Map of major CO2-EOR activity in the US. (Images courtesy of Advanced Resources International Inc.)

Many state that using CO2 capture and storage (CCS) would impose severe economic hardships on consumers and the nation’s economy. However, CCS can also provide significant benefits, especially if value-added opportunities for productively using captured CO2 — the proverbial “low-hanging fruit” — is encouraged and pursued. Specifically, combining CO2 storage with enhanced oil recovery using CO2 injection (CO2-EOR) can help produce more oil from mature domestic oil fields while sequestering large quantities of CO2 rather than emitting this to the atmosphere.

As such, CO2-EOR can provide a “bridge” to a low-carbon energy future involving widespread market penetration of CCS technology. Revenues from sales to the oil industry can offset some of the costs of capture from coal-fired power plants. In addition, CO2-EOR can build pipelines and other infrastructure for storing CO2. Finally, the support provided by CO2-EOR for early implementation of CCS will help drive down costs through “learning by doing.”

Current CO2-EOR activity

CO2-EOR technologies have been demonstrated at commercial scale for more than 30 years in the Permian Basin. These projects are, for the most part, injecting from natural reservoirs, sources that are high in purity and readily available at low cost. Today, more than 100 projects provide nearly 250,000 b/d of incremental oil production in the US. Since 1986, more than 1.3 Bbbl of incremental oil has been recovered using this technology, with another 1 Bbbl remaining as proved reserves.

More than 80% of the CO2 used for projects in the US comes from four large natural fields — Jackson Dome, Sheep Mountain, McElmo Dome, and Bravo Dome. The rest of the CO2 used for projects comes from gas processing plants, ammonia plants, and one large coal gasification facility (Table 1).

Despite the many projects in the US, activity elsewhere in the world is limited. Nonetheless, the “poster child” of an integrated sequestration project is EnCana’s Weyburn flood in Canada, where oil production from CO2-EOR continues to increase. EnCana buys anthropogenic CO2 from the Dakota Gasification Synfuels plant in Beulah, N.D. The project currently injects 2.4 million tonnes of CO2 per year and plans to store 23 million tonnes as part of CO2-EOR. With continued injection after EOR operations have ceased, the ultimate expectation is to store 55 million tonnes of CO2.

Limits to expansion

Perhaps the single largest deterrent to the expansion of oil production from today is the lack of sufficient volumes of reliable and affordable CO2. For example, after several decades when CO2 supplies outpaced demand, today there is a shortfall in CO2 supply in the Permian Basin. Current project expansions, the conversion of old waterfloods to CO2 injection, and several new projects looking to pursue the residual oil zone (ROZ) could lead to another 5 to 9 million tonnes per year of incremental CO2 demand in the Basin should new CO2 supplies be available.

Some steps are taking place to address, at least to some extent, this limitation:
• Kinder Morgan completed its Doe Canyon gas plant in southwestern Colorado in early 2008, adding 3.5 million tonnes per year of CO2 supply availability to the Permian Basin. In addition, McElmo Dome has added another 3.5 million tonnes per year of CO2 production capacity.
• Enhanced Oil Resources Inc. (EOR Inc.) announced a memorandum of understanding (MOU) for developing a pipeline with SunCoast Energy Corp. to transport 6 million tonnes per year of CO2 350 miles (563 km) from its St. Johns, Ariz., helium and CO2 field to the Permian Basin.
• In June 2008, SandRidge Energy reached agreement with Occidental to build a CO2 treatment plant and associated CO2 compression and pipeline facilities in Pecos and Terrell Counties in Texas, providing Occidental with a dedicated CO2 stream for CO2-EOR. The plant could ramp up to 8 million tonnes per year of CO2.
• Anadarko Corp. has plans to extend to the Linch-Sussex area in Wyoming its 125-mile (201-km)pipeline that currently transports CO2 to the Salt Creek and Monell fields from the ExxonMobil La Barge gas plant. Plans are to deliver more than 6 million metric tons a year (up from 4 million tons per year) of high-purity CO2. Several other projects are also being considered that could further expand CO2 supply.

Denbury Resources is going beyond just incremental increases in capacity by taking a more long-term strategic approach to the application of projects and the CO2 to supply these projects in the Gulf Coast. Denbury plans to expand the existing pipeline infrastructure to bring additional captured CO2 to the market. The company has signed CO2 purchase contracts with three planned facilities and is actively pursuing additional industrial sources of CO2, that could provide from 30 to 36 million tonnes per year of CO2 to supplement its natural reserves, which are projected to decline beginning around 2015.

Schematic illustration of how CO2-EOR coupled with other strategies for CO2 storage could dramatically increase the CO2 volumes that could be cost-effectively stored.



Achieving the benefits of CCS

Today, CCS without EOR is generally not economically viable without a price on CO2 emissions reductions, established either from “cap and trade” or a carbon tax. While pilot-level activity is underway, ensuring that CCS makes the contribution many expect will require a substantial increase in today’s level of activity. The benefits of success for CCS necessitate such aggressive activity.

Benefit 1. CCS with CO2-EOR would help coal-fired electric power to become an environmentally acceptable, economically viable source of energy. Two of the most important barriers to CCS are: (1) the cost and energy penalty of capturing CO2 emissions, and (2) public acceptance for geological storage. While numerous steps are being taken to address these two barriers, more is required. This includes launching multiple commercial-scale demonstrations of CO2 capture, supported by robust R&D. These demonstrations should address alternative capture technologies and coal types. A sufficient number (30+) of demonstrations are needed to achieve three doublings of installed capacity and reduce costs by 50% through “learning by doing.” Fifty years of industrial experience show that “learning by learning” and “learning by doing” can dramatically lower costs of new energy technologies. A US $24 billion demonstration program could be funded through a small 0.1¢/kWh fee on coal-fired power.

In addition to reducing costs, multiple demonstrations will show the public that CCS can be safe and effective. Establishing regulatory requirements, standards, and performance criteria for long-term CO2 storage are necessary. However, these cannot hinder the utilization of CO2-EOR for both increasing oil production and facilitating long-term CO2 storage. Finally, while subsurface property rights and long-term liability issues related to CO2 injection for EOR are well established, geologic CO2 storage presents a novel set of demands on the current legal regime that will need to be resolved.

Establishing and then utilizing the CO2-EOR available, lower cost CO2 storage and CO2 sales potential offered by CO2-EOR provides a potential demand for 10 to 13 gigatons (Gt) of industrial CO2 (at a $100-per-barrel oil price). This is equal to the storage capacity for 30 years of captured CO2 emissions from 60 to 80 GWs of coal-fired power.

Benefit 2. Productive use of CO2 could increase oil production and reduce oil imports. Additional economically recoverable domestic oil resources of 48 to 70 Bbbl (at $100/bbl) could be added, according to a report from the Department of Energy, amounting to a reduction in wealth transfer out of the US of $5 to $7 trillion (at $100/bbl price). This could reduce US oil imports by 30%, assuming peak CO2 -EOR production of 3 million b/d of oil. With value for sequestering CO2, integrated “second-generation” CO2-EOR and CO2 storage technology could store more CO2 than contained in the incremental oil produced.

Two proactive steps would help achieve the large energy security and economic benefits from productive use of captured CO2 emissions for CO2-EOR. First, there is a need to send a positive message to the public and to public officials on the potential of integrating CO2 storage and CO2-EOR. Second, we recommend that Congress establish and fund a CO2 Storage and Oil Recovery Institute, perhaps modeled on the Gas Research Institute, which was instrumental in unlocking the potential of unconventional gas that now provides half of US natural gas supply.

Benefit 3. CCS can provide an important option for reducing CO2 emissions from the transportation sector. Large-scale introduction of plug-in hybrid vehicles, while offering much higher mileage efficiency, will increase electricity demand. Even though much of this demand would be met by base load power plants during off-peak times, CO2 emissions would increase in the electricity sector. With CCS and plug-in hybrids, power companies would avoid these increased emissions and gain more efficient use of existing infrastructure and, with sale of the captured CO2 to CO2-EOR, improve economic margins. In fact, assuming 20 million plug-in hybrid vehicles in use (with a 40-mile or 64-km battery range) would result in lower CO2 emissions of 100 million tons per year and reduced use of 500,000 b/d of oil.

Summary

While a substantial amount of activity related to CCS is underway, much more needs to be done, and much faster. To accomplish this requires putting a “positive outlook” on CCS and CO2-EOR by proactively articulating its multiple benefits. There is no need for the oil and gas industry, or the coal and electric utility industry, to take a back seat to Boone Pickens’ “plan” or other promotions for addressing our domestic energy problems while combating climate change.