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The Future of Co2

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A temporary lack of available CO2 has limited its oilfield usage, but remedies are on the way even as CO2 technology sees new horizons.

Even Steve Melzer admitted that the injection of carbon dioxide for use in enhanced oil recovery projects in the Permian Basin has taken a backseat to the much more publicized unconventional resource plays, such as the Wolfberry and Bone Spring, which have sparked a remarkable resurgence in activity in recent years.

“No question about it,” acknowledged Melzer, who owns Melzer Consulting and is a leading authority on the use of CO2 in EOR projects. But he said that doesn’t diminish the importance of CO2 floods to the crude oil production picture in the Permian Basin.

“I call it a baseline, a long-lived growth industry that doesn’t have the ups and downs of some of these other plays and doesn’t require the near-term investment,” he explained. “It is a constant baseline. A lot of these other plays are a flash in the pan. They have an initial good rate of return and then they fall into the baseline.”

There is no doubt that the Permian Basin is still the king of CO2 EOR projects. According to the latest U.S. Oil and Gas Journal, 67 of the nation’s 127 CO2 EOR projects, or 53 percent, are located in the Permian Basin. But the Basin’s 67 projects produce 190,000 barrels per day, or about 70 percent of the nation’s production from CO2 EOR projects.

The Permian Basin is also home to the nation’s only 11 residual oil zone (ROZ) projects in which operators are injecting CO2 below the oil/water contact line, a transitional zone offered referred to as “Mother Nature’s water flood” in successful EOR efforts.

Melzer claimed that about three billion cubic feet of carbon dioxide is injected into mature Permian Basin fields each day, about 1.7 to 1.8 Bcf of it being new CO2 and another 1.3 Bcf being CO2 that is recycled. Most of the new CO2 is piped to the Permian Basin from the McElmo Dome, Sheep Mountain, Doe Canyon, and Bravo Dome fields in New Mexico and southern Colorado. A small amount is also captured from the Val Verde gas plants in Terrell County in the far southern end of the Basin.

The Permian Basin’s production from CO2 EOR projects, however, has been flat for the last five years, according to Melzer. He said many EOR projects remain on the shelf because of a lack of available CO2.

So how can more CO2 be made available for Permian Basin EOR projects? Well, there are a number of projects in the works, both short term and long term.

Kinder Morgan expansions

Kinder Morgan Pipeline announced several new CO2 projects in its first-quarter earnings report, according to Emily Mir, manager of corporation communications for Kinder Morgan.

As a result of a strong demand for CO2 for EOR projects in the Permian Basin, which are obviously in response to sustained high oil prices, Kinder Morgan announced it has entered into five new CO2 sales contracts that combined total more than two trillion cubic feet of aggregate daily contract quantities exceeding 440 million cubic feet per day at their peak.

These volumes, according to the Kinder Morgan press release, are primarily contracted by third parties and will support both new and existing CO2 floods in the West Texas area and have a volume-weighted average term of nearly 16 years. One of the contracts includes transporting CO2 via the company’s 91-mile Eastern Shelf Pipeline to a project near Kinder Morgan’s Katz Field in Stonewall County on the eastern side of the Basin. This contract will commence in 2014 and is expected to increase CO2 transported via the pipeline to more than 130 MMcf/day, which will require additional pump stations to bolster capacity.

Kinder Morgan, of course, operates the Basin’s oldest CO2 EOR project, the SACROC Unit in Scurry County. It reported that its first-quarter production was 26,900 barrels per day in the SACROC Unit, which was below plan due to operational delays, and 21,200 barrels per day in the Yates Field, another CO2 EOR project.

The company also ramped up production in the past year in the Katz Field, which is Kinder Morgan’s newest CO2 EOR project. First-quarter production was 1,500 barrels per day, compared to only 200 barrels per day in the first quarter of last year.

In another effort to help meet increasing CO2 demand, Kinder Morgan is working on a previously announced $255 million expansion of its Doe Canyon Unit, a CO2 source field in southwestern Colorado. The expansion, which includes drilling 19 wells in the next 10 years that will increase capacity from 105 MMcf/day to 170 MMcf/day, will also include installation of both primary and booster compression with construction beginning in the second quarter of this year. The primary compression is expected to be in service in the fourth quarter of 2013 and the booster compression is targeted to be complete in the second quarter of 2014.

Kinder Morgan also closed on a transaction in January to acquire the St. Johns’ CO2 and helium source field and related assets in Apache County, Ariz., and Catron County, N.M., from Enhanced Resources. Mir said well testing and predevelopment activities are under way in the St. Johns field, but it is too early to put a number on how much CO2 that the new source field will mean for tertiary projects in the Permian Basin. A pipeline will have to be built to transport the CO2 from the Arizona/New Mexico border to the Permian Basin.

Impact of gas prices

Oddly enough, the current depressed natural gas prices have an impact on available CO2 for enhanced oil recovery projects. The Val Verde gas plants in Terrell County had been the Permian Basin’s only source of anthroprogenic, or man-made, CO2, but the volume those plants are handling is obviously down at the moment because of the low gas prices, causing a cutback of companies’ drilling for natural gas.

SandRidge Energy is managing construction of the Century plant, one of the Basin’s newest projects, for Occidental Petroleum Corporation. The Century plant, a hydrocarbon gas processing facility near Fort Stockton in Pecos County, will not only process gas from the fields in the nearby West Texas Overthrust, but will also provide carbon dioxide for use in Oxy’s CO2 enhanced oil recovery projects.

Kevin White, senior vice president for business development for SandRidge, says the first module, which will be able to handle 400 MMcf/day, is finished. The second module, which will process another 275 MMcf/day of natural gas, is scheduled for completion this summer.

SandRidge also owns the neighboring Pinon Field, which produces natural gas that it will send to the Century plant.

“We haven’t drilled a well in the Pinon Field since 2011, however,” White explained. “We need higher gas prices. So, when the Century plant begins operation, it will be running at less than capacity.”

When the plant reaches capacity, it will also be able to provide 400 MMcf/day of CO2 for use in Oxy’s EOR projects, according to White.

Other future sources

Time will tell if new carbon capture regulations will positively impact the availability of CO2 for EOR projects in the Permian Basin. There are two proposed coal-fired power plants that will generate electricity and capture CO2 that will be sold to Permian Basin oil and gas operators for use in EOR projects.

One, the Summit plant as it is known, is under construction near Penwell. Laura Miller, former mayor of Dallas, joined Summit in 2008 to work on the Texas Clean Energy Project, which is an integrated gasification combined cycle (IGCC) project. She said the plant, when in operation, is expected to produce about three million pounds of CO2 per day, although that could be at least 2014 before carbon dioxide in available from the Summit facility.

Meanwhile, the prospects of selling the CO2 from the proposed Trailblazer plant on a 2,400-acre site east of Sweetwater were sufficient reason for the Omaha, Neb.-based Tenaska to chose the Permian Basin. Tenaska’s Trailblazer facility is much different than the Summit coal gasification plant near Odessa. Instead, the Trailblazer is a more traditional pulverized coal plant. There has been no announcement on the start date for the Trailblazer facility, however, as Tenaska continues to work on funding and obtaining water for its proposed plant.

ROZ projects

The success of using CO2 in the 11 residual oil zone EOR projects in the Permian Basin only increases the demand for carbon dioxide. For example, Hess Corporation is developing the West Bravo Dome, a CO2 source field in northeast New Mexico, to supply up to 75 million cubic feet per day of CO2 to the company’s Seminole San Andres Unit, according to company spokesperson Marpat Sexton.

The gathering system delivers CO2 to a compression station in West Bravo to process the CO2, which is then transported to the Seminole San Andres Unit via the Sheep Mountain Pipeline.

Hess Corporation also operates the Seminole Gas Processing Plant, just northwest of the city of Seminole. It was constructed in the mid-1980s to support Seminole San Andres Unit tertiary production by processing the produced gas from the oil field. Its capacity was expanded in 2003 from 160 MMcf/day to 205 MMcf/day. To support the first stage of the ROZ development in the Seminole San Andres Unit, a 70 MMcf/day expansion of the processing plant was necessary and upgrades to the gathering and distribution infrastructures were completed in June 2009.

Legado Resources is one of the first companies to simultaneously inject CO2 in both the main pay and in the ROZ below the oil/water contact line in its Goldsmith-Landreth (San Andres) Unit near Goldsmith, just northwest of Odessa. Melzer said Legado is doing well, taking the field from 170 barrels per day production to a reported 1,000 barrels per day as it continues to experiment with the most effective CO2 EOR techniques in the residual oil zone.

New ideas

Melzer said Denbury Resources, which is enjoying success with piping CO2 from its Jackson Dome source field in Mississippi via its Green Pipeline to the Oyster Bay and Hastings fields on the Texas Gulf Coast, will make a presentation at the annual CO2 conference in Midland in December.

“Denbury has a novel new idea,” Melzer explained. “They are re-pressuring the Oyster Bay and Hastings fields with CO2. We have never thought that was affordable here in the Permian Basin. We have always re-pressured with water. By using CO2, however, it contacts more oil, soaking the reservoir as it re-pressures. It takes over a year before they produce any oil. That is an exciting new development and a different way to look at things.”

Technology always seems to find a way to produce oil that was previously thought to be unattainable. For the CO2 EOR projects in the Permian Basin, only the sky appears to be the limit—if operators can find enough CO2, which the oil and gas industry considers a commodity but the government seems to want to consider a waste product.

“It is a hot topic,” Melzer said. “People are paying attention where it is going. There are a bunch of EOR projects on the shelf in the Permian Basin, just waiting on CO2.”

 

 

 

 

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