HOUSTON—Carbon capture, utilization and sequestration (CCUS) opportunities are moving past theory as upstream players take strides to make the Gulf Coast a major carbon storage site. As the oil and gas industry shifts to net-zero emissions, large public independent energy company Talos Energy Inc. is relying on its oil and gas expertise to advance CCUS in the region.

“In-house, we have the conventional reservoir and seismic expertise, the data, and the operating expertise,” said Talos president and CEO Tim Duncan at Hart Energy’s recent Energy Transition Capital Conference. “All those things have helped us build and manage the right reputational strength that we want on the E&P side and every ounce of those skills ought to be transferable to what we’re doing on the CCUS side.”

As a top producer in the U.S. Gulf of Mexico, Talos intends to use what it has learned to operate the first major offshore storage site along the Gulf Coast. Duncan said the company has identified 40,000 to 70,000 acres of prime geology to build the site and estimates 225 to 275 million metric tons of CO2 storage capacity.

“I'm trying to find acreage with the right geology and depths and the least amount of liabilities like old wells that have been P&A [plugged and abandoned] so I can then take it to a midstream and industrial partner and say ‘this is the right spot,’” Duncan said. “We will do this anywhere we have the right geology, that’s a starting point for us. If that’s offshore, that’s great. If it’s in the marshlands of Louisiana, that’s fine, too.”

Out of 12 bidders—along with its partner Carbonvert Inc.—Talos was selected as the sole winning bidder for the Jefferson County storage site located near Beaumont and Port Arthur, Texas. The award places the company among a small group of domestic independents with a physical project site dedicated to carbon sequestration and storage.

“Our job now is to try to figure out the right relationships that can make that project work and we’re working very hard on that right now,” he said.

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According to Duncan, producers should take notes from the midstream handbook for pipelines to be successful with CCUS projects around the Gulf Coast. For the Jefferson County project, Talos is taking the anchor-tenant approach to develop the site by working with emitters, as well as midstream providers, to advance the site.

“It’s a midstream model with midstream returns, but it’s over a longer period of time,” he said. “But the drivers for making this successful is you have to be a low-cost producer and have experience with stores [storage] and you have to be able to scale.”

He said as these projects get to five-year final investment decision, there will be an influx of participants looking to partner on these projects. But he warns it isn’t like drilling an oil well, so producers have to be transparent about the returns and whole roadmap of a CCUS project.

“Typically, those offshore projects are seven years, but now we’re talking about a 30-40 year project,” he said. “This has a different return profile and is a different business in general, so there will be a lot of explanation needed as this develops.”

“Our job is to not put our shareholders in the position where they don’t understand what we're doing,” he continued, “or they don't lose any confidence that we’re not chasing the right projects or the right returns.”

In the next 12 months, the company plans to identify three to four more storage sites across the Gulf Coast utilizing anchor tenant emitters at each site. Talos is actively advancing multiple potential projects across more than half a million acres, Duncan said.

“As we go all the way,” he said, “we’re going to need to be thoughtful about doing things, most of which is right through the wheelhouse of what we've done in the past, and some of these things require us to be thought-forward about how we think about injection technology, monitoring technology and how we think about engineering design on these projects.”

“We’re taking a very measured approach,” he added. “These projects all have to stand up on their own two feet. Each of these will be their own separate projects that are big things, but there’s a big market out there…We’ve launched something that we think is really interesting and we’re not going to stop there, we’re going to continue to focus on projects along the Gulf Coast.”

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