Maximising oil recovery with stored CO 2 : A win-win for the North Sea

Maximising oil recovery with stored CO 2 : A win-win for the North Sea James Lorsong, 2Co Energy Limited UK Oil and Gas Reserves Getting the Best from the Rest UK World Energy Council Workshop London 26 November 2013

Context Outlook to 2050 World Energy Council, October 2013 Global energy demand continues to increase, potentially doubling No shortage of fossil fuels, technology application has increased reserves Fossil fuels remain vital to the energy mix, demand flat or increasing Climate goals unattainable without carbon capture & storage (CCS) Implications for the North Sea basin: Continuing high demand for oil production CCS for power and industrial applications Enhanced oil recovery with carbon dioxide (CO 2 EOR) brings these together in a win-win for the North Sea 2

Maximising oil recovery with stored CO 2 Enhanced oil recovery in the North Sea Maximising oil production with CO 2 CO 2 EOR challenges in the North Sea EOR + CCS value chains CO 2 injection well in west Texas Courtesy Bruce Hill, Clean Air Task Force 3

Heat Chemicals Gas EOR technologies for the North Sea EOR Process Potential (billion bbl) Miscible CO 2 5.7 Miscible Hydrocarbon 5.4 Nitrogen & Flue Gas 0.5 Surfactant + Polymer 4.8 Polymer 2.1 Colloid Dispersal Gel 3.1 Bright Water 3.1 Low Salinity Water 2.0 In-Situ Combustion 0.7 Steam 0.6 source: PILOT 2012, DECC EOR Screening Tool PILOT EOR screening (2012) 6 billion barrels EOR potential EOR Process Prize Barriers to Application Low Salinity 2.0 Chemicals 4.8 technical understanding brownfield retrofits timing high P, T in some reservoirs high operating cost source: PILOT 2013 Miscible Gas 5.7 access to large volumes of cheap gas Miscible gas EOR offers greatest reserves and lowest technical risks Successfully applied in North Sea, but limited gas supply CCS could provide large supplies of miscible gas (CO 2 ) for North Sea EOR 4

Miscible gas EOR 38 years North Sea experience Numerous CO 2 studies since 1979 Forties, Miller, Claymore, Gullfaks, etc. BP, Shell, Statoil, Apache, ConocoPhillips, etc. Advanced designs for multiple CO 2 EOR projects (e.g., Miller) Full-scale field developments Ula (1998) and Magnus (2002) More than a decade of successful operation Stranded gas key to deveolpment N Sea EOR Pilots 1975-2005 (Awan et al., 2008) EOR tests with enriched hydrocarbon gas 18 North Sea field tests 1975-2005 17 considered technically and economically successful Full-scale EOR has been limited by lack of large, low-cost supplies of solvent (hydrocarbons or CO 2 ) 5

UKCS CO 2 EOR targets EOR potential by field CO 2 Chemical Low Salinity PILOT screening >20 fields with >50 million barrels potential incremental recovery from CO 2 EOR UKCS CO 2 targets and potential sources source: PILOT, DECC SENEOR Tool Fields suitable for CO 2 are widely distributed in the Central and Northern N Sea Many fields are accessible by pipeline from proposed CCS capture plants Map scale distorted after: Hughes, 2013 (PILOT) 6

CO 2 EOR process overview CO 2 injection wells oil production wells imported CO 2 recycled CO 2 CO 2 compression produced fluid separation produced water exported oil CO 2 plume mixing zone cap rock oil/water contact JAL 2013 oil bank unswept oil 7

Production of oil and CO 2 from EOR Incremental oil recovery typically 10-15% of the oil originally in place (compare 30-60% for water flood) Ultimate EOR recovery is typically 2.5-3.5 barrels per tonne of CO 2 imported Water flood recovery EOR incremental recovery Is CO 2 really stored? Wertz Field, Texas (from Lake & Walsh, 2008) Some injected CO 2 is eventually produced along with oil, water and natural gas present in the reservoir The remainder is trapped in the rock or mixed with reservoir fluids not produced Produced CO 2 is separated from other fluids and re-injected into the reservoir (recycled) Nearly all imported CO 2 remains in a closed system that is eventually sealed, like any other storage 8

CO 2 EOR today Full scale operations since 1972 US CO 2 EOR production ~300,000 b/d, 6-8% of total In 2011, ~72 Mt of CO 2 was injected for N American EOR (24% captured) (EPSA, 2012) from NEORI, 2012 Most CO 2 captured for CCS (86%) is stored in EOR sites Operating Under Construction Define (FEED) Planned 1 Mtpa Modified after The Global Status of CCS 2012, Global CCS Institute Operating in North America CCS + EOR planned for China, Middle East and North Sea 9

Bringing CO 2 EOR to the North Sea CO 2 EOR potential Among a range of EOR technologies, CO 2 offers the greatest technical potential CO 2 EOR is well established and widely applied (North America, onshore) Principal limitation is access to CO 2 - large supplies at low-cost CO 2 for EOR is increasingly sourced from CCS projects Oiceana.org North Sea challenges EOR performance uncertainty Facilities suitability and retrofit Moving CO 2 EOR offshore Commercial CO 2 supply 10

EOR performance challenges No CO 2 pilot projects in the North Sea Wide range reservoir properties in >130 analogue CO 2 floods Many EOR projects in reservoirs similar to North Sea Successful North Sea miscible gas EOR developments with hydrocarbon gas Magnus Field miscible gas EOR Large well spacing drives higher capex and lower/slower recovery Some N Sea fields are similar spacing to onshore EOR Larger N Sea spacing compensated by better reservoir quality oiilrigphtos.com Flow assurance with CO 2 (hydrates, asphaltenes, wax and scale) Effectively managed on and offshore; higher offshore costs unlikely to be significant 11

Facilities challenges Life extension ageing structures and equipment Indications that many structures are likely to be suitable Extensive experience of materials and equipment from existing CO 2 projects Economic benefit of deferring decommissioning cost Additional facilities and equipment (mainly gas treatment and recycle) New space creates opportunity for cost efficiency and value add improved safety, efficient construction and operation, access to satellites CO 2 safety offshore confined spaces, evacuation, venting Specific N Sea project designs have managed these issues Re-use of wells with CO 2 Workovers likely required to install new materials and equipment Significant component of capital cost; may drive field selection 12

Moving CO 2 offshore CO 2 EOR has been successfully conducted offshore in 12 projects, including: Deep water, far offshore Large-scale injection Produced gas recycling Extended operation Offshore CO 2 injection Lula Field, offshore Brazil en.mercopress.com pilot from 2011, injecting CO 2 separated from produced gas full-scale production start June 2013 13

Commercial challenges Investment case for CO 2 EOR is difficult Several studies suggest economic, but not commercial Expected returns probably too low to compete for capital, considering first-mover risks Large capital investments for field re-development To secure CO 2, developers must collaborate with capture, different industries and novel counterparty risks Improving EOR economics Early projects have little scope to reduce facility costs Storage fees limited (by capture subsidy and non-eor storage costs) Scottish Enterprise CO 2 EOR Economics Study, 2012 Tax incentives are probably most effective (cf. recent field allowances for brown field developments) Tailored measures are likely to produce incremental tax revenue - EOR oil would not be produced otherwise 14

/MWh CO 2 supplies for North Sea EOR CCS can enable EOR and vice versa Capture plants are only source of CO 2 EOR revenues can offset CCS costs (6-16% cf. CCS Cost Reduction Task Force, 2013) EOR may make CCS competitive with other low-carbon electricity 200 180 160 140 120 100 80 60 40 20 0 Source: Mott Macdonald for DECC, UK Electricity Generation Costs Update June 2010 Integrating CO 2 capture and EOR EOR must accept storage obligations o Monitoring, leakage liability, post-injection care Take or pay for EOR plus send or pay for capture EOR must assure high availability for CO 2 off take (excess injection capacity) EOR economics will not support (large) payments for CO 2 (limited by incentives) CO 2 transfer price is likely to be near zero (compared non-eor storage fee) 15

Maximising North Sea recovery with stored CO 2 CO 2 EOR is technically attractive for the North Sea Many candidate fields - more than 5 billion barrels of incremental production Technology is well established with CO 2 from natural sources Technical challenges entail costs and commercial risks, but are well understood Early EOR projects require incentives Projects are likely to be economic, but not commercial Tax incentives can offset first-mover risks and attract essential participation from North Sea operators CO 2 EOR realises maximum value in integrated CCS value chains CCS is the only source of CO 2 to unlock vast EOR reserves CCS deployment will create large, low-cost CO 2 supplies for EOR Coordinated policy to deliver both CCS and EOR could create sufficient incremental production tax to substantially offset CCS costs 16

The Don Valley CCS Project is co-financed by the European Union s European Energy Programme for Recovery. The sole responsibility for this publication lies with the authors. The European Union is not responsible for any use that may be made of the information contained therein. www.2coenergy.com www.donvalleypower.com