ECONOMICS OF CO 2 INJECTION AND STORAGE IN DEEP COAL SEAMS

Transcription

1 ECONOMICS OF CO 2 INJECTION AND STORAGE IN DEEP COAL SEAMS Coal-Seq I Forum Presented by: Vello A. Kuuskraa, President Advanced Resources International, Inc. vkuuskraa@adv-res.com Houston, TX March

2 OUTLINE 6 Background 6 Review of Performance 6 Economic Cases Current Case High Gas Price/High Efficiency Case Moderate Gas Price w/incentives Case 6 Summary

3 BACKGROUND Injection of CO 2 into deep coal seams can provide: 6 Secure, long-term storage of CO 2 6 Potential for value added production of natural gas However, considerable uncertainty exists on the commercial readiness of this CO 2 sequestration option and particularly its economics.

4 N 2 /CO 2 - ENHANCED COALBED METHANE RECOVERY PILOTS 1. Burlington Resources Allison Unit, San Juan Basin 2. BP Tiffany Unit, San Juan Basin 3. Alberta Research Council, Alberta Basin 4 injectors, 16 producers, 3 MMcfd injected Only multi-well pilot to date 6 years of CO 2 injection history 12 injectors 34 producers ARI/BP/DOE joint monitoring project N 2 pilot operating CO 2 pilot on hold Single-well, short-term huffn-puff test completed Plan 5-spot once funding in place

5 LOCATION OF ECBM PILOTS SAN JUAN BASIN, USA LA PLATA CO. ARCHULETA CO. McElmo Dome CO Field 2 CO Pipeline 2 La Pla ta R ive r Durango Ri ve r COAL Site Florida River Plant N /CO Pipeline 2 2 BP Tiffany Unit Pilot Pagosa Springs COLORADO R i ve r NEW MEXICO Farmington An ima s Aztec F A I R W A Y 30 Mile Connector Ju a n Burlington Allison Unit Pilot Dulce Sa n JAF01674.CDR

6 ALLISON UNIT CO 2 -ECBM PILOT, SAN JUAN BASIN T32NR7W T32NR6W CO Injection Well CH Production 32 Well JAF01905.CDR

7 ALLISON PRODUCTION HISTORY (cartesian scale) Rates, Well Count Producers, 4 Injectors, 1 POW Gas Rate, Mcf/mo CO2 Injection Rate, Mcf/mo Avg Line Press, psi Five Wells Shutin During Initial Injection Period Injection Suspended, Five Wells Reopened Line Pressures Reduced, Well Reconfigured, Onsite Compression Installed JAF XLS Pressure, Temp Jan-89 Jul-89 Jan-90 Jul-90 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 0 Date

8 CROSS-SECTIONAL SECTIONAL VIEW OF THE ALLISON UNIT CO 2 ECBM PILOT, SAN JUAN BASIN 0 #112 Production Well 3500ft N05E #142 CO2 Injector 3000ft N80E #114 Production Well Depth (ft) ' 3124' 2900' 3030' TD=3148' Pilot Total 4.7 BcfCO 2 Injected 1.6 BcfCH 4 ECBM 2.9 BcfCO 2 /CH 4 Ratio CH ' CO 2 CO 2 CH ' 3092' 3104' Fruitland 2965' Coal Seam 2965' 3059' 3077' 3149' TD=3149' 3400 JAF01693.CDR 3385' 3328' TD=3390' Note: Depths, elevations, thicknesses expressed in feet

9 ECONOMIC CASES 6 Current Case 6 High Case 6 Incentives Case

10 ECONOMICS OF CO 2 STORAGE IN DEEP COAL SEAMS The example setting for CO 2 storage is a large, deep western coal basin: 6 Gas in place Tcf 6 Conventional recovery Tcf; 3 Bcf/well 6 Inc. recovery by CO 2 Injection to 2 Bcf/well 6 CO 2 to CBM ratio to 4 Mcf/Mcf 6 Market price for CO % of oil price 6 Capital investment: Cost of injection wells/facilities -- $500,000 per I well Inj. well to prod. well ratio 1:3 to 1:1 Cost of SMV -- 50% increase

11 ECONOMICS OF CO 2 STORAGE IN DEEP COAL SEAMS (Cont d) Example CBM Basin Current Case CO 2 Injection Pattern (4 Sections) Sec. 6 Sec. 5 Sec.7 Sec. 8 Gas In Place 50 Tcf Production Wells 8,000 Depth 3,000 ft Gas In Place 100 Bcf Conventional Recovery 48 Bcf Incremental Recovery 16 Bcf (est.) Production Wells 16 Injection Wells 6 (new)

12 Economics Of CO 2 Storage: CURRENT CASE The economics of CO 2 storage are first examined using expected natural gas prices, current CO 2 costs and assumed CO 2 /CBM displacement performance: 6 Wellhead $3.00/Mcf 6 Oil Price $20/BO 6 CO 2 /CBM ratio 2.5 Mcf/Mcf 6 Inc. Recovery 1 Bcf/well 6 I well/p well ratio 1 to 3 6 SMV costs Incentives - -

13 Economics Of CO 2 Storage: CURRENT CASE (Cont d) Current Case ($/Mcf) Wellhead Gas Price $3.00 Less: Basin Differential ($0.30) BTU Adjustment (@ 5%) ($0.15) Wellhead Netback $2.55 Less: Royalty/Prod. Taxes ($0.51) O&M/Gas Processing ($0.50) Gross Margin $1.54 Capital Costs (1) ($0.38) CO 2 Costs (@ ratio of 2.5 to 1) (2) ($1.50) Net Margin Negative (1) Capital Costs = $500,000 * 6 (I wells) = $3,000,000/16 Bcfg = $0.19/Mcfg * 2 = $0.38/Mcfg (2) CO 2 Costs = $20/BO * 3% = $0.60/Mcf * 2.5 = $1.50/Mcf (CO 2 )

14 Economics Of CO 2 Storage: CURRENT CASE (Cont d) Lower cost CO 2 would accelerate its injection and storage in deep coal seams. CO 2 Cost ($/Mcf) CO 2 /CBM Displacement Performance (2.5 Mcf/Mcf) CO 2 Cost Net Margin $0.60 $0.50 $0.40 At wellhead gas price (Henry Hub) of $3/Mcf. $1.50 $1.25 $1.00 ($0.34) ($0.09) $0.16

15 Economics Of CO 2 Storage: HIGH GAS PRICE/HIGH EFFICIENCY CASE Higher natural gas prices and a lower CO 2 /CBM ratio would improve the economics of CO 2 storage in deep coals: 6 Wellhead natural gas price $4.00/Mcf 6 Oil price $30/BO 6 CO 2 /CBM ratio 2 Mcf/Mcf 6 Inc. recovery 1 Bcf/well 6 I well/p well ratio 1 to 3 6 SMV costs Incentives - -

16 Economics Of CO 2 Storage: HIGH GAS PRICE/ HIGH EFFICIENCY CASE (Cont d) High Case ($/Mcf) Wellhead Gas Price $4.00 Less: Basin Differential ($0.30) BTU Adjustment (@5%) ($0.20) Wellhead Netback $3.50 Less: Royalty/Prod. Taxes ($0.70) O&M/Gas Processing ($0.50) Gross Margin $2.30 Capital Costs (1) ($0.38) CO 2 Costs (@ ratio of 2 to 1) (2) ($1.80) Net Margin $0.12 (1) Capital Costs = $500,000 * 6 (I wells) = $3,000,000/16 Bcfg = $0.19/Mcfg * 2 = $0.38/Mcfg (2) CO 2 Costs = $30/BO * 3% = $0.90/Mcf * 2 = $1.80/Mcf (CO 2 )

17 Economics Of CO 2 Storage: MODERATE GAS PRICE W/INCENTIVES At moderate natural gas prices plus incentives for CO 2 sequestration, deep coals offer the potential for storing large volumes of CO 2 : Incentive Cases 6 Wellhead natural gas price $3.00/Mcf $3.00/Mcf 6 Oil price $25/BO $25/BO 6 CO 2 /CBM ratio 2.5 Mcf/Mcf 4 Mcf/Mcf 6 Inc. recovery 2 Bcf/well 2 Bcf/well 6 I well/p well ratio 1 to 1 1 to 1 6 SMV costs $250,000/I well $250,000/I well 6 Incentives $10/TCO 2 $15/TCO 2

18 ECONOMICS OF CO 2 STORAGE IN DEEP COAL SEAMS (Cont d) Example CBM Basin Incentives Case CO2 Injection Pattern (4 Sections) Sec. 6 Sec. 5 Sec.7 Sec. 8 Gas In Place 50 Tcf Production Wells 8,000 Depth 3,000 ft Gas In Place 100 Bcf Conventional Recovery 48 Bcf Incremental Recovery 32 Bcf (est.) Production Wells 16 Injection Wells 16 (new)

19 CONVERTING CURRENT EOR PRACTICES TO CO 2 STORAGE 1. Assess and configure reservoir for longterm (~1,000 year) storage of CO Maintain CO 2 in reservoir (at pressure) rather than blow down reservoir and reuse the CO Install long-term monitoring and safety systems.

20 Economics Of CO 2 Storage: MODERATE GAS PRICE w/incentives (Cont d) Incentive Cases $10/T CO 2 $15/T CO 2 Wellhead Gas Price $3.00 $3.00 Less: Basin Differential ($0.30) ($0.30) BTU Adjustment (@5%) ($0.15) ($0.15) Wellhead Netback $2.55 $2.55 Less: Royalty/Prod. Taxes ($0.51) ($0.51) O&M/Gas Process./SMV (2) ($0.75) ($0.75) Gross Margin $1.29 $1.29 Capital Costs - I Wells (1) ($0.50) ($0.50) - SMV (2) ($0.25) ($0.25) Net CO 2 Costs (3)(4) ($0.43) (0) Net Margin $0.11 $0.54 (1) Capital Costs $500,000 * 16 = $8,000,000/ 32 Bcfg = $0.25 * 2 = $0.50/Mcfg (2) SMV Costs = plus 50% (3) CO 2 Costs (@ $10/T) = $25/BO * 3% = ($0.75/Mcf - $0.58) Mcf = $0.17/Mcf * 2.5 = $0.51/Mcf (CO 2 ) (4) CO 2 Costs (@ 15/T) = (assume 0)

21 ECONOMICS OF CO 2 IN DEEP COAL SEAMS The economic analysis of CO 2 sequestration in the example western coal basin is summarized below: Outcomes Current Case High Price/High Efficiency Case Modest Price w/ Sequestration Incentives $10/TCO 2 $15 /TCO 2 Economic No Marginal Marginal Yes CO 2 Storage (MM Tons)* ,330 3,720 Additional Natural Gas - 8 Tcf 16 Tcf 16 Tcf Capital Investment 6 Inj Wells - $1.5 Billion $4 Billion $4 Billion 6 SMV - - $2 Billion $2 Billion *Using 17.2 Mcf CO 2 /Ton CO 2.

22 SUMMARY 1. Considerably more laboratory and field work are required to provide confidence in the key variables controlling the economics of CO 2 injection in deep coal seams. 2. Lower cost CO 2, higher CO 2 /CBM efficiencies and/or higher natural gas prices are required to encourage commercial use of this value added CO 2 sequestration technology.

23 SUMMARY (Cont d) 3. With appropriate incentives and technology however, deep coal seams offer the potential for: 6 Storing considerable volumes of CO 2 in the 2020 to 2050 timeframe. 6 Providing important volumes of additional domestic natural gas production. 6 Encouraging the development of CO 2 sequestration business units.

24 SEQUESTRATION OF CO 2 USING DEEP COAL SEAMS Natural Gas Production From Deep Coal Seams (Bcfd) Growth of CBM (offset by 20 years) Value Added CBM Recovery (Bcfd) Annual CO 2 Sequestration (MMt) JAF XLS CO2 Sequestration (Tons/Yr) (1980) (1990) (2000) Year

25 SCENARIO 2020: CO 2 SEQUESTRATION BUSINESS UNIT Fertilizer Plants Power Plants 170 MMt/yr CO 2 Injection Project (San Juan, Raton, Uinta, etc.) 8 Bcfd CO 2 Injection 4 Mcf CO 2 / Mcf CBM Ratio LA PLATA CO. ARCHULETA CO. Free CO 2 to CBM Field Site La P l ata Ri v er Durango Ri v er Pagosa Springs Annual Report Gross Gas Revenues (@$3.00/Mcf) = $2,190 MM COLORADO NEW MEXICO Ri v e r Before Tax Net Revenues = 390 MM Dulce Farmington A ni mas S an Aztec F A I R W A Y J uan Gas Processing CO 2 Sequestration Incentives Make Uneconomic ECBM Projects Economic JAF01705.CDR

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