OTC 2022: An evolving energy company–how CCS fits
Building an offshore oil company from scratch as a secondary asset owner, by buying producing properties from the majors, is the way we started, said Talos Energy Founder, President and CEO Tim Duncan during a keynote presentation at the Offshore Technology Conference on Tuesday.
“We are oil and gas guys with a significant amount of geological/geophysical capabilities, but we can also do carbon capture and sequestration,” Duncan explained. “There has been a significant amount of discussion about what to do with free cash flow. The focus on ESG and safety leadership led Talos to launch an aggressive CCS initiative. We expect CCS technology will take six to 15 years to develop, but to reach net-zero CCS must be part of the solution,” Duncan continued. Talos has taken a leadership role in the developing market for global emissions reductions, but additional CCS capacity is required to meet global emissions reductions and climate objectives.
Talos CCS value chain proposition. Duncan presented a slide that outlined Talos’ bespoke CCS strategy that involves capturing, transporting, injecting and permanently storing CO2 emissions from industrial sources back into the ground, in saline aquifers:
Capture – CO2 emissions removal uses proven gathering, processing and compression technology.
Transport – CO2 safely piped through midstream assets (potential to use existing pipelines).
Sequester – CO2 safely stored underground in EPA Class VI injection wells (disposal-type wells).
Complementary skill sets. Duncan then outlined how the company is applying its overlapping geological expertise and business development skills to build a large-scale decarbonization solutions company. The items below are core engineering E&P competencies that the company possesses, which are applicable to building-out Talos’ aggressive CCS initiative:
- Conventional reservoir expertise and G&G team
- Significant Gulf Coast / GOM presence
- Vast seismic database
- Established operator and project management capabilities
- Strong HSE track record
- Business development and commercially driven
Two CCS project types. “The U.S. Gulf Coast is a world-class market opportunity for CO2 capture,” Duncan stated. The area contains the ingredients for a new business, because it’s rife with big industrial emitters who are financially motivated to capture, transport and store CO2. They require a dedicated technology partner with the geological expertise and practical business plan to accomplish their goals. Duncan then drilled down deeper into Talos CCS strategy, revealing the two types of projects underway in the U.S. Gulf Coast (Texas and Louisiana) that include regional hubs (clustered industrial base) and point source (single facility/plant).
Talos was selected recently as the sole winning bidder for the Texas General Land Office’s Jefferson County carbon storage site, making Talos the operator of the first and only large-scale offshore carbon storage location in the U.S. This week, Chevron announced that it would partner with Talos to develop its CCS opportunities. Combined, the two regional hubs and two point source facilities have the capacity to store 800 million MT of CO2.
Exceptional value creation. Duncan put a wrap on his high-energy presentation by outlining his vision to combine the company’s upstream and carbon capture segments to create a unique and specialized complementary economic framework. The CCS and upstream businesses will form the foundation for a successful energy company in the future.
The upstream segment will execute high-return projects drawn from an ample inventory of high-quality geological prospects. The developing carbon capture segment will offer stable long-term projects that will deliver steady cash flow. These complementary business models will optimize value for the enterprise providing growth optionality, risk allocation and unique investment opportunities relative to publicly traded U.S. E&Ps.
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