2). Moreover, emerging areas for CO₂ utilization encompass the production of recycled aggregate concrete [43,44], electrochemical reduction of CO₂ to produce ethylene, ethanol, and other petrochemicals [45], conversion of CO₂ into biomass for further production of high-value products [46], and phosphogypsum (a waste product from wet-process phosphoric acid) conversion by ammonium carbonate solution to obtain useful products [47].

Promising chemical CO₂ processing methods based on catalytic hydrogenation exist at various technology readiness levels (TRL). These methods include the production of petrochemical products such as synthetic liquid hydrocarbons, olefins, carboxylic acids, alcohols, and dimethyl ether [48] (Table 1).

Considered the most promising among solutions for CO₂ utilization in existing forecasts, the production of fuels stands out as the primary method for reducing emissions in hard-to-abate sectors. Currently, one of the processes nearing large-scale commercial implementation is the synthesis of methanol from H₂ and CO₂. Methanol serves as both an energy carrier and an intermediate product in petrochemical synthesis, known for its convenience in storage and transportation [49]. However, for the methanol produced via this method to be classified as carbon-neutral, it necessitates the use of H₂ obtained through water electrolysis, with the requisite energy sourced from renewable energy sources.

The technology for CO₂ hydrogenation to methanol (e-methanol) has been successfully demonstrated at the George Olah renewable methanol plant in Iceland, operational since 2011 with a capacity of 4 thousand tons per year [50]. The methanol produced there is marketed as carbon neutral owing to the conversion of CO₂ captured from flue gases and the production of necessary H₂ via water electrolysis using locally available geothermal energy sources. In 2022, the Shunli plant in China commenced operations with a capacity of 110 thousand tons of methanol per year, produced from H₂ and CO₂ sourced from nearby coke oven and lime kiln facilities [50]. Presently, approximately ten plants, for the production of carbon-neutral methanol, with capacities ranging from 8 to 200 thousand tons per year, are in the design or construction phase [51].

Table 1. CO₂ utilization avenues: features and key barriers.

Technology	Direct Utilization	Mineral Carbonation	Hydrogenation	Electrochemical Reduction	Organic Synthesis	Biological Conversion
TRL	9	4–9	2–9	2–4	2–9	7–9
Utilization Pathway	EOR Food processing Metal working Pharmaceutical processes	Building Materials Chemicals	Fuels Chemicals	Fuels Chemicals	Chemicals Polymers	Biomass and further synthesis products
Product Example	Crude oil Beverages Dry ice Fire extinguishers	Cement Concrete Inorganic carbonates	Methanol Dimethyl ether Ethanol Formaldehyde Formic acid Methane Synthetic fuels	Methanol Ethanol Formaldehyde Formic acid Methane Ethylene	Polycarbonates Salicylic acid Urea Polyols Polyurethanes Carbamates	Green microalgae Cyanobacteria
Product Life Cycle Duration	Long	Long	Short/Long	Short/Long	Short/Long	Short/Long
Key Technological Barriers	-	Reaction rates are slow at ambient conditions Carbonation is impeded in the presence of moisture Need for sustained high pH levels in the solution to promote carbonate precipitation	Low per pass conversion Low selectivity Poor catalyst stability Source and cost of H2	High overpotentials Low selectivity	High purity CO2 required for polymers	Resource needs (land, location, water) Scalability

Compiled by the authors based on [32,52,53].

Table 1. CO₂ utilization avenues: features and key barriers.

Technology	Direct Utilization	Mineral Carbonation	Hydrogenation	Electrochemical Reduction	Organic Synthesis	Biological Conversion
TRL	9	4–9	2–9	2–4	2–9	7–9
Utilization Pathway	EOR Food processing Metal working Pharmaceutical processes	Building Materials Chemicals	Fuels Chemicals	Fuels Chemicals	Chemicals Polymers	Biomass and further synthesis products
Product Example	Crude oil Beverages Dry ice Fire extinguishers	Cement Concrete Inorganic carbonates	Methanol Dimethyl ether Ethanol Formaldehyde Formic acid Methane Synthetic fuels	Methanol Ethanol Formaldehyde Formic acid Methane Ethylene	Polycarbonates Salicylic acid Urea Polyols Polyurethanes Carbamates	Green microalgae Cyanobacteria
Product Life Cycle Duration	Long	Long	Short/Long	Short/Long	Short/Long	Short/Long
Key Technological Barriers	-	Reaction rates are slow at ambient conditions Carbonation is impeded in the presence of moisture Need for sustained high pH levels in the solution to promote carbonate precipitation	Low per pass conversion Low selectivity Poor catalyst stability Source and cost of H2	High overpotentials Low selectivity	High purity CO2 required for polymers	Resource needs (land, location, water) Scalability

Compiled by the authors based on [32,52,53].

However, due to the substantial energy requirement for activating the CO₂ molecule and initiating chemical reactions [54], the products obtained through these methods may incur higher costs compared to those produced using traditional technologies. Although the mentioned industrial processes have proven economically viable, they were implemented under specific conditions conducive to competitive production costs.

Progress in the CCS sector entails the establishment of large-scale projects with similar production cycles, often involving companies from multiple industries. Consequently, experts and researchers can monitor trends in their value over time and across various implementation sites. Conversely, CCU technology is typically developed by institutes and design teams that do not disclose cost data. Furthermore, the diverse range of CO₂ utilization avenues and CO₂ conversion options raises challenges regarding their universal classification, leading to a lack of qualitative comparison in economic terms within the scientific community.

Researchers have identified several trends regarding the cost of CO₂ utilization processes, including the following:

• Costs associated with the particular CO₂ utilization stage are heavily influenced by economies of scale [55];
• When renewable energy sources (RES) are used for energy supply, the cost of CO₂ conversion is linked to the cost of RES due to the high energy intensity of the processes.

Factors that could boost CCU deployment include the development of institutional frameworks, reductions in the cost of renewable electricity, economies of scale, and advancements in research and development (R&D) [56]. In 2022, approximately 20% of all investments in CCUS were allocated to companies engaged in CO₂ utilization technologies, totaling around USD 500 million [57].

3.3. Current CCUS Activities Declared and Run by Oil and Gas Companies

To examine the stance of major players in the oil and gas sector towards CCUS initiatives, the authors conducted a content analysis of sustainability reports for the years 2022 and 2023. A sample of 10 oil and gas companies was utilized for this analysis, as outlined in Cherepovitsyna’s study [28], which was based on the CDP ranking [58]. This selection was guided by several criteria, with a focus on analyzing the industry’s best low-carbon practices. Additionally, to evaluate the situation within Russia, the six largest Russian oil and gas companies were included in the analysis. A synthesis of the key activities performed by both global and Russian oil and gas companies within the CCUS domain is presented in Appendix A.

It is important to note that the projects presented do not constitute an exhaustive compilation of initiatives, but rather reflect the main activities detailed in recent sustainability reports. Despite this limitation, the authors assert that this dataset offers sufficient information to draw conclusions regarding the key areas of CCUS development in the oil and gas sector. The results of this analysis are presented in

Table 2. Key CCUS activities performed by major players in the global oil and gas sector.

Company	CCS	Transport and Storage Hub	Blue Hydrogen	Capture and Storage Technology Development	BECCS	CCU Initiatives
Equinor	V	V	V	V
TotalEnergies		V			V	V
Shell	V	V		V
Eni		V	V	V		V
Repsol	V	V		V		V
Woodside	V	V	V	V		V
BP	V	V	V
Gazprom	V		V
OMV	V					V
Chevron	V	V		V

Compiled by the authors.

and

Table 3. Key CCUS activities performed by Russian oil and gas companies.

Company	CCS	Transport and Storage Hub	Blue Hydrogen	Capture and Storage Technology Development	BECCS	CCU Initiatives
Gazprom	V		V
Lukoil	V		V		V
Rosneft	V		V
Surgutneftegas	No activities declared
Tatneft	V
Novatek	V		V

Compiled by the authors.

.

It could be argued that CCUS initiatives are part of the decarbonization strategies adopted by all major oil and gas companies included in the sample. CCS technologies, along with transport and storage hubs, are emerging as the predominant models for current CCUS project development. While half of the reviewed companies have announced initiatives for producing CO₂-based products, four of them have started turning their plans into reality: TotalEnergies has started working on CO₂-based aviation fuel, Repsol has almost finished its synthetic fuel plant and CO₂-based aggregates production, Woodside is involved in ethanol development, and OMV has started building a chemical production plant.

The projects described above are in the early stages of implementation, and their characteristics are not presented in open sources. Only Repsol’s aggregates production project claims support from the European Union [59]. However, the following project implementation features can be identified: (1) pilot projects are usually implemented in partnerships with other large companies in the same sector or operating within the same territory (the chemical plant by OMV, the synthetic fuel plant by Repsol); and (2) as an alternative to establishing dedicating research laboratories, companies introducing CCUS initiatives often choose to cooperate with businesses that already have their own technologies (CO₂-based aggregates by Repsol, ethanol development by Woodside).

The following table illustrates the degree of interest in CCUS technologies demonstrated by Russian companies. Given the limited experience of Russian manufacturers in project implementation, the table has been compiled based on company statements regarding their intentions to engage in various directions, irrespective of actual project execution. It can be inferred that Russian companies acknowledge the imperative of CCUS project implementation and are taking steps in this direction; however, CO₂ utilization initiatives are not their primary focus.

Global practice demonstrates that companies playing a major role in advancing CO₂ utilization technologies are usually engaged in producing goods using traditional feedstocks. For instance, chemical companies are investing in startups focused on developing chemicals from CO₂, while construction firms are partnering with manufacturers of CO₂-based building materials, thus expanding opportunities for related diversification. Ongoing projects in the oil and gas sector are mainly centered on industries closely aligned with their production chains, such as fuel production (oil refining) and chemical manufacturing (petrochemicals).

There are no existing or pilot CCUS projects in Russia. However, based on the analysis, it can be argued that Russian oil and gas companies have the following competitive advantages for their implementation:

• Vertically integrated companies, possessing sufficient financial resources, are better positioned to undertake such projects, especially in the absence of external financial incentives for smaller firms to develop CO₂ utilization methods.
• Oil and gas companies boast experience in managing CO₂ and other GHGs within conventional business operations, such as CO₂ removal from natural gas, as well as expertise in producing fuels from hydrocarbons.
• There is an emerging interest among Russian companies in the CO₂-EOR option, further highlighting their readiness for deploying full CCU chains.

However, despite these advantages, the feasibility of companies undertaking such projects largely hinges on their economic viability. Of particular interest is the assessment of the full CCU chain implemented by oil and gas companies.

3.4. The Full CCU Chain Implemented by an Oil and Gas Company: A Case Study from Russia

3.4.1. Case Modeling

This case study focuses on the production of fuels from CO₂ since it features as the key CO₂-based product in long-term forecasts. As previously mentioned, methanol stands out as one of the few commercially viable products derived from CO₂. Methanol is essential in chemical plants for producing end-use products, and it is also extensively utilized by oil and gas companies themselves as a hydrate inhibitor in gas pipelines. Promising applications for methanol include its use as a motor fuel and as a raw material for olefin production [49]. The production chain in the case study is based on the one used at the George Olah CO₂-based methanol production plant, which was described in Section 3.2. The advantages of methanol production over green hydrogen production include higher energy content per unit volume and simpler storage and transportation options.

CO₂ emission sources exist at all stages of the oil and gas production chain, including the following processes:

• Natural gas processing. Before gas is transported through pipelines or subjected to further processing, it must be purified to remove acidic components, including CO₂. Globally, only about 17% of such impurities are captured annually, with the remainder being released into the atmosphere [4].
• Oil refining. Key sources of CO₂ emissions include different heating furnaces, regenerators used in fluid catalytic cracking (FCC), and systems for hydrogen production via steam methane reforming (SMR).
• Natural gas liquefaction. The CO₂ content in natural gas during liquefaction should not exceed 0.005%, necessitating additional purification by manufacturers. Moreover, liquefaction processes are energy-intensive, with part of the supplied gas (approximately 9% of the total volume) combusted for energy supply, making LNG plants significant emission sources [60].

The implementation of a CCU project based on oil refining and petrochemical facilities may appear attractive due to the optimal integration of methanol into main production chains and established logistics routes, including within the petrochemical clusters [61]. However, modeling such a case presents challenges at both the capture and production stages. The dispersion of emission sources and the specific composition of exhaust gases complicate the capture stage, while the complexity of the production process adds difficulty at the production stage. Given the significant consumption of methanol in the gas industry, it may be more sensible to focus on natural gas facilities.

The analysis of CO₂ capture projects at natural gas processing plants worldwide has revealed that the natural gas supplied to these facilities typically contains 9% or more CO₂ [31,62,63]. The subsequent stages of the production chain only require dewatering and compression, leading to low process costs and overall economic viability. This technology is often integrated into gas field development projects. However, natural gas in Russian fields generally has a lower CO₂ concentration, rendering large-scale CO₂ removal unnecessary. Consequently, modeling such a project for Russia may not be logical.

Furthermore, natural gas processing facilities are often located in close proximity to production sites, making them convenient for geological storage applications. In contrast, LNG plants are typically connected to seaports and may not be situated near production fields, potentially impacting the transportation costs in the “Capture at an LNG plant + geological disposal” scenario. Therefore, CCU technologies may be more attractive in the case of CO₂ capture at LNG plants.

Presently, several large-scale projects involving CO₂ capture at gas liquefaction facilities are underway, including Gorgon (Australia), Sleipner (Norway), and Ras Laffan CCS (Qatar) [64,65]. According to the Global CCS Institute [66], dedicated geological storage is implemented in all these cases. However, there is little information about the Ras Laffan project in open sources. Gorgon, with a capacity of up to 4 million tons of CO₂ per year, stands as the largest LNG project implementing capture technology. Carbon dioxide is captured at the Gorgon gas plant and subsequently pumped underground to a depth exceeding 2 km [67]. Meanwhile, the Equinor Sleipner project incorporates CO₂ capture as part of gas field development, with the carbon tax serving as a significant factor motivating CO₂ reinjection. Sleipner was pioneering in implementing this process on an offshore platform.

In Russia, large natural gas liquefaction capacities are concentrated in the north (including the Yamal LNG and Arctic LNG projects run by Novatek on the Yamal Peninsula), the Far East (such as the Sakhalin-2 project of Sakhalin Energy on Sakhalin Island), and the north-west of the country (where an LNG plant is under construction in the port of Ust-Luga). The commitment to implementing low-carbon initiatives is evident from the fact that Sakhalin Energy and Novatek have already supplied carbon-neutral LNG by offsetting emissions with natural offsets and carbon units [68]. The LNG plant operated by Sakhalin Energy was chosen as a potential facility due to the ongoing efforts to limit greenhouse gas emissions in this region [30]. Sakhalin Energy is a joint venture with Gazprom as the main shareholder [69]. According to the analysis presented in Section 3.3, it is also engaged in CCUS activities and studies.

Wind power currently stands as the most cost-effective and dominant source of energy among renewable energy sources. Plans for constructing a wind farm on the territory of Sakhalin have been announced. Therefore, the study assumes that there will be excess electrical energy from the planned wind farm.

Taking into account the existing capabilities, limitations, and available information, the conceptual model is based on organizational and technological solutions involving CO₂ capture at the LNG plant and CO₂-based methanol production using wind generation (see Figure 3).

The methanol produced in this manner can be classified as carbon-neutral.

3.4.2. The Project’s Economic Viability: A Minimum Price of Carbon-Neutral Methanol

CO₂ emissions from an LNG plant typically occur during two main processes: (1) purification and (2) power generation to supply liquefaction processes [60]. Electricity generation usually involves burning natural gas, resulting in CO₂ emissions ranging from 0.20 to 0.28 tons of CO₂ per ton of LNG produced. When including emissions from an acid gas removal unit (AGRU), this range increases to 0.30–0.40 tons of CO₂ per ton of LNG for low-CO₂ content gas [29]. However, an assessment of Sakhalin Energy suggests an emission intensity at the LNG production stage of 0.228 tons of CO₂ per ton of LNG [30], possibly due to the very low concentration of CO₂ in the source gas. To simplify calculations, the CO₂ emitted by AGRU will be neglected.

According to research by the IEA Greenhouse Gas R&D Program [29], LNG plants are allowed to use any of three types of capture methods, with post-combustion technology being optimal for existing production facilities. This type of capture requires minimal modifications to the plant during implementation and has been industrially utilized at energy facilities. The design capacity of the Sakhalin-2 plant is 9.6 million tons of LNG per year [70], providing a maximum capture potential of 2.59 million tons of CO₂ per year with an accepted emission standard of 0.3. This is comparable to existing full-scale post-combustion capture plants like Boundary Dam (Canada) and Petra Nova (USA), which can be used as examples for capital investment calculations. Capital investments were calculated using Formula 1, with the Petra Nova project (USD 1000 million with a capacity of 1.4 million tons of CO₂ per year) serving as an example. At CCUS facilities employing geological storage, economies of scale apply, whereby larger volumes result in lower specific costs per ton of CO₂ [11]. Therefore, the model is based on the maximum capture volume, with capital investments in the capture stage amounting to USD 1587 million.

The operating costs were determined based on the gas tariff in the region, which is USD 0.05 per m³. At the capture stage, operating costs were divided into energy costs (calculated through the rate of energy consumption per ton of captured CO₂) and non-energy costs (assumed to be equal to 5% of capital investments [31]). The operating costs for capturing 1 ton of CO₂ amounted to USD 37, which is comparable to global practice.

The methanol production stage was modeled based on the George Olah plant in Iceland, as described in Section 3.2. According to the technology, resource consumption standards per 1 kg of methanol are ~1400 kg of CO₂, ~200 kg of hydrogen, and ~1700 kg of water. At the design capture volumes, the annual production capacity will be 1.9 million tons per year, with capital investments equal to USD 810 million. Around 10–11 MWh of renewable electricity is required to produce 1000 kg of methanol, a predominant part of which is used for the electrolysis of water [71]. The cost of water in the region is USD 0.83 per ton. The cost of producing H₂ directly depends on the cost of generating electricity from renewable energy sources, which is approximately USD 0.07 per kWh for wind generation in Russia [72]. Based on this cost, the estimated cost of H₂ will amount to approximately USD 4500 per ton [73].

The project inputs used in the economic evaluation are summarized in

Table 4. Project inputs of CO₂-based methanol production project.

Parameter	Value
CO2 capture capacity	2.59 Mt/y
Investment in Capture stage	USD 1587 MM
Methanol production capacity	1.89 Mt/y
Investment in Methanol production stage	USD 810 MM
Construction time	2 years
Depreciation period	20 years
Operational costs	USD 922/t
Property tax	2.2%
Income tax	20%
Emission tax	USD 12/t

Compiled by the authors.

.

The methanol selling price will depend on the region, the application of the product, and buyers’ willingness to pay extra for a low-carbon product. Due to the lack of price benchmarks for the case under consideration, the authors decided not to calculate project performance indicators (NPV, IRR, and others) at a given methanol price, calculating instead the minimum price of methanol for the project to break even. According to the assessment, the minimum price of methanol is USD 1145 per ton. The current experimental tax rate on Sakhalin for GHG emissions in excess of the quota established for the company is ~USD 12/t. Even assuming that all captured emissions would be taxed, this would reduce the minimum price to USD 1128 per ton.

Figure 4 shows the sensitivity analysis of the project’s NPV at a minimum break-even price of USD 1128 per ton.

It can be concluded that the factors with the greatest impact on the project are the methanol selling price and hydrogen production costs, which are primarily influenced by the cost of electricity derived from renewable energy sources.

4. Discussion

Conceptually, CCU technologies align with the principles of a low-carbon economy, contribute to achieving carbon neutrality, and are considered foundational for the emergence of a circular carbon economy [12]. However, our analysis has revealed that these assumptions have a number of major limitations, primarily because CO₂ utilization in most areas, including those discussed in this article, does not lead to the isolation of CO₂ from the Earth’s carbon cycle. This is primarily due to the short life cycle of CO₂-based products. The source of CO₂ used and the energy supply for the entire process are also important considerations. Energy supply is often influenced by the availability and cost of renewable energy sources, factors that must be considered when making forecasts and assessments regarding the future of CCU. To draw more informed conclusions about the potential of producing carbon-neutral products from CO₂, the utilization of LCA is essential, representing a promising avenue for future research.

Progress in the CCUS sector is frequently associated with oil and gas companies by many researchers in this area [74,75,76]. The competitive advantages of the oil and gas industry revealed in this study indicate that beyond the emerging opportunities for CO₂-EOR, these companies possess the experience, competencies, and assets required at various stages of CCUS. Even though our content analysis was limited to reports on the sustainable development of some oil and gas companies, it still revealed that, at the current stage, the international oil and gas industry is involved in initiatives related to creating CO₂-based products. Despite the absence of similar projects in Russia today, the authors suggest that the gradual integration of CCUS into the operations of oil and gas companies could potentially drive Russian business interest in CCU technologies.

Companies’ current interest in CCU is contingent upon the economic viability of projects. An in-depth economic assessment of a potential CCU project in Russia for the production of fuel revealed that the minimum selling price for CO₂-based methanol should be approximately USD 1128 per ton. This value aligns with the global average estimated costs for such production (USD 1225 per ton) [77]. However, this stands in stark contrast to the average price of traditional methanol, which is approximately USD 400 per ton, rendering the product uncompetitive in current conditions. Existing regulatory measures in most regions, including the Russian pilot region (Sakhalin, with a carbon tax of USD 12 per ton), are insufficient to substantially improve the economic performance of such projects. To reduce the price of carbon-neutral methanol to match traditional methanol, the carbon tax would need to reach USD 540 per ton, which is highly improbable.

Moreover, in the simulated case, the methanol is deemed carbon neutral, as CO₂ emissions from methanol combustion can be offset by CO₂ capture. The implementation of such a project is unlikely to significantly impact the volume of CO₂ emissions during LNG production. Therefore, this implementation model cannot be considered part of a program to decarbonize LNG production but rather the independent production of a carbon-neutral product, which comes with high costs. This approach presupposes full independence and the need for autonomous economic viability for the new low-carbon business, which is currently only achievable if potential buyers are willing to pay a premium for low-carbon alternatives. However, this premium must be reasonable. In this case, the price of carbon-neutral methanol is almost three times higher than that of traditional methanol, a gap that cannot be bridged by such a premium.

Nonetheless, projects like the one described above can serve as components of the low-carbon diversification of the oil and gas industry, often referred to in the literature as “green diversification” [78], which is already employed by businesses, particularly in the development of renewable energy sources [79]. This approach has the potential to enhance a company’s sustainability, bolster its market reputation, and unlock new market opportunities. CCU, when integrated with other decarbonization strategies such as operational enhancements and transitioning to low-carbon energy sources, can enable companies to adapt to evolving market expectations and align with the standards of a low-carbon economy while maintaining commercial viability. However, the high costs of developing the full CCU chain and the uncompetitive prices of the resulting products under current conditions are major barriers to progress in this area.

This study is based on data from open sources and focuses on competitive goods for modeling and calculations, allowing us to draw only general conclusions about the economic indicators of such projects. Specific cases may have competitive advantages that lower the costs of the CCU chain. For example, access to cheap geothermal electricity at the George Olah plant [80] reduced the cost of producing methanol to USD 600 per ton. Therefore, a more detailed economic assessment is necessary for each specific case.

5. Conclusions

In contrast to prior studies in the CCU field, this research highlights the opportunities and limitations encountered when oil and gas companies implement the full CCU chain. CCU technologies have the potential to contribute to achieving carbon neutrality. However, oil and gas companies, both globally and in Russia, predominantly focus on CO₂-EOR as the most mature technology. While there is an existing market for CO₂-based products with favorable development prospects, and some CCU models may be partially carbon neutral, current technological and institutional conditions do not support their independent economic viability. Today utilizing CO₂ for product manufacturing is not only economically questionable but also requires substantial investment in R&D to reduce current cost levels.

The results of our study, as well as global experience in implementing CCUS initiatives, indicate that specific institutional conditions are necessary for the deployment and scaling of such projects. A number of academic and practice-oriented studies have explored this issue [13,25]. In particular, the IEA [13] proposes a division of current policy mechanisms for CCUS into five groups: (1) legal and regulatory frameworks for CCUS activities and safe and secure storage of CO₂; (2) cost-reduction measures (grants, tax credits, etc.); (3) regulation of industrial activities (carbon tax or emissions trading schemes); (4) strategic signaling at the state level; and (5) revenue support (contracts-for-difference and the regulated asset base model).

Based on this division, the following assumptions can be made regarding CCU: Strategic signaling measures can foster the development of CCU if state-level guidelines for CCUS are established through specific goals, strategies, and documents. Expanding legislation and regulations related to CCU will shift from frameworks focused on safe CO₂ storage to those regulating the production and use of CO₂-based products. This development will facilitate the use of CO₂-based products in areas where their traditional substitutes are currently used.

The assessment results show that the cost gap between traditional and carbon-neutral methanol production is too large, necessitating the development of measures directly aimed at the economic activities of the companies initiating the project (groups 2, 3, and 4, as mentioned above). The regulation of industrial activities, particularly by means of carbon taxes, cannot significantly impact the economic performance of these projects, as confirmed by the calculations. For instance, applying the carbon tax in force on Sakhalin (~USD 12/t CO₂) to the considered case would only reduce the minimum price of methanol by 1.5% (from USD 1145 to USD 1128 per ton). This suggests that while such measures can support the general vector of climate policy implementation, they cannot serve as strong incentives for these initiatives. Providing a predictable revenue stream for CCU projects through measures like contracts-for-difference would also fall short at the current cost levels. Specialized measures that target the economic parameters of such projects are necessary. It can be assumed that the most effective cost-reduction measures will be those associated with government support, such as grants, preferential conditions for attracting borrowed capital, tax deductions, and other financial incentives.

To date, the main tool for climate projects in Russia is the developing system of carbon market. However, given the carbon-neutral nature of the project as a whole, it is difficult to assess how effective the sale of carbon units can be as an additional source of funding. Based on the currently developed methodologies for assessing climate projects, it is possible to apply this tool to individual parts of the case, for example, the construction of a wind power plant.

Given the high current key rate in Russia, the introduction of subsidized financing systems for such projects could be effective. Given the high capital intensity of the projects, another area of government support could be property tax exemption or reduction of the income tax burden. Such measures are currently implemented in other areas of Russian tax legislation, but they are not applied to climate projects. Specialized tax credits, such as 45Q for CO₂ storage projects, are one of the most mature support measures for climate projects to date. An analogous measure applicable per 1 ton of CO₂ captured and used for the production of products can provide substantial support to companies initiating CCU projects.

The high barrier to entry primarily relates to technology, which remains the main constraint on project development. The imperative to reduce costs for key components—such as hydrogen production, which directly correlates with the cost of electricity production from renewable energy sources, and the cost of a capture installation—is evident. To foster the development of such technologies in countries like Russia, measures must first focus on achieving CO₂ capture costs aligned with global practices while continuing to drive down the cost of renewable energy sources.

Nevertheless, it can be assumed that CCU will establish a stable position within the broader spectrum of CCUS technologies and other decarbonization options, even as the CCUS industry shifts its focus from EOR to dedicated CO₂ storage [13]. Strengthening the position of CCU solutions in the general decarbonization landscape will depend on the development of institutional frameworks, improvements and scaling of CO₂ utilization technologies, and reductions in the cost of renewable energy sources and capture technologies.