Including sub-surface uncertainties in CCS hub investment decision making – a case history

Introduction – prior study of the Surat Basin storage prospects

Given the uncertainties involved in predicting long-term injectivity and therefore storage site dynamic performance (Lane et al. 2021), quantifying the probability of success for a defined project size is crucial to understanding storage prospects in screening-stage studies. We define the technical probability of success (TPOS) as the probability that a target sustained rate of injection (Mtpa) can be sustained for 30 years. Economic probability of success (EPOS) is the probability that the 30-year sustained injection rate can be achieved within a given target (or hurdle) unit technical cost (UTC – $/t-CO₂).

A previous study (Garnett et al. 2022) applied those metrics to early storage appraisal work that was undertaken during a CCS hub investigation for the Surat Basin in Queensland, Australia (Garnett et al. 2019). That analysis, summarised here in Figs 1, 2, showed how the collection of targeted information can substantially reduce the uncertainties in expected site performance, providing great benefit to storage investors and hub designers. The appraisal work (reflected in Fig. 2) ruled out many of the ‘high decline’ rates and very low well initial rates that had previously been assumed to be a possibility (Fig. 1). For projects <20 Mtpa, this changed the TPOS relatively little. For larger projects the appraisal reduced the TPOS, identifying there would be greater levels of well interference (in a better, more connected, higher permeability reservoir) and limitations in the maximum allowable well count (due to improved understanding of the reservoir extent). The effect on EPOS was somewhat different. The EPOS improved for smaller sized projects (e.g. for a target 5 Mtpa project, EPOS at UTC = $10/t was around 10% higher), whereas for larger projects (say 15 Mtpa) EPOS was unchanged. In other words, the new appraisal information was insufficient to change our understanding of economic risks for very-large-scale projects.

Fig. 1. 

Pre-appraisal uncertainty analysis for the Surat Basin: (left) example ranges of well initial and decline rates; (centre) resultant range of full project UTCs and Technical POS (red curve) by target project size; and (right) EPOS at specified UTCs for different sustainable injection rates.

Fig. 2. 

Re-evaluated uncertainties after the early-stage appraisal that involved reservoir re-conceptualisation and re-interpretation of all dynamic data. (left) Re-evaluated spread of initial rate and decline; (centre) TPOS and UTC for different project sizes; and (right) EPOS at specified UTCs, for different project sizes.

Addressing the residual geological uncertainties

At completion of that early-stage appraisal work, there remained two key geological uncertainties responsible for the suppressed TPOS and EPOS for larger projects – uncertainties which influenced the ranges of well initial rates; and uncertainties in long-term well decline (pressure transient) behaviour – see Garnett et al. (2022). Both were related intrinsically to the proximity and representativeness of existing well data around the storage site. Additional, site-specific well test data was needed to improve our understanding of possible well initial and decline behaviours, and reduce the range of associated values included in the economic modelling.

A new appraisal well drilled in 2021 showed permeabilities that were generally higher than had been expected, allowing the range of initial well injectivity estimates to be more tightly constrained in the model. That work did not, however, address the risk of longer-term pressure build-up (and injection decline). Contrasting with Fig. 2, the revised TPOS and EPOS estimates in Fig. 3 show how that additional information improves the understanding of storage risk for investors.

Fig. 3. 

(left) Re-evaluated uncertainties in initial rate after the new 2021 appraisal well; (centre) TPOS and UTC for different project sizes; (right) EPOS at specified UTCs for different project sizes.

TPOS is generally higher (lower risk) for all project sizes by around 5–10% points. Similarly, EPOS is also improved for all project sizes. For example, for 5 Mtpa at $5/t the EPOS is now almost 90%, increased from 80% (similar magnitude of improvement for a 10 Mtpa project) For a very large project, say 20 Mtpa, the new information increases the EPOS at $10/t to just over 60% compared to around 55% pre-drill.

The value of further appraisal

Significant uncertainties remain for large-scale industrial hub developments, relating to the prospect of pressure build-up and long-term injection rate decline. These uncertainties could be addressed by collecting additional data, for example, through extended well tests that could cost several million dollars. A key question is whether this additional investment in data would be worthwhile. A decision on whether to invest in such new information (appraisal) depends therefore on (i) the tolerance of the investor to risk (i.e. of over- or under-investing in capture and transport, or being exposed to effective carbon prices lower than those required for break-even); and (ii) the expected gain or ‘value of information’ (i.e. the potential impact of new information on the TPOS and EPOS at project sizes relevant to the capture and transport size design choices).

Conceptualising the value of appraisal information

Evaluating the value of information (VOI) or value of appraisal (VOA) usually requires an assessment of storage development NPV (net present value) and an a-priori assessment of the likely (conditional) change in probability of success (δPOS) that would arise from a specific appraisal program. Rather than using NPV, we can instead set decision ‘hurdle rates’ based on a tolerable storage development UTC. While the whole-of-hub, break-even price would be much larger than the storage development UTC, the latter is useful for assessing the value of appraisal information gathering.

Defining unit appraisal cost (UAC) as Appraisal Costs/PV(injection), and a discounted, real-terms unit price earned, RTUPE, as PV(revenue)/PV(injection): the appraisal investment can be justified if:

So, investment is justified if the (likely) change in POS after appraisal would be:

Or, appraisal is justified if proponents are confident that carbon price earned is higher than the storage-only break-even, UTC:

The need to put appraisal investment ‘at risk’ has the impact of increasing the required future ‘carbon price’ to achieve risked, break-even conditions. Estimating changes in TPOS and/or commerciality considerations (i.e. likely carbon prices earned in terms of an appraisal margin above UTC) can inform discussions on prospective appraisal spend. From a detailed VOI-VOA analysis, four decision outcomes are possible:

The final option could be taken in circumstances where appraisal tests need to be so large, or would take so long, that phased development is the optimal risk reduction approach. In this case, information from early (lower rate, but higher pre-appraisal POS) phases would be used to inform POS for larger-scale development.

While the a-priori estimates of δPOS and appraisal costs are relatively easy to explore, the main sensitivity to appraisal investment is the developer’s view of future carbon prices and their risk-tolerance, as indicated by their judgement of the likely appraisal margin (RTUPE − UTC) that can be earned.

It is important to note that VOI and VOA are understated in this method as they do not evaluate the benefit of reducing risk of over-spend in the capture and transport elements of the project (i.e. where the designed steady capture and transport rate exceeds the sustainable storage/injection rate).

Data availability

The synthetic data used in this study will be shared upon reasonable request to the corresponding author.

Conflicts of interest

The authors confirm that there are no conflicts of interest.

Declaration of funding

No funding from external organisations was received for this research.