COLUMN-U.S. bets on producing oil with captured CO2: John Kemp

Reuters Middle East

(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)

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