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The market’s blasé reaction to the production cut ordered by OPEC ministers in Algeria this week was bad news for greentech investors (see the Wall Street Journal’s green business blog). The more lasting news from the meeting, however, may be the conference sideshow that took journalists to one of the world’s largest carbon capture and storage operations: Algeria’s In Salah natural gas operation, which stores about 800,000 tons of carbon dioxide per year 1.2 miles below ground.

In Salah, hidden deep in the Sahara desert some 700 miles south of Algiers, is operated by oil and gas giant BP, Norway’s Statoil, and Algerian state oil and gas firm Sonatrach. The field’s gas is about 7% CO2, which must be cut to 2% or less before it can be shipped on to European markets. In Salah cuts the CO2 to 0.3% but, instead of simply venting the removed CO2 as many gas operations do, pumps it into an aquifer below the gas reservoir. Given the scale of the gas flow, it’s the environmental equivalent of taking 200,000 cars off the road.

The reporters visiting In Salah this week noted that the CO2 seems to be staying put, as is the case with the other two large-scale CCS projects in operation – the natural gas-stripping plant at Statoil’s Sleipner field in the North Sea, and the Dakota Gasification coal-to-synthetic natural gas operation. The Associated Press quoted Mohamed Keddan, the station manager, expressing confidence that the layer of thick shale sealing the In Salah reservoir would hold the CO2 for good: “If it contained gas for millions of years without leakage, why would it start leaking now?” said Keddan, according to the AP.

Better still, the cost of storing the CO2 is relatively low. Business Week reports that the $100 million CCS operation was just 2.5% of the overall $4 billion cost of the In Salah gas production complex. That puts the cost of sequestering the CO2 at about $14/ton.

At that price BP, Statoil and Sonatrach could eventually make money on the stored CO2 by selling carbon credits earned at In Salah to other polluters, such as coal-fired utilities, which face steeper CCS costs. That is, if future treaties governing greenhouse gas emissions enable CCS operations in developing countries such as Algeria to earn carbon credits. This concept was rejected by international climate negotiators meeting in Poland last week but could be revived by the time a follow-on to the Kyoto protocol is hammered out in Copenhagen twelve months from now.

So, given its success and low cost, why do we hear so little about In Salah, whereas the Dakota Gasification and Sleipner CCS operations enjoy pinup status? Business Week’s correspondent may have hit on the answer, noting that about 2,000 people work at In Salah if one includes the “military units intended to deter attacks by Islamic militants, who are still a serious threat in Algeria.”

Sometimes, and some places, it pays to keep your head down.

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Tagged: Energy, natural gas, carbon capture, carbon credits

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