Many members of the oil and gas sector are starting to feel the heat of global warming concerns among the general public, politicians, regulators and financiers. Use of their fossil fuel products and the methods used to produce them are widely considered to be major contributors to global warming.

On the other hand, the tertiary recovery of oil has long been boosted through CO2 injection. It sounds like a match made in heaven: Can CO2 injection, in part through its role in enhanced oil recovery (EOR), be used in the fight against global warming?
So far, the answer seems to be maybe, but powerful pressures are being exerted to find a way to turn this into yes.

Sequestration
The core idea is the use of carbon capture and storage (CCS) to slow the flow of additional CO2 into the atmosphere, reducing its climate-altering effects. Storage can be achieved through injecting vast volumes of CO2 into rock formations deep underground with the expectation that it will stay there, essentially forever.

Much of the technology for doing this is based on an understanding of reservoir geology,

Carbon dioxide from a plant in North Dakota goes into an enhanced oil recovery flood at EnCana’s Weyburn field in Saskatchewan. (Photo courtesy of EnCana)
drilling technology and reservoir engineering developed in the oil industry, although the long timeframe required for monitoring and maintaining sequestration are well outside the lifecycle of an EOR project. About the only precedents for such technology come from the long-term disposal of acid gas from mid-stream oil and gas processing facilities in a similar fashion and from international efforts to monitor and maintain isolation of nuclear waste in underground storage facilities.

Is CCS a flavor of the month? Signs are that it is not. Consider:
• Coal-fired plants in many North American jurisdictions are almost certain to not receive regulatory approval unless they contain substantial provisions for managing their CO2 emissions, and increasingly this means investments in CCS.
• In the Canadian province of British Columbia, a recent Throne Speech (an official pronouncement of the government’s intentions) indicated that no new coal power generation anywhere in the province would be permitted without substantial CCS provisions.
• In the United States, the Department of Energy is pushing utilities to move beyond small-scale pilot projects into larger, field-scale CCS implementations. The US Supreme Court ruled in April that the Environmental Protection Agency has the authority to regulate carbon dioxide emissions.
• Several governments are engaged in a race to be the greenest of them all in CCS. For example, the province of Alberta claims leadership in some areas, as does British Columbia. The UK government announced in March 2007 a competition to build the world’s first, full-scale demonstration of CCS.
• In the United States, natural sources of CO2 are being depleted as seen in recent news accounts of steep declines in production of the gas from Huerfano County, Colo., used in EOR applications in Texas.
• The Kyoto process seems about to recognize CCS as a viable clean development mechanism, which means CCS-generated credits in qualifying parts of the world could have cash value and be tradable on the European Union’s Emission Trading system.

These signs indicate that CCS is a worthwhile means to reduce CO2 emissions for the oil and gas industry in all parts of the globe, particularly those where environmental concerns are becoming a top-of-mind concern for many members of the voting public.

Add to this the fact that increasingly, investment financing goes most gladly to companies that demonstrate good environmental performance. Having an effective capability in CCS is one way oil and gas companies can gain “green” credentials.

What’s in the way?

Challenges
Even given the fact that the oil and gas industry has been injecting CO2 underground for decades, not much is known about the practicality of the idea for geological sequestration of CO2. There is no promise that the CO2 will not migrate back to the surface through fractures, or that there will never by any leakage up to the surface through the injection wells. Also, it is not a complete “win” for CO2 reduction, given the fact that collecting the gas takes energy (= carbon emissions), as does the transportation and injection of the gas.

Does it make sense for oil and gas companies to combine CCS priorities with those of EOR? So far, how to effectively do both is not clear. The volumes, rates and timing of CO2 injections for maximizing oil recoveries do not correlate with the volumes and timing needed to pump large volumes of the gas underground to meet CCS goals. And what about all those CO2 emissions from the extra oil produced? How do those get accounted for?

It may make more long-term economic sense to use existing wells and infrastructure to continue injecting CO2 underground once all recoverable hydrocarbons have been produced, rather than to meet the demands of both sequestration and EOR.

Solutions
The picture may change in the near future. One reason oil and gas companies do not undertake more CO2 flooding is that supplies of the gas are limited and currently expensive, which is a strange asset/liability dynamic that needs to be resolved to move forward.

However, there is increasing talk of a “CO2 backbone,” or trunk pipeline system in North America to carry carbon dioxide from CO2 -producing sources such as coal-fired power generation plants, refineries and the Alberta oil sands to geological sequestration sites. If this happens, a CO2 backbone could increase the availability of CO2 in oil-producing areas may make its EOR applications more attractive. Consider the plans being made for a central terminal system for collecting CO2 emissions in Alberta refineries, at Fort Saskatchewan and Sturgeon, to be piped to Pembina and Swan Hills for EOR purposes.

At present, one of the few large-scale CCS-for-EOR purposes projects takes gas generated from a power plant in North Dakota and runs it through a purpose-built pipeline to increase recoveries in EnCana’s Weyburn field in Saskatchewan.

Expansion of projects such as this seem likely given current oil prices, rising production costs and supply security realities, but as far as CO2 emission reduction goes it is important to remember that the story of the oil and gas sector is one of once-impossible things made possible through a combination of need, technology, money and most importantly a “can-do” attitude for which the industry is famous, once motivated. Such deeds include producing reservoirs underlying hostile environments in the North Sea, Alaska’s North Slope and off Russia’s Far East, as well as in the deep waters of the Gulf of Mexico.

Some of the money to blend CCS with EOR may come through the evolving carbon credit market. A reality in Europe, the market for carbon credits is starting to develop in North America as well. Currently, in North America it is a “voluntary” market, but the signs are that the lessons learned in Europe about how to put a monetary value on carbon emissions will be applied in North America sooner rather than later, particularly given the fact that the Americans invented emission trading in the first place in response to the smog and acid rain crises in the last century.

It is the large utilities using fossil fuels that are feeling some of the greatest pressures to develop their CO2 capabilities. One issue is that at present, most of these utilities are planning to look in their own backyards for injection sites, rarely considering locations more than about 50 miles (80 km) from their plants. Our experience helping match sources of CO2 to sinks has found that utilities based in eastern North America may not have nearby access to the conventional reservoirs from which oil and gas are produced. Rather, these plants may need to be sequestering their gases in fractured limestones and dolomites, coal beds and other geological formations that imply greater uncertainties and costs in their development, monitoring and reliability than the conventional matrix-dominated reservoirs, even though they may make good injection sites for CO2.

With the growth of a CO2 backbone, this picture may change to allow more EOR-related sequestration.

While the marriage of EOR and CCS is not yet a sure thing, it’s a good bet. It also seems likely that much of the research and development money for CO2 emission reduction will flow toward making CCS a reality. What is also safe to say is that companies with large CO2 emissions will need to do some serious homework in considering CCS in conjunction with other potential emission reduction options and be prepared to defend a decision not to implement CCS. Members of the upstream oil and gas sector will do well to keep current on developments in this area.