Investments in pipeline or ship CO2 transport

Impact of risks and uncertainties

Published: 17/12/2014

The goal of this study is to analyse which of the two marine CO2 transport options, pipeline or ship, is the financially preferable one. The study compares the Net Present Value of the two CO2 marine transport options under the prevailing uncertain conditions of CCS projects. Ecofys looked at the impact of uncertainties in the transport fee, project duration and transported volumes on the Net Present Value. Two periods can be distinguished: In the first period, volumes and project duration are assumed to be certain (“contracted”). In the second period, fees, volumes or project duration are uncertain and can vary within a predefined range. In addition, we investigated the sensitivity of the economic performance of pipeline projects and shipping projects to discount rates, transport distance and transported volumes.

The main conclusions are that pipelines have on average a higher Net Present Value across the uncertainty intervals, and that the option to invest in additional pipeline capacity at the start of the second period significantly mitigates the risk profile. In case the project duration is highly uncertain, the shipping option is preferable over pipelines. Under the studied conditions, the Net Present Value of the pipelines as well as the ships becomes negative at discount rates above 15-20%.

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Paul Noothout
Energy Systems and Markets