California Resources management continues to evaluate potential equity investments in projects for which the company has signed carbon management agreements, including California hydrogen and ammonia projects, as it moves toward a separation of the carbon management business, Carbon Terravault.
Carbon Terravault, a JV with Brookfield, has so far signed four carbon dioxide management agreements, bringing the total injection rate to 610,000 MTPA of CO2, with 200,000 targeted to its Elk Hills reservoir and 410,000 MTPA targeted in the Sacramento basin area.
CEO Francisco Leon said in prepared remarks yesterday that Carbon Terravault is still in the early stages and must achieve certain milestones before initiating a separation, “such as an EPA Class VI permit approval, project FID, line of sight to first CO2 injection and first cash flow among others.”
In the meantime, the company and Brookfield have “preserved the right to invest into the equity of all four projects,” Leon said, starting with a review of the Grannus Blue Ammonia and Hydrogen Project and the Lone Cypress Hydrogen Project.
Grannus aims to be California’s first blue ammonia and hydrogen facility producing 150,000 MT per annum of blue ammonia and 10,000 MT per annum of blue hydrogen, while Lone Cypress is a 30-tons-per-day blue hydrogen facility at Elk Hills.
“We’re reviewing not only the cost profile of those businesses, but the market, in a lot of cases” – such as with hydrogen – “is not very well developed, but there’s a lot of interest. And that also requires understanding the offtake contracts and in the depth of the market, in where they best place the hydrogen and the ammonia.”
He added, “We’d like to have a decision this year on Lone Cypress in particular. That’s going to be the first project we’re reviewing the equity. We think these markets will develop nicely in California. There’s a lot of support again by IRA, hydrogen has 45V that supports it, but we’re seeing a lot of potential demand for the product. So at both Brookfield and CRC, we have retained that ability to invest in the equity and it’s something that gets us very excited about participating in these new energy verticals.”
The JV has the right to participate in the Lone Cypress blue hydrogen facility up to and including a majority equity stake, a presentation shows.
“You should expect to see over time as we do more and more of these that we’re going to have multiple models,” Chief Sustainability Officer Chris Gould said last year in an interview with ReSource, noting that a typical financial structure may emerge as the industry matures.
The company this week said it signed storage-only CDMAs with Yosemite Clean Energy and InEnTec Inc. for 40,000 and 100,000 MTPA of CO2 injection, respectively. The four combined agreements amount to 12% of the company’s pore space.
CRC also submitted Class VI permit applications for a new development area, called CTV IV, for an additional 34 million metric tons, bringing Carbon Terravault’s total potential permitted storage to 174 million metric tons or over 85% of its stated 2027 target of 200 million metric tons.
The Elk Hills complex includes a gas-fired power plant, and the company is evaluating whether the plant would move with a potential spin-off of Carbon Terravault. CRC is conducting a second FEED study in two years – the first with Flour, now with NextDecade – to evaluate the installation of a carbon capture system at the plant.
Addressing the need for a second FEED study, Leon said, “We’ve had a lot of inflationary pressures over the last two years. We want to make sure it’s the project that not only delivers that ability to reduce that CO2 emission footprint, but it’s also a profitable project.”
