An Updated Status of CO 2 Flooding and Emerging Options for the Future. Melzer COnsulting

Transcription

1 An Updated Status of CO 2 Flooding and Emerging Options for the Future Presented at the 2 nd Annual Wyoming CO 2 Conference Casper, Wyoming May 29, 2008 Steve Melzer Melzer COnsulting 2

2 OUTLINE OF TALK The Changing Times in Energy CO 2, CO 2 Everywhere Carbon Capture and Storage (aka Sequestration) Updated Status of CO 2 EOR The New Lens Revenue Stream from Sequestration? Policies Aligned to Meet both Energy and Environmental Needs 2

3 Credits Thank yous are given to the SPE Permian Basin Section and the CO 2 Conference sponsors & committee persons for their long time support of the CO 2 Flooding Conference, the source of much of this information. 3

4 A TRUE ENERGY CRISIS (THIS TIME AROUND) Emergence of China and India Peak Oil Decreasing Coal Plant Permits / Emission Restraints Food to Fuel Our Policy Love Affair with Renewables Accelerating the Problem the Solution? Where will we get adequate transportation fuels and electricity? 4

5 CONCLUSION: CONTINUING USE OF HYDROCARBONS In Spite of Society s Affair, There Can be no Divorce from Fossil Fuels But Business Clearly Now Recognizes the Day of Business as Usual is Gone (Cleaner Energy including Capture of CO 2 Emissions is Here) Size of WW CO 2 Capture Challenge is Immense (>10 gt per year {500 bcfpd}) 5

6 HOW TO AVOID EMISSIONS? WHAT ARE THE U.S. MARKETS FOR CO 2 Existing CO 2 EOR (2.2 bcfpd) Shortages of CO 2 Exist Today Probably could use 50% more right away! - & a Bunch More in the Future! Predominately Stored Merchant CO 2 Hydrofracturing services (60 mmcfpd) Food Grade (550 mmcfpd) Food, beverage, waste water treatment Potential Enhanced Coal Bed Methane Enhanced Gas Recovery Smaller & Ultimately Vented 6

7 IF: WITH CO 2 CAPTURE THEN: NEW SOURCES OF CO 2 FOR EOR (1) EXISTING SOURCES (BUT NOT CAPTURED) EXISTING BUT NON-UTILIZED INDUSTRIAL CO 2 SOURCES NATURAL GAS BYPRODUCT CO 2 HYDROGEN PLANTS ETHANOL CEMENT EXISTING FOSSIL FUEL POWER PLANTS PETROLEUM COKE GASIFIERS OTHERS 7

8 IF: WITH CO 2 CAPTURE THEN: NEW SOURCES OF CO 2 FOR EOR (2) COMING SOURCES NEWLY DEVELOPING INDUSTRIAL SOURCES ELECTRIC POWER PLANTS RETROFITS FOR CAPTURE NEW POST COMBUSTION CAPTURE (e.g., TENASKA SWEETWATER, Tx) COAL GASIFICATION (FUTUREGEN-LIKE (e.g., Edwardsport) SYNGAS AND POLYGEN GASIFICATION (e.g., DKRW in Wy, Eastman in GC) OIL SHALE AND IN-SITU GASIFICATION OTHERS 8

9 Industrial CO 2 Sources Power Plants Cement & Landfills Steam Methane Reforming Ethanol Transportation IGCC (FUTUREGEN) GREEN REFINERIES I N C R E A S I N G P U R I T Y Coke Gasification Fertilizer (Ammonia) Natural Gas By-product CO 2 THE CO 2 SOURCE FRUIT TREE

10 Options for CO 2 Usage/Disposal EGR EOR Value Added CO 2 Emission Capture ECBM GOB Regulatory driven Types of Gas Storage Noncommercial utilization of pore space A = Salt Caverns B = Mines C = Aquifers D = Depleted Reservoirs E = Hard Rock Caverns 10

11 BUT PIPELINE INFRASTRUCTURE IS NEEDED PERMIAN BASIN CO 2 FLOOD AND PIPELINE MAP

12 An Updated Look at CO 2 EOR Today 12

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14 BACKGROUND (OF CO 2 EOR PROJECT GROWTH*) 120 GROWTH OF PERMIAN BASIN & WORLDWIDE CO2 PROJECTS WW Projects PB Projects NO. OF PROJECTS * Ref: O&GJ Biennial EOR Editions & UTPB YEAR Melzer Consulting - 5/08 14

15 BACKGROUND (OF CO 2 EOR PRODUCTION GROWTH*) 300 WW & PERMIAN BASIN CO2 EOR PRODUCTION Permian Basin Worldwide CO2 EOR PRODUCTION - kbopd * Ref: O&GJ Biennial EOR Editions & UTPB Pt Id t Alli YEAR Melzer Consulting - 5/08 15

16 New Developments in Mississippi EOR Production - Kbbls/day RECENT GROWTH OF MISSISSIPPI CO2 PROJECTS & PRODUCTION EOR Production bbls/day - Rt Scale Denbury Operates 12 Floods now YEAR 16

17 HOW BIG IS THE CO 2 BUSINESS? Annual Production Rev Figures** U.S. $8.0 billion* PB $5.3 billion* $80/bbl NOV 2005 * Source: Oil & Gas Journal (Mar 08) and CO 2 Flooding Conference (2007) ** Does not take into account the NGLs produced from the recycle volumes

18 HOW BIG CAN THE CO 2 BUSINESS BECOME? IF WE VIEW THROUGH THE OLD LENS OIL PRICES AVERAGING $12-25/BBL CO 2 SOURCE AND TRANSPORTATION INFRASTRUCTURE EXPENSIVE AND LIMITED NOT MANY MORE RESERVOIRS PASS MUSTER THE NEW LENS OIL PRICES ABOVE $80/BBL CO 2 CAPTURE UBIQUITOUS REVENUE STREAMS FOR BOTH OIL PRODUCTION AND STORAGE MANY, MANY MORE RESERVOIRS ARE PROFITABLE SO LET S BEGIN TO LOOK AT CO 2 FLOODING DIFFERENTLY 18

19 Important New Paradigm The major objection to CO 2 by oil producers is long pay out times not necessarily total reserves or NPV initial oil response large capital exposure But what if reservoir storage space is valuable and injector is paid to store? 19

20 THIS IS WHERE WE VE BEEN SO WHERE MIGHT THINGS BE GOING? 20

21 IF IT IS A NEW DAY, WHAT KIND OF CO 2 PROJECTS COME TO MIND? Vertical (gravity-dominated) floods (Historically too slow to respond) Reefs (a la HCMFs) Steeply dipping Depleted Reservoirs/Soaking (Significant well re-entries/reworking required) Repressuring with CO 2 21

22 VERTICAL FLOODING With Adequate Vertical Permeability, Gravity Floods Offer Some Advantages Straightforward Mass Balance Accounting for CO 2 Storage High Oil Recoveries Recycle is Minimized But Disadvantage is Delayed Response (Gravity Dominated) Perhaps, in the Future, Compensated for by Additional Revenue Stream (e.g., Emission Credits) 22

23 REMEMBERING THE CANADIAN EXPERIENCE (THE RECAP OF HCMF) Vertical Hydrocarbon Miscible Floods have had strong performance to date in URF =70 to 80% Vertical floods have performed better than horizontal floods 23

24 REPRESSURING WITH CO 2 Viscosity vs. Saturation Pressure Nice Decrease in Oil Viscosity with Increased CO 2 in Solution Ref: Generalized Correlations for Predicting Solubility, Swelling and Viscosity Behavior of CO 2 - Crude Oil Systems, SPE 917, Oct 64 24

25 REPRESSURING WITH CO 2 Oil Swelling vs. CO 2 Mole Fraction in Oil 38% Swelling Ref: Generalized Correlations for Predicting Solubility, Swelling and Viscosity Behavior of CO 2 - Crude Oil Systems, SPE 917, Oct 64 25

26 Conclusions The mobility of medium viscosity oils are aided greatly (viscosity and swelling) by the addition of CO 2 Repressuring with CO 2 should be worth a close examination for improved recovery if/when CO 2 becomes ubiquitous; especially if formation storage is compensated. Dramatically Increasing Oil Production while Providing CO 2 Storage in Proven Traps is Quite Feasible 26

27 But, as a Cautionary Note, Governmental Policies can Mess this up Final Section Policies Aligned to Meet both Energy and Environmental Needs 27

28 CO 2 Storage Conceptual Analogues CO 2 EOR (124,000 tons/per day of new CO 2, = 2.16 bcfpd ~ 1.1 mmbpd) Natural Gas Storage (450 State Permitted NG Injection Sites) Strategic Petroleum Reserve (688 mmbo in Storage as of 10/6/06*) Current storage capacity mmbo Conclusion: Industry is Doing This! * oryreportviewdoe_new.html 28

29 Oil & Gas Known Seismic Core Produced Pressure Minimizes risk CO 2 STORAGE In which reservoir should I inject? Deep Saline Unknowns Long term liability increased It s s better to have the devil that you know than the one you don t. t. 29

30 Disjoint between Government and Industry If CO 2 capture and geological storage is to play a significant role in mitigating global emissions, then the quantity of CO 2 placed in geological storage will need to approach 10 Gt/yr worldwide or roughly 300 times the current rate of CO 2 injection for EOR. D. Keith and M. Wilson, Nov My number: 10 GT/yr = 520 bcfpd (~250 x current rate of new CO 2 utilization in the U.S.) 30

31 Government vs. Petroleum Industry Focused on: Long term Geological storage Regulatory Requirements Research Focus for Industry: Shorter term and dramatic deployment of new technologies Exploration Resource plays: cost/payout Optimal Utilization of Assets Experienced Personnel Subsurface knowledge 31

32 THE DISJOINT Industry Has Lots of Talent to do CCS but, Is Exploration Focused Returns aren t there for Injection/ Production Projects to Compete with the Resource Plays Most O/G Interests are Quite Happy with Business as Usual 32

33 THE COMING CARBON REGULATED WORLD THE FOUR COMPETING STANDARDS QUALIFYING CO 2 EMISSION REDUCTIONS ALLOW EFFICIENCIES, FUEL CONVERSIONS TO RENEWABLES, PLUS AGRICULTURAL AND FOREST SEQUESTRATION WITH 1. NO GEOLOGICAL SEQUESTRATION 2. GEOLOGICAL BUT NO CO 2 EOR 3. GEOLOGICAL INCLUDING CO 2 EOR WITH ADDITIONALITY 4. GEOLOGICAL INCLUDING CO 2 EOR WITH OR WITHOUT ADDITIONALITY 33

34 THE COMING CARBON REGULATED WORLD STANDARD #1 KYOTO-LIKE UNQUALIFIABLE EMISSION REDUCTIONS QUALIFIABLE EMISSION REDUCTIONS GEOLOGICAL SEQUESTRATION THE WALL EFFICIENCIES FUEL CONVERSIONS RENEWABLES AGRI SEQUESTRATION TERRESTRIAL SEQ 34

35 Environmentalists call on MOP 2 to reject CDM sequestration projects News Release - 9/06 Climate Action Network Europe (CAN Europe) has called on the second Meeting of the Parties (MOP 2) to the Kyoto Protocol to reject the inclusion of carbon capture and storage (CCS) under the clean development mechanism umbrella. In a public letter sent out last week to the heads of delegations, CAN Europe, which represents over European 100 non-governmental organisations, said the technology has not yet been shown to be environmentally safe and sound, which is a requirement for the inclusion of the technology under the Marrakech Accords. Issues such as permanence, liability, responsibility and insurance against leakage need to be addressed in an adequate framework, the letter said. The second MOP is to take place in Nairobi next month and is expected to make a decision on whether to include the controversial measure, which involves capturing CO2 from an emitting installations and storing it in geological formations, under the CDM. If included, CCS has the potential to capture millions of tonnes of CO2 that would otherwise enter the atmosphere. However, environmentalists have expressed concerns about the long-term reliability of the process, citing lack of clarity over long-term monitoring and liability rules. The letter also forecasted that the inclusion of sequestration would divert funds from long-term sustainable projects such as renewables and energy efficiency, and that CCS does not meet additionality criteria. 35

36 THE COMING CARBON REGULATED WORLD STANDARD #2 GEOLOGICAL BUT w/commercial EXCLUSON UNQUALIFIABLE EMISSION REDUCTIONS QUALIFIABLE EMISSION REDUCTIONS CO 2 ENHANCED OIL RECOVERY THE WALL EFFICIENCIES FUEL CONVERSIONS RENEWABLES AGRI SEQUESTRATION TERRESTRIAL SEQ GEOLOGICAL SEQ IN UNPROVEN TRAPS, CONSIDERABLE RESEARCH REQ D 36

37 THE COMING CARBON REGULATED WORLD STANDARD #3 IMMEDIACY OF ACTION UNQUALIFIABLE EMISSION REDUCTIONS QUALIFIABLE EMISSION REDUCTIONS CO 2 ENHANCED OIL RECOVERY Without Additionality THE WALL EFFICIENCIES FUEL CONVERSIONS RENEWABLES AGRI SEQUESTRATION TERRESTRIAL SEQ GEOLOGICAL SEQ INCLUDING SOME EOR (additionality) 37

38 THE COMING CARBON MANAGED WORLD STANDARD #4 INFRASTRUCTURE BUILDOUTS UNQUALIFIABLE EMISSION REDUCTIONS QUALIFIABLE EMISSION REDUCTIONS INCENTIVE GAMING THE WALL EFFICIENCIES FUEL CONVERSIONS RENEWABLES AGRI SEQUESTRATION TERRESTRIAL SEQ GEOLOGICAL SEQ INCLUDING EOR (w/ or w/o additionality) 38

39 CO 2 Storage Future Under Standards 3 or 4 Potentially Huge CO 2 Volumes (>1 mm tons/day by 2016) Grows from Known Subsurface Traps (Stage 1) then (Potentially) into Non-Hydrocarbon Bearing & Saline Aquifer Formations (Stage 2) - but probably not until 2016 or later Injected as a Commodity (Stage 1) then as a Waste Stream (Stage 2) Stage 2 Requires Significant PR and a large number of Demo Projects to Convince the Public (if it is a Waste Stream) Potentially Regulated by the Federal Government (EPA) Existing State Organizations Currently Regulating Underground Injection (SOGRAs) are Regulating CO 2 EOR only would continue during Stage STAGE 1 STAGE 2 39

40 SUBSURFACE RIGHTS ANALOGUES ARE: CO 2 EOR (Mineral Rights) Unitization is Key Model, Both Voluntary and Statutory Storage (Surface Rights, in most States) Acquisition and Eminent Domain Models STATE-by-STATE VARIABLE LAW 40

41 THE CASE FOR CO2 EOR JUMPSTARTING CCS I. Expansion of the Existing and Experienced Industry II. III. IV. Established Subsurface Conditions: Proven Traps and Seals Potential for Value-Added Products with Commercial Subsidizing of CCS Co-Use and Expansion of Existing CO 2 Infrastructure V. Well Explored Local and Regional Geologic Settings VI. VII. Embedded Compensation to Mineral/Surface Owners The Superposition of Oil Production and CCS Provides a Solution to the Most Difficult of Propositions: Convincing Site Owners of the Need for Waste Injection on Their Property 41

42 CO 2 INJECTION FINANCIAL ENGINES (ECONOMICS) CO 2 INFRASTRUCTURE CAPITAL COSTS ARE VERY LARGE SOURCES More about this tomorrow PIPELINES Stay tuned for Brian s Talk tomorrow FIELD CAPITAL PERMITTING COSTS HAVE NOT BEEN ONEROUS OPERATING COSTS HAVE NOT BEEN ONEROUS BUT SURVEILLANCE IS MORE COSTLY (EQUIVALENT IN CONCEPT TO MONITORING AND VERIFICATION) HISTORICALLY PURCHASED CO 2 COSTS IN THE RANGE OF $10-20/TON Now these have doubled RECYCLED CO 2 COST IN THE RANGE OF $5-10/TON Doubled? Wyoming Trying to Keep this under control 42

43 SO LET S GROW THE CO 2 MARKET! 43

44 Thanks Time for Questions? Credits Thank yous are given to the SPE Permian Basin Section and the CO 2 Conference sponsors & committee persons for their long time support of the CO 2 Flooding Conference, the source of much of this information Credits are also given to Mr. Richard Baker of Epic Consulting, Calgary, Canada for some of the ideas and slides provided in this talk 44

45 BACKUP SLIDES 45

46 ANTICIPATED PHASES OF CCS REGULATORY OVERSIGHT STATE (SOGRAs) EPA (Ground Water) STATES PERMITTING INJECTION CLOSURE POST- CLOSURE Categorization of Sites to Consider the Following: Geological Attributes of Site, Seals, Adequate Unit Size, Bonding (Operator s Record/History), etc. Industry Operations Will Determine Level of Monitoring Required

47 PUBLIC HEALTH & SAFETY REGULATORY OVERSIGHT NO LOSS OF LIFE ACCIDENT DUE TO CO 2 EXPOSURE BASIC FRAMEWORK FOR REGULATION OF CO 2 STORAGE HAS BEEN DEVELOPED WITHIN STATES THAT DO EOR &/or GAS STORAGE State Oil & Gas Regulatory Agencies (SOGRAs) for CO 2 ops DOT s Office of Pipeline Safety for LD CO 2 transport to lease boundary SOGRAs METHODOLOGY INCLUDES MEASURES (UNITIZATION) FOR AGGLOMERATION OF NECESSARY RIGHTS (MINERAL, SURFACE) STATES WILL DEVELOP STANDARDS FOR STORAGE PROJECT LICENSING NEEDS NEW OVERLAYS FOR: Emplacement Monitoring Requirements and Duration IOGCC has addressed Long Term Responsibility and Liability Provisions Statutory Assistance for Aggregating Surface and/or Mineral Rights 47

48 The Annual CO 2 Flooding Conference Held Each December in Midland, Texas Home Base to 53 CO 2 Floods Concentrates on Actual Case Histories Includes a Field Visit (this year to Oxy s Denver Unit) Includes a Short Course (this year on CO 2 Sourcing for EOR ) Includes an EOR Carbon Management Workshop (This year in Houston) Great CO 2 Networking Opportunity with Project Folks Visit: or call

49 Final Thoughts Looking forward in time: Oil is more valuable than in the past Permanent CO 2 Storage in reservoirs is so desirable that it brings a revenue stream Filing a depleted oil reservoir back up with CO 2 becomes an attractive option in certain reservoirs (CO 2 Soaking in either a gravity dominated or horizontal configuration) Depleted Medium viscosity oil reservoirs should be particularly interesting 49

50 THE FUTUREGEN CONCEPT also referred to as Clean Coal or Integrated Gasification Combined Cycle ELECTRICITY SALES AIR AIR SEPARATION N 2 AIR O 2 H 2 O H 2 -RICH STEAM STEAM TURBINE H 2 O COAL G A S I F I E R MARKETABLE ASH/SLAG BYPRODUCT GAS CLEANING AND STEAM GENERATION TO H 2 SULFUR RECOVERY MARKETABLE SULFUR BYPRODUCT CO 2 SEPARATION MARKETABLE CO 2 FOR ENHANCED OIL RECOVERY H 2 SEPARATION or CO 2 DISPOSAL (DEEP SALINE AQUIFERS) H 2 PRODUCT SALES (TRANSPORTATION, REFINERIES) 50

51 PERMIAN BASIN (TX) CO 2 EOR AND INFILL WEDGE ** PRIMARY, SECONDARY AND TERTIARY (EOR & INFILL WEDGE) HISTORY Production (MBOPD) 2,250 2,000 1,750 1,500 1,250 1, Prim ary & WF Development (32 B bbls) Year Wells Completed per Year Historical Production (actual) EOR & Infill Wedge (estimated) Hubbert Curve (Primary & WF) Hubbert Curve (EOR & Infill) Hubbert Curve (combined recovery) EOR & Infill Wedge (2.5 B bbls) Combined Recovery (34.5 B bbls) 30,000 25,000 20,000 15,000 10,000 5,000 0 Wells Completed per Year * Courtesy of Oxy Permian (9/05) 51

52 PERMIAN BASIN OIL PRODUCTION PRIMARY, SECONDARY, TERTIARY AND UNCONVENTIONAL OIL PROJECTIONS * Unconventional Oil Projections** * Courtesy of Oxy Permian (9/05) ** Unconventional Oil Projections Melzer Consulting

53 Top Five Things to Remember for CO 2 EOR Economics 1. Oil price and CO 2 price & availability 2. Oil price and CO 2 price & availability 3. Oil price and CO 2 price & availability 4. Start up costs are very field dependent 5. Generally good waterfloods make good CO 2 miscible floods But we ll come back to this point later: do we have to have waterflooded a reservoir to have a good CO 2 project? 53

54 THE PERMIAN BASIN (SAN ANDRES) EXPERIENCE RULES OF THUMB: CO 2 MISCIBLE INJECTION PERCENT OF OOIP 8 TO 18 (12) RATIO TERTIARY / (P + S) 20 TO 35 (25) SWEEP EFFICIENCY 25 TO 50 (35) RATIO E t / E(P+S) 50 TO 60 (50) 54

55 WHAT ARE THE MOST IMPORTANT METRICS FOR EXPANDING CO 2 EOR? Initial oil response (response time/peak oil rate); Current oil saturations Injection rates Permeability Reservoir heterogeneity CO 2 price & availability Existing Infrastructure Wellbore integrity 55

56 BACK TO SECONDARY CO 2 FLOODING IN THE PAST, VERY FEW SECONDARY CO 2 FLOODS HAVE BEEN IMPLEMENTED Good waterfloods make good CO 2 floods Quantified Heterogeneity, i.e., Sweep Efficiency is Proven CO 2 flood funding commitments have historically been very large & have made economics challenging But do higher oil prices, possible second revenue stream (storage), and cheaper CO 2 change that paradigm? 56

57 SWEEP EFFICIENCY (1) WF Swept Area 57

58 SWEEP EFFICIENCY (2) WF Swept Area CO 2 Swept Area 58