(John Kemp is a Reuters market analyst. The views expressed are
his own)
LONDON, July 30 (Reuters) - The United States can extract
billions of barrels of otherwise unrecoverable oil by injecting
carbon dioxide (CO2) underground and also needs to bury CO2,
produced by its reliance on coal for power and industry, to
fight climate change.
Until now, the CO2 used for recovering oil has been
specially extracted from underground but the government is
working to use the lure of oil extraction to encourage the
capture and storage of carbon produced from power stations.
Pumping carbon dioxide into depleted fields to recover oil
left behind by conventional production methods and waterflooding
accounts for more than 300,000 barrels per day (bpd) of U.S. oil
output, according to a survey published earlier this year in the
Oil and Gas Journal, up from 200,000 bpd in 2004 and less than
100,000 bpd in 1990.
The first commercial-scale carbon dioxide injections to
support enhanced oil recovery (EOR) began at Scurry County,
Texas in 1972. Since then, the United States has become the
largest employer of CO2-EOR technology in the world.
In 2012, CO2 injection was being used to support EOR at more
than 100 projects across the United States, up from around 50 in
1990 ("Miscible CO2 now eclipses steam in U.S. EOR production"
Oil and Gas Journal, April 2, 2012).
Ironically, given that policymakers are worried about global
warming as a result of man-made emissions, almost all the CO2
being used in EOR projects comes from natural sources.
CO2 is produced from underground formations where it occurs
naturally, transported by pipeline, then pumped back into
depleted oil fields to support oil extraction. There is no net
benefit in terms of reduced atmospheric CO2.
Most CO2-EOR projects are concentrated in Texas, Wyoming,
Louisiana and Mississippi, close to natural CO2 sources. In
contrast, California's depleted oil fields mostly inject hot
steam, producing around 300,000 bpd by this technique in 2012.
Shortages of CO2 from natural sources at reasonable prices
have emerged as the main constraint on producing more oil by
this method.
"The single largest barrier to expanding CO2 flooding is the
lack of substantial volumes of reliable and affordable CO2,"
according to a comprehensive survey prepared by Advanced
Resources International (ARI), a consultancy firm.
According to the authors, in the Permian Basin of west
Texas, as well as Wyoming and Mississippi, EOR output "is
constrained by CO2 supply, and CO2 production from currently
supply sources is fully committed" ("U.S. oil production
potential from accelerated deployment of carbon capture and
storage" March 2010).
RECOVERING STRANDED BARRELS
EOR through CO2 injection offers the perfect combination for
policymakers concerned about the cost of curbing global warming
and anxious to wean the United States off dependence on foreign
oil.
From an energy perspective, it promises to extend the life
of existing oil fields, and help recover billions of barrels of
oil that would otherwise remain "stranded", unavailable for
commercial use.
Most oil fields go through three phases of production during
their lifetime. During primary production, oil is produced using
the natural pressure of the reservoir. In secondary production,
sometimes called "improved oil recovery" (IOR), water or
sometimes natural gas is pumped into the reservoir to maintain
output as natural pressure falls.
But even after waterflooding, 60 percent or more of the oil
originally in place (OOIP) is still typically left in the
reservoir. CO2 injection (and other EOR methods) can recover an
addition 5-20 percent, depending on the type of oil and the
reservoir geology.
The potential for gleaning extra oil from aging fields is
therefore enormous. Excluding the deepwater areas of the Gulf of
Mexico, the United States was originally endowed with 596
billion barrels of oil, of which 175 billion had been produced
by 2008, and another 21 billion had been booked as proved
reserves, according to ARI.
That still leaves 400 billion barrels "stranded" after
primary and secondary recovery ("Storing CO2 with enhanced oil
recovery" May 2008).
According to the Department of Energy's National Energy
Technology Laboratory (NETL), the Wasson Field in West Texas
began producing in 1938, and production peaked in the mid 1940s.
As natural field pressure and output declined, waterflooding
began in 1965 and continued through 1982, by which point the
wells were producing far more water than oil.
CO2 injection commenced in 1983. By 1998, the field was
still producing 31,500 barrels per day, of which nearly 29,000
were "incremental" barrels attributable to CO2 injection.
CO2-EOR produced an extra 120 million incremental barrels
from Wasson between 1983 and 2008 that would not have been
produced if the field had been allowed to decline naturally,
according to NETL ("Carbon dioxide enhanced oil recovery:
untapped domestic energy supply and long-term carbon capture
solution").
In 2010, ARI estimated that employing current best
practices, EOR-CO2 could enable an extra 85 billion barrels of
oil to become technically recoverable (72 billion barrels in the
Lower 48 states). At an oil price of $70 per barrel and a
delivered CO2 cost of $15 per tonne, 48 billion barrels would be
economically recoverable (38 billion in the Lower 48).
Estimates for both recoverable reserves and cost are subject
to uncertainty; most of these studies may have erred on the side
of optimism since the Energy Department and others are keen to
promote the benefits of EOR. Nonetheless the potential is
obvious, and CO2-EOR is competitive with other forms of oil
production, at costs well below current oil prices.
EARLY ACTION PATHWAY ON CCS
From a climate perspective, carbon capture and storage (CCS)
remains an essential part of policy in the United States and
Europe, despite the lack of commercial projects on any
significant scale to capture emissions from power plants.
CCS is crucial to ensuring the continued viability of
coal-fired power generation (and to a lesser extent natural gas)
while meeting CO2 reduction targets.
Coal reserves are simply too large a part of the total
hydrocarbon base to write them off for climate reasons. The
policy problem is especially acute in the United States, which
has the world's largest coal reserves, and where coal is vital
to the economy of several politically contested states.
Burning coal therefore has to be made politically and
environmentally acceptable, even if there is still scepticism
about the seriousness of the "clean coal" mantra, which many
environmental groups and policy analysts still regard as little
more than clever branding campaign. The same problem applies
albeit to a lesser extent to natural gas.
EOR cannot sequester all the CO2 being produced in the
United States each year. At most it can make a small
contribution. Total U.S. CO2 emissions from industrial sources
are about 100 trillion cubic feet per year, according to NETL.
So far the cumulative amount of CO2 injected under EOR
programmes since 1972 is just 11 trillion cubic feet, about 10
percent of one year's CO2 emissions.
Even if CO2-EOR is scaled up massively in the next 20 years,
most CO2 emissions would still have to be stored in other
formations such as salt-water aquifers.
For policymakers, the real significance of CO2-EOR is its
potential to act as a catalyst or "early action pathway" to
overcome barriers to a wider roll out of CCS infrastructure.
CO2 capture and storage is capital intensive and immensely
costly at every stage: technology for stripping it out of the
combustion exhaust; pipelines for transport; wells for
injection; and an appropriate monitoring, compliance, legal and
regularly framework. In practice the costs are often
prohibitive. But if the captured CO2 that is a by-product of
combustion can be given a value as an input into EOR, the
effective costs are reduced.
Crucially, there are significant scale and network
economies. Once pipelines have been built to transport CO2 to
EOR projects, it is much cheaper to build out the network to
store additional volumes in other non-oil bearing formations.
HEAVY TECHNOLOGY FUNDING
Advocates and policymakers hope successful CO2 injection in
EOR projects can win public and regulatory acceptance, and sort
out legal issues such as long term liability and who actually
owns the empty space in the rock formations that the CO2 is
being injected into.
If this all sounds very ambitious, it is. But CO2-EOR is
such an obvious win-win technology with the potential to
transform the oil industry and climate policy, that policymakers
are betting heavily on it.
The Department of Energy is busy rebranding carbon capture
and storage (CCS) as carbon capture utilisation and storage
(CCUS).
CO2-EOR already benefits from an extensive array of federal
and state tax incentives (most introduced in the late 1970s and
1980s to boost flagging national oil production). Now the Energy
Department is funding advanced research on CO2 capture
technologies, sequestration and EOR.
The federal government is currently part-funding seven
advanced "Next Generation" CO2-EOR projects, including publicly
available software to help operators assess whether CO2
injection would be economic in small fields.
It is the sort of small-scale, early-stage funding the
government provided to help commercialise infant fracking
technology in the 1970s-1990s, transforming the oil industry.
The U.S. government is betting that early-stage technology
backing for a big expansion of CO2-EOR could have an even bigger
pay off in terms of climate change and future energy security.
(Editing by Anthony Barker)
