CO2EOR: AN ENABLING BRIDGE FOR THE OIL TRANSITION

1
CO2-EOR AN ENABLING BRIDGE FOR THE OIL TRANSITION
Presented to Modeling the Oil Transition A
DOE/EPA Workshop on the Economic and
Environmental Implications of Global Energy
Transitions Presented by Vello A. Kuuskraa,
President Advanced Resources International vkuuskr
aa_at_adv-res.com Washington, DC April 20-21, 2006
2
CO2-EOR AND THE OIL TRANSITION

• A close and mutually beneficial relationship will
  and should exist between CO2-based enhanced oil
  recovery (CO2-EOR) and coal during the transition
  from oil to alternatives.

• Coal liquids, one of the key elements in the
  transition, emits 1.8 times the volume of CO2
  as the hydrocarbon it replaces.
• Other transition fuels, such as shale oil and
  hydrogen from coal, also emit large volumes of
  CO2.
• Capturing and storing these CO2 emissions, if
  required, will add significantly to the costs of
  these fuels.

CO2-EOR can provide a value-added CO2 market
for these new industrial sources of CO2. The
additional oil produced by CO2-EOR can also help
stretch the age of oil and provide an enabling
bridge for the oil transition.
3
CO2-ENHANCED OIL RECOVERYWHAT KIND OF ENABLING
BRIDGE?
Not That Kind Of Bridge!
Maybe If We Turn Into Wood Chips?
Now, Thats More Like It!
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OVERVIEW OF PRESENTATION

• In response to Congressional language, our
  company - - Advanced Resources Intl - -
  undertook three studies for the DOE Office of
  Fossil Energy to examine the dual issues of
  CO2-EOR and industrial sources of CO2.

• A large volume of oil - - 400 billion barrels - -
  remains unrecoverable (stranded) in already
  discovered domestic oil fields. This is because
  todays primary/secondary oil recovery technology
  recovers only about one-third of the original oil
  in-place.
• Our Basins Studies establish that application
  of CO2-EOR can recover a substantial portion of
  this stranded oil. A modest but growing
  volume, about 200,000 barrels per day, is already
  being produced by this technology.

5
GROWTH OF CO2-EOR PRODUCTION IN THE U.S.
JAF2005044.XLS
250,000
GULF COAST/OTHER
MID-CONTINENT
ROCKY MOUNTAINS
200,000
PERMIAN BASIN
150,000
Enhanced Oil Recovery (barrels/day)
100,000
50,000
0
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Year
Source Oil and Gas Journal, 2002.
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OVERVIEW OF PRESENTATION (Contd)

• Our Game Changer report examines how advances
  in CO2-EOR technology - - advances that are
  scientifically possible but not yet fully
  developed - - could further improve oil recovery
  efficiency and add oil supply.
• Our Residual Oil Zone work documents that
  additional domestic oil resources - - resources
  not currently included in any national totals -
  - exist in residual oil zones. These resources
  are also recoverable with CO2-EOR technology.

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OVERVIEW OF PRESENTATION (Contd)
Importantly, the timely and economic development
of this stranded oil resource is constrained by
lack of sufficient EOR-Ready CO2. As such,
understanding the mutually beneficial link
between CO2-EOR and new industrial sources of
CO2, particularly CO2 from production of
synthetic fuels, will be important.

• Todays presentation will further examine this
  topic.

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MEETING THE CONGRESSIONAL MANDATE

• Congressional Budget language (for FY2004 and
  2005) for the Oil Technology Program of DOE
  Fossil Energy directed that basin-oriented
  assessments be conducted to examine new steps to
  accelerate adoption of carbon dioxide-based
  enhanced oil recovery (CO2-EOR).
• Congressional Budget language for FY2006
  continued this direction and added emphasis on
  productively using industrial sources of CO2.
• In response to Congress, DOE/FE requested our
  firm, Advanced Resources International, to
  undertake an assessment of the status of the
  CO2-EOR and examine how this technology could
  augment domestic oil supplies and encourage
  productive use of industrial CO2.

9
MEETING THE CONGRESSIONAL MANDATE (Contd)

• Three CO2-EOR technology assessments were
  prepared

• Basin Studies. What is the size of the prize
  for CO2-EOR technology? (Is the game worth the
  candle?) What set of policies and economic
  conditions that would facilitate productive use
  of industrial CO2?
• Game Changer. How could next generation
  CO2-EOR technology could increase the size of
  the prize and further support productive use of
  industrial CO2?
• Residual Oil Zone. Is there a larger than
  traditionally viewed domestic oil resource base
  that is applicable to CO2-EOR and industrial CO2?

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LARGE VOLUMES OF DOMESTIC OIL REMAIN STRANDED
AFTER PRIMARY/SECONDARY OIL RECOVERY
Original Oil In-Place 582 B BarrelsStranded
Oil In-Place 390 B Barrels
Future Challenge 390 Billion Barrels
Cumulative Production172 Billion Barrels
Proved Reserves20 Billion Barrels
All domestic basins except the Appalachian
Basin. Source Advanced Resources Intl. (2005)
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DOMESTIC CO2-EOR ACTIVITY

• Currently, 71 CO2-EOR projects provide 206,000
  B/D of production
• Affordable natural CO2 launched CO2-EOR activity
  in the 1980s
• Federal tax credits (Sec.43) and state severance
  tax relief still encourage CO2-EOR
• New players have entered the CO2-EOR business
• OxyPermian (purchased Altura adding new CO2-EOR
  projects)
• KinderMorgan (providing CO2 pipelines/supply
  purchasing oil fields amenable to CO2-EOR)
• Denbury (using Jackson Dome CO2 for EOR in
  Mississippi and Louisiana)
• Anadarko (using CO2 from the LaBarge gas
  processing plant for EOR in the Rockies)

71
Number of CO2-EOR Projects Natural CO2
Source Industrial CO2 Source CO2
Pipeline Proposed CO2 Pipeline Commercial CO2-EOR
Fields
Dakota Coal Gasification Plant
Antrim Gas Plant
LaBarge Gas Plant
9
2
Enid Fertilizer Plant
McElmo Dome Sheep Mountain Bravo Dome
5
Jackson Dome
53
Val Verde Gas Plants
2
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ASSESSMENT 1. BASINS STUDIES

• Our company, Advanced Resources International,
  completed ten basin studies that provide an
  initial perspective on combining CO2-EOR and the
  use of industrial CO2. The studies

• Cover 22 of the oil producing states plus
  offshore Louisiana,
• Include 1,581 large (gt50 MMBbls OOIP) oil
  reservoirs, accounting for two thirds of U.S. oil
  production,
• Estimate CO2EOR recovery and CO2 supply needs
  using streamline reservoir simulation and an
  extensive data base of domestic reservoir
  properties.

These reports are available on the U.S.
Department of Energys web site at
http//www.fe.doe.gov/programs/oilgas/eor/Ten_Basi
n-Oriented_CO2-EOR_Assessments.html
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U.S. BASINS/REGIONS STUDIED FOR FUTURE CO2-EOR
AND USE OF INDUSTRIAL CO2
The 22 states with shading are included in the
ten Advanced Resources International prepared
basin studies of CO2-EOR.
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TECHNICALLY RECOVERABLE OIL RESOURCES(State-of-t
he-Art CO2-EOR Ten Basins/Areas)
Original Oil in Place, in all reservoirs in
basin/area Remaining Oil in Place, in all
reservoirs in basin/area. Source
Advanced Resources Intl, 2005.
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ECONOMICALLY RECOVERABLE OIL RESOURCES
(Alternative CO2-EOR Scenarios)
Depending on technology and financial conditions,
from 4 to 47 billion barrels of the 89 billion
barrels of technically recoverable oil resource
could be economically recovered with CO2-EOR
technology.

• Scenario 1. Traditionally practiced CO2-EOR
  technology (small volumes of CO2, high technical
  risks) would enable only a modest portion, 4
  billion barrels, of this CO2-EOR potential to be
  economic.1
• Scenarios 2 3. State-of-the-art CO2-EOR
  technology (larger volumes of CO2, modified
  injection designs) plus lower technical and
  economic risks would make 24 to 40 billion
  barrels economically viable.2
• Scenario 4. Availability of lower cost,
  EOR-Ready CO2 supplies would increase the
  economically viable resource to 47 billion
  barrels and would also greatly accelerate the
  conversion of this resource to reserves and
  production.3

1. This case assumes an oil price of 30 per
barrel, a CO2 cost of 1.20 to 1.50/Mcf, and a
ROR hurdle rate of 25 (before tax). 2. This case
assumes an oil price of 30 to 40 per barrel, a
CO2 cost of 1.20 to 2.00/Mcf, and a ROR hurdle
rate of 15 (before tax). 3. This case assumes an
oil price of 40 per barrel, a CO2 cost of
0.80/Mcf, and a ROR hurdle rate of 15 (before
tax).
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ECONOMICALLY RECOVERABLE RESOURCES (Alternative
CO2-EOR Scenarios)
Depending on technology and financial conditions,
from 4 to 47 billion barrels of domestic resource
could be economically added to domestic oil
supply with CO2-EOR technology.
Traditional Practices
State of the Art Technology
50
46.8
39.8
40
Improved Financial Conditions
Current Financial Conditions
30
Billion Barrels of Additional, Economically
Recoverable Oil
24.1
20
10
3.8
0
High Risk/ High Cost CO2/ Mod. Oil Price
Low Risk/ High Cost CO2/ Mod. Oil Price
Low Risk/ High Cost CO2/ High Oil Price
Low Risk/ Low Cost CO2/ High Oil Price
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MARKET FOR INDUSTRIAL CO2
A significant and growing market exists for
EOR-Ready CO2 , particularly from new
industrial sources

• The size of the potential market is about 380
  Tcf, equal to 20 billion metric tons.
• Future oil prices and the cost of EOR-Ready CO2
  will determine how much of this market may be
  economically captured.
• Natural sources of CO2 currently providing about
  2 Bcfd, will only meet a portion, 40 to 50 Tcf,
  of this market demand.
• Industrial sources of CO2, currently providing
  only about 0.5 Bcfd, will need to meet the
  remainder of the demand.

18
MARKET FOR PURCHASED CO2 (Technically
Recoverable with State-of-the-Art CO2-EOR
Technology)
Equal to 20 billion metric tons. Source
Advanced Resources Intl, 2006.
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PERMIAN BASIN CO2 SUPPLIES

• The initial CO2 for EOR came from Val Verde
  natural gas processing plants. The CO2 from
  these plants was delivered by a 200 mile pipeline
  to SACROC.

Source KinderMorgan estimates, Oil and Gas
Journal, EIA
Today, CO2 supplies for Permian Basin CO2-EOR are
primarily from three natural CO2 fields - -
McElmo Dome, Bravo Dome and Sheep Mountain.
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MISSISSIPPI/LOUISIANA CO2-EOR PROJECTS

• Denbury owns CO2 reserves at Jackson Dome and is
  expanding its CO2 pipeline system
• 2.7 Tcf proved CO2reserves with a potential
  resource of 12 Tcf,
• Extending pipeline to E. Mississippi and to S.
  Louisiana.
• CO2EOR currently used on six depleted oil
  fields additional fields planned for future
  years.
• CO2-EOR production expected to reach 10,000 B/D
  in 2005 and 33,000 B/D in 2010.

CO2 Pipeline
Planned 80 Mile Pipeline
Potential 120 Mile Pipeline
Source Denbury Resources, 2005
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ROCKY MOUNTAIN CO2-EOR PROJECTS
Net Production
60,000
175 MMcfd Purchased CO2 Supply Scenario
50,000
Monell
40,000
Sussex
Net BOPD
30,000
20,000
Salt Creek
10,000
Existing Production
0
2012
2014
2004
2006
2008
2010
Source Anadarko
Anadarko Petroleum is pursuing CO2-EOR in the
Rockies

• 400 million barrels of EOR already captured.
• Another 400 million barrels of upside in Powder
  River Basin alone.

Source Carbon Dioxide in Wyoming, WY State
Geological Survey, Info Pamphlet 9, 2001
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CO2-EOR PROJECTS SEQUESTERING U.S. ANTHROPOGENIC
CO2
Source Advanced Resources International, 2004
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WEYBURN CO2-EOR/CO2 STORAGE PROJECT

• Largest CO2 EOR project in Canada
• OOIP 1.4 Bbbls
• 155 Mbbls incremental
• Outstanding EOR response
• Worlds largest geological CO2sequestration
  project
• 2.4 million tonnes/year
• 8 million tonnes to date
• 55 million tonnes ultimately
• Example of international corporations

Regina
Weyburn
Saskatchewan
Manitoba
Canada
USA
North Dakota
Montana
Beulah
CO
2
Source EnCana
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ASSESSMENT 2 GAME CHANGER
The next report, Evaluating the Potential for
Game Changer Improvements in Oil Recovery
Efficiency from CO2-Enhanced Oil Recovery,
examines how much additional CO2-EOR and
productive use of industrial CO2 could result
from next generation technology. The report

• Reviews the performance and technical limitations
  of past CO2-EOR floods, both successful and
  unsuccessful.
• Sets forth theoretically and scientifically
  possible advances in technology for CO2-EOR.
• Examines, using reservoir simulation, how much
  these next generation CO2-EOR technologies
  would improve oil recovery efficiency and expand
  the CO2 storage capacities of existing oil
  reservoirs.

The scientifically possible next generation
technologies set forth in the report have yet to
be fully developed or demonstrated.
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LIMITATIONS OF PAST PERFORMANCE
Relative Location of the Water Front in Layered
Reservoir

• A major cause of less-than-optimum performance
  has been the inability to efficiently target the
  injected CO2 to preferred (high residual oil)
  reservoir strata and then capture the mobilized
  oil.
• The figures show CO2 channeling in highly
  heterogeneous reservoirs and why the lower
  permeability portions of reservoir strata are
  less efficiently swept.

Layer 1 (20 md)
368 Days
Water
Layer 2 (100 md)
478 Days (Breakthrough)
1839 Days (Channeling in Layer 2)
0
100
200
300
Distance, ft
Source Adapted by Advanced Resources Intl from
Enhanced Oil Recovery, D.W. Green and G. P.
Willhite, SPE, 1998.
Well 27-6 Injection Profile Before And After
Cement Squeeze
6,350
Depth
6,900
0
20
40
60
80
100
0
20
40
60
80
100
Injected Before
Injected After
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LIMITATIONS OF PAST PERFORMANCE
Oil and Water

• In many of the previous CO2 floods, the injected
  CO2 achieved only limited contact with the
  residual oil in the reservoir due to
• Gravity override by the less dense CO2
• Viscous fingering of the less viscous CO2 through
  the reservoirs oil
• The figure shows how addition of viscosity
  enhancers could help reduce this problem.

Water
Waterflood (High Mobility Ratio)
Oil and Water
Polymer In Water
Water
Viscosity Enhanced Flood (Improved Mobility Ratio)
Source Adapted by Advanced Resources Intl from
Enhanced Oil Recovery, D.W. Green and G. P.
Willhite, SPE, 1998.
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ARE HIGH OIL RECOVERY EFFICIENCIES ACHIEVABLE?

• Example Carbonate Field Oil Recovery Efficiencies

Source Three ExxonMobil Oil Fields, SPE 88770
(2004)
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NEXT GENERATION CO2-EOR TECHNOLOGY
Next Generation technology could significantly
increase the recovery efficiency of using CO2-EOR
by successfully applying four advanced
technologies and practices

• Innovative flood design and well placement
• Viscosity enhancers and miscibility reducers
• Increased volumes of CO2 injection
• Real-time flood performance diagnostics and
  control

Significant research will need to be undertaken
to develop, test and demonstrate these next
generation technologies.
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ONE EXAMPLE OF NEXT GENERATION TECHNOLOGY - -
VERTICAL CO2 FLOOD
30
TECHNICALLY RECOVERABLE OIL RESOURCE FROM
STATE-OF-THE-ART AND NEXT GENERATION CO2-EOR
TECHNOLOGY (FIRST SIX BASINS/AREAS ASSESSED)
STATE-OF- THE-ART
ALL RESERVOIRS (Six Basins/Areas)
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EXPANDING CO2 STORAGE A CASE STUDY

• To examine how much next generation technology
  could expand CO2 storage capacity, we present a
  case study of a large, 340 million barrels
  (OOIP), Gulf Coast oil reservoir

• Main Pay Zone
• Depth - - 14,000 feet
• Porosity - - 29
• Net Pay - - 325 feet
• Transition/Residual Oil Zone (130 feet)
• Underlying Saline Aquifer (195 feet)

Within the spill point of the reservoir
structure.
32
EXPANDING CO2 STORAGE A CASE STUDY

• Compared to conventional CO2-EOR design, almost
  six times more CO2 storage is possible in this
  reservoir with next generation design.

Under this scenario, 76 instead of 13 of the
reservoirs theoretical storage capacity is used
for CO2 storage while significantly increasing
oil recovery.
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ASSESSMENT 3. RESIDUAL OIL ZONE
Typically, the producing oil-water contact for
a reservoir is set at the first occurrence of
free water. A significant zone of residual oil
can exist below this producing oil-water
contact due to capillary effects, hydrodynamics
and basin tilt. Reservoir simulation shows that,
with proper design, CO2-EOR can technically (and
economically) recover a significant portion of
this previously unaccounted for oil resource

• Residual oil zones exist for reservoirs in the
  Big Horn, Permian and Williston Basins
• A number of CO2-EOR projects (e.g., Seminole,
  Wasson, Salt Creek) have added the residual oil
  zone to the main pay zone being CO2 flooded.

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OIL RESOURCES IN RESIDUAL OIL ZONES (Contd)
Oil Saturation
100
0
4800
4850
4900
4950
Main Pay Zone (MPZ)
5000
Oil Saturation Profile in the TZ/ROZAdapted
from Wasson Denver Unit Well.
5050
Base of Producing OWC
OWC
5100
Transition Zone (TZ)
5150
5200
5250
Residual Oil Zone (ROZ)
5300
5350
5400
Base of Ultimate OWC
5450
35
OIL RESOURCES IN RESIDUAL OIL ZONES (Contd)
Residual Oil Zone Resources

• The Big Horn Basin report identifies 13 fields
  and 4.4 billion barrels of oil in-place in the
  residual oil zone with 1.1 billion barrels
  technically recoverable.
• The Williston Basin report identifies 20 fields
  and 6.8 billion barrels of oil in-place in the
  residual oil zone with 3.3 billion barrels
  technically recoverable.

The largest residual oil resource is in the
Permian Basin of W. Texas and E. New Mexico.
This basin has 56 oil fields (in 5 oil plays) and
30.7 billion barrels of oil inplace in the
residual oil zone with 11.9 billion barrels
technically recoverable.
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SUMMARY

• The domestic CO2-EOR potential is large - - 89
  billion barrels (technically recoverable with
  state-of-the-art technology) offering a market
  for 20 billion metric tons (380 Tcf) of EOR
  Ready CO2.
• Of this large technical resource potential, 47
  billion barrels may be economically recoverable
  (Scenario 4).
• Next Generation CO2-EOR technology and
  development of the Residual Oil Zone would
  significantly increase the size of the prize
  and Increase the market for industrial CO2 many
  fold.

Original Oil In-Place 582 B BarrelsStranded
Oil In-Place 390 B Barrels
Future Challenge 260 Billion Barrels
State-of-the-Art CO2-EOR Technology

• 43 Billion Barrels
• (Six Basin/Areas)
• 89 Billion Barrels
• (Ten Basins/Areas)

Cumulative Production172 Billion Barrels
Next Generation CO2-EOR Technology
Proved Reserves20 Billion Barrels

• 40 Billion Additional Barrels
• (Six Basins/Areas Studied to Date)

Residual oil resources would add 42 billion
barrels to stranded oil. Assumes 40/B oil
price and low cost (0.80/Mcf) CO2 supplies
(Scenario 4). Source Advanced Resources Intl.
(2005), all domestic basins except the
Appalachian Basin.
37
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Drive, Suite 910 Arlington, VA 22203 Phone (703)
528-8420 Fax [phone] vkuuskraa_at_adv-res.com
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805 Houston, TX 77042 Phone [phone] Fax
[phone] Denver, Colorado 1401 Seventeen
St., Suite 400 Denver, CO 80202 Phone (303)
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