Appendix A: CO2 for use in enhanced oil recovery (EOR)

Overview

Enhanced oil recovery (EOR) involves flooding oil reservoirs with injected CO2 to displace oil contained within. At the start of a well’s lifecycle, oil will flow freely via the pressure gradient, known as primary production. This kind of production recovers 5 per cent to 40 per cent of the oil originally in place.

Over the life of the well, The pressure underground will become insufficient to force oil to the surface, meaning secondary and tertiary recovery methods need to be employed – if economically viable to continue with oil extraction. Various agents have been used for EOR, among them CO2, increasing original oil recovery by 7 per cent to 23 per cent further from primary extraction.

Oil displacement by CO2 injection relies on the behaviour between CO2 and crude. This interaction depends on the oil’s weight, and the reservoir characteristics. In high pressure applications with lighter oils, CO2 is miscible with the oil (in all proportions forms a single phase liquid), with resultant swelling of the oil, and reduction in viscosity, and possibly also with a reduction in the surface tension with the reservoir rock. All these effects serve to improve the flow of oil to the production wells.

In the case of low pressure reservoirs or heavy oils, CO2 (potentially along with alternating water injection) will form an immiscible fluid, or will only partially mix with the oil. Some oil swelling may occur, and oil viscosity can still be significantly reduced. However, in immiscible CO2 flooding the main function of the CO2 is to raise and maintain reservoir pressure. CO2 immiscible flooding is considered where the reservoir permeability is too low for water flooding, or where the geochemistry or other geological conditions are unfavourable for water flooding.

During these CO2-EOR applications, more than 50 per cent and up to 67 per cent of injected CO2 will return to the surface with the extracted oil, requiring separation and reinjection into the well to prevent release into the atmosphere and to reduce operating cost of obtaining additional CO2.

The effectiveness of CO2-EOR is dictated by reservoir characteristics, such as temperature, pressure, height, angle and permeability. For example, injection depth must be generally greater than 600m and well pressure over 10MPa into light weight oil to achieve the desirable miscible flood, described above. These factors along with the well’s stage of production must be considered when selecting a reservoir for CO2-EOR.

Technology status

CO2 for EOR is a proven technology, first applied in the early 1970s in Texas, USA and has since been developed constantly and applied in many parts of the world. Due to this, EOR with CO2 can be considered commercial.

Companies employing this technology for capture on industrial plants (e.g. syngas, natural gas sweetening, coal power, fertiliser, or cement production) and within transport range of suitable oil wells, with existing demonstration size or greater EOR projects, include:

Andarko Petroleum Corporation (Salt Creek, USA), Chevron (Rangely-Webber EOR, USA), The Chinese Government (Daqing EOR, China), EnCana (Weyburn, Canada), and Penn West Energy trust (Pembina Cardium EOR, USA).

Research status

Research concerning this technology in the past suggested that CO2 flooding was only viable in certain types of reservoirs, which in the case of the US, referred to the Permian Basin found in Texas and New Mexico. New research determined the successful implementation of CO2 in any kind of reservoir as long as a reasonable minimum miscibility pressure (MMP) was achieved. Tests on nearly every kind of rock showed CO2’s reliability in EOR, which could be implemented in many more areas which were previously considered as not suitable for this practice.

The U.S Department of Energy is investing and supporting research to aid America’s oil producers to expand their CO2-EOR operations and implementations, as an alternative to water use. Currently, The research has made CO2 flooding the fastest growing EOR technique in the U.S, whilst other techniques have been steadily declining in comparison.

Project development

Developments for EOR have been taking place all over the globe. In North America, The Department of Energy (DOE) estimated around 50 Mt CO2/yr being currently used for CO2-EOR. Of this, 75 per cent is applied in projects in West Texas alone.

Projects employing industrial CO2 capture and transport to an injection site include, Salt Creek, USA and Weyburn, Canada, which inject approximately 4000–6000 tCO2 per day with total planned storage of 20Mt for each project. Incentives proposed by the National Energy Technology Laboratory (USA) into projects for CO2-EOR estimate that these technologies could double in implementation from 2010- 2020.

Growth could be much greater in other countries considering the USA has only 1.6 per cent of the world’s proven oil reserves. As oil production declines from existing wells in the Gulf States, CO2 use for EOR, if economic, would be many times greater than the USA’s current annual application based on proven oil reserves.

CO2 utilisation and resource quantities

Commercial scale of CO2-EOR injection differs according to their locality and proximity to CO2 producing sources. In the case of West Texas, for example, CO2 comes from naturally occurring reservoirs.

CO2 injection per oil displacement rate is very dependent on reservoir characteristic (e.g. size, pressure, temperature). This varies dramatically and would need to be examined on a site by site basis. Projects employing industrial CO2 capture and transport to an injection site include, Salt Creek, USA and Weyburn, Canada, which inject approximately 4000–6000 tCO2 day with total planned storage of 20Mt for each project.

Potential markets

CO2-EOR is very specific to the location. CO2 sources and transport options local to a suitable reservoir determine if EOR is a cost effective way to extend well production life.

CO2-EOR with CCS capture from industrial applications is on the cusp of being a commercial level of deployment based on the size of the projects currently active, such as Salt Creek, USA and Weyburn, Canada. Offshore CO2-EOR is yet to be demonstrated.

Size of market

In North America where CO2-EOR is most widely employed, The Department of Energy (DOE) estimated around 50 Mt CO2/yr is currently used.

Currently, CO2-EOR is used to produce about 250,000 barrels per day of oil in the US that are incremental to base case production. A recent study by Advanced Resources International states that an additional 4 to 47 billion barrels of domestic resources could be economically recovered using CO2-EOR. The study notes that at least 8 billion tonnes of CO2 could be sequestered in the US by using EOR6.

Market drivers

Apart from the obvious benefits of increased oil production and GHG reduction through CO2 storage (commercial benefit if/ when Environmental trading Schemes (ETS) are in place), other commercial benefits are provided through limiting a government’s reliance on foreign oil and increased tax revenue. Jobs will also be created and maintained through prolonging reservoir life and the CCS chain (on an industrial plant) providing CO2 for EOR. However, The main market driver for use of EOR will be the prevailing and forecast future oil prices.

Level of investment required (to advance the technology)

A large amount of investment is required in order to advance and further commercialise the technology. The CENS project model, which is looking at the feasibility of using CO2-EOR technology in the North Sea, shows investment costs of roughly:

  • US$1.7 billion for CO2 pipeline.
  • US$2.2 billion for CO2 capture plants.
  • US$5.0 billion for EOR investment in oilfields (Sharman 2004).

These of course are project investment costs, as opposed to research costs. Future project economics may one day come to make such an investment into North Sea EOR a possibility.

Potential for revenue generation

Through aggressive greenhouse gas (GHG) reduction targets, Western governments are supporting the development of CCS by funding demonstration projects, with the aim to see CO2 capture and storage from industrial applications become economically and technically viable for widespread deployment. CO2-EOR is a stepping stone in this process in which revenue can be generated to help support the cost of CCS implementation and operation.

A decline in the world’s established oil production means CO2-EOR could be employed more widely in the future to maintain oil production. For example, Oman’s oil production between 2001 and 2007 fell by 27 per cent, but by 2009, due largely to EOR projects, oil production increased by 17 per cent. Additional oil revenue benefits both governments and the production companies, which could lead to future funding of CO2-EOR.

Price sensitivity

A rise in oil price would make the additional cost of CO2-EOR more appealing; however the current fluctuating oil price makes future investment decisions difficult.

The high CAPEX and OPEX of CCS from industrial applications potentially erode the revenue benefits of increased oil production through EOR.

Research, including the CENS project in the North Sea suggests that the break-even oil price is around US$30/bbl assuming CO2 capture costs of US$48 per tonne (CO2 Norway, 2005). As at June 2010 crude oil was trading at US$77/bbl.

Commercial benefit

This will develop when oil becomes scarce and the increased cost can support CO2-EOR from industrial sources. This could be in parallel to CCS technology improving to be more efficient (reduced OPEX) and more cost effective (reduced CAPEX) to install/ retrofit to existing plants.

Benefits

Increased oil revenue through CO2 storage would be very substantial all over the world. In the US alone in 2005, it was estimated that CO2-EOR could increase oil production up to 2–3 million barrels per day by 2025. This would in turn reduce the countries trade deficit of over US$1.7 trillion through reduced oil imports and could provide 500,000 well paid domestic jobs from the direct and indirect benefits of this increase in oil production. Return on investment of this kind, through oil production, could assist industrial CCS roll-out in the short term.

CO2-EOR could present a cheaper option for EOR developers. It is also estimated, that in order to encourage the use of CO2 from power plants, fiscal incentives such as tax or emission trading credits will be issued. This would enable the expansion of the CO2-EOR industry and facilitate the technology to grow in more areas where power plants are present – which are abundant especially in developed countries.

Barriers

High CAPEX and OPEX for CCS implementation, along with uncertainty over the long term oil price and oil well production timelines when secondary production is optimal have kept oil companies from using EOR. Added to this, unclear regulations and wavering public support (particularly for onshore injection) of CO2 have provided barriers to EOR.

The cost of CO2-EOR with industrial capture will provide a barrier to developing countries, while offshore CO2-EOR had not been implemented in any county due to the high cost involved, despite CO2-EOR itself being very applicable if the country is an oil producer and wants to maintain its future oil production.

6 World Resources Institute: CO2-Enhanced Oil Recovery http://www.wri.org/publication/content/8355