NRG Energy Inc and JX Nippon Oil & Gas Exploration Corp said on Tuesday they had begun operations at a $1.04 billion carbon capture facility at a Texas coal-fired power plant and were using the emissions to extract crude from a nearby oilfield.

The facility, the largest of its kind in the world, is the latest in efforts by the power industry to curb carbon dioxide (CO2) emissions as pressure mounts from regulators, investors and consumers to stem climate change.

The carbon capture facility could become a model for CO2 collection at existing power plants in China and India, analysts said.

By pumping the plant’s CO2 underground to extract oil, the project could ameliorate concerns from environmentalists about emissions from coal-fired power plants while also using a funding mechanism – oil sales – to pay for long-term maintenance.

The U.S. Department of Energy funded $190 million of the project’s construction, with $250 million in loans from the Japanese government. NRG and privately-held JX Nippon split the remaining $600 million cost in a joint venture arrangement.

At its peak, the Thompsons, Texas, facility should collect 1.6 million tons of carbon dioxide per year, roughly 90 percent of emissions from NRG’s nearby power plant, the largest in Texas.

The facility collects the plant’s carbon emissions, known as flue gas, via a pipe 16 feet in diameter and strips out CO2 in a four-step process. The plant, engineered by Mitsubishi Corp, has collected more than 111,000 tons of CO2 since opening on December 29.

Carbon capture has existed in various forms for decades. Utilities, though, have struggled with what to do with CO2 once it is collected since power plants are rarely near underground storage caverns or existing oil wells.

A new $7 billion Southern Co power plant in Kemper, Mississippi, slated to open later this month, would chemically alter coal before collecting carbon, a different process from the NRG venture, which connects to an existing power plant.

NRG, one of the largest power providers in deregulated Texas, said the CO2 project would not affect electricity costs.

In an agreement with privately-held Hilcorp Energy, the NRG-JX Nippon joint venture built an 80 mile CO2 pipeline to the West Ranch Oil Field, which first opened in 1930 and produces 300 barrels of oil per day (bpd).

With the help of CO2 injections, production should jump to 15,000 bpd within three years, NRG said.

Source: www.reuters.com