With ownership of the source field, Denbury Resources is setting the stage for wider tertiary activity in Mississippi with its Little Creek enhanced oil recovery (EOR) program.
Though the Permian Basin is still the nation's epicenter for carbon dioxide (CO2) injection for EOR, a Dallas, Texas-based company has been heading up the only other major US CO2 flooding program - in southwestern Mississippi.
And now that the company, Denbury Resources Inc., owns the field from which the injected CO2 is produced, expanding miscible gas injection across a wider swath of the Magnolia State is a pretty good bet.
Denbury operates in Mississippi and on and offshore Louisiana. It also recently acquired properties in the Barnett Shale gas play in Texas' Fort Worth Basin. Founded in 1990, the company looks for bypassed reserves in mature fields. It found them first in Mississippi, where it has redeveloped several older reservoirs.
But Denbury production began to grow noticeably by the late 1990s, particularly in 1999, when it purchased 83% net revenue interest in the Little Creek field in Lincoln and Pike counties, Miss., which is the hub of its CO2 injection program.
Discovered by Shell in 1958, Little Creek was unitized in 1962. Waterflooding began the same year. Meanwhile, Shell had developed the South Pisgah CO2 source field near Jackson, in central Mississippi. Eager to pilot test CO2 injection at Little Creek and nearby fields, Shell persuaded several unit members to join them, then built a 183-mile (295-km), 20-in. pipeline to Little Creek for a phased pilot injection program. That began in 1974, when the idea of CO2 injection was "a pup." It was expanded to a fieldwide flood in 1985, when oil prices - at the time - gave tertiary recovery an economic boost.
But when Shell's corporate emphasis shifted in the mid-1990s, it sold its Mississippi properties, including Little Creek, the CO2 field and the pipeline. By that time, Denbury had a minority interest at Little Creek, and was operating 19 other Mississippi fields.
But Denbury management saw the chance to dominate a tertiary recovery niche in Mississippi. Ronald T. "Tracy" Evans, Denbury's vice president of reservoir engineering, said many of the state's producing formations were identified as excellent candidates for CO2 injection, due mainly to their relatively high permeability and rapid oil production response to CO2 injection.
In August 1999, the company acquired an average 99% working interest and 84% net revenue interest at Little Creek for US $13.25 million. The purchase included 37 producing wells and 17 injectors, with several inactive wells that, along with new drilling, offered significant CO2 flood expansion. The field has 49 producers and 26 injectors, reflecting the high priority the company gave it. Average well depth is 10,700 ft (3,264 m).
With such expansion, Denbury decided to gain control of the CO2 source field and pipeline, as well. So in February, it purchased them for $42 million. The field contains 10 producers tapping structural traps in the Buckner, Smackover and Norphlet formations at depths of about 15,000 ft (4,575 m). Production is about 90 MMcf/d, with an estimated 1 Tcf of proved CO2 reserves. What's more, the surrounding area - in which Denbury has a significant leasehold - contains an estimated 12 Tcf of usable CO2, Evans said.
At Little Creek and elsewhere, control of the CO2 stream gives Denbury substantial cost savings. Currently, the company buys its CO2 (about 49 MMcf/d) from a subsidiary for about 25¢/Mcf. According to the company's financial report for first-quarter 2001, Denbury's CO2 cost was reduced by $250,000 during March and April 2001, the first 2 months of CO2 assets ownership.
At year-end 2000, CO2 injection at Little Creek had increased ultimate recovery in a major portion of the field to about 17%, compared to about 20% and 18%, respectively, for primary and secondary recovery. At the same time, the field had produced a cumulative 57 million bbl of light, sweet crude, and Denbury expects additional ultimate recovery of 9 million bbl. Average production was 2,100 b/d to 2,300 b/d. With the additional CO2 injectors and oil producers, the company estimates Little Creek production should peak in 2003 at about 3,500 b/d to 4,500 b/d.
Furthering its new CO2 emphasis, Denbury in April acquired the West Mallalieu and Olive contiguous oil fields about 5 miles (8 km) from Little Creek. The price was $3.8 million. Both are former Shell properties in various stages of CO2 flood. Denbury plans to spend up to $30 million at West Mallalieu during the next 3 years for an additional 8 million bbl of production. The Olive field CO2 flood also will be expanded.
Denbury probably will acquire more properties in the area. It appears to be well-positioned to develop tertiary reserves in a long list of Lower Tuscaloosa fields in southwestern Mississippi, most of which are near depletion or abandonment. Denbury estimates area reservoirs contain 80 million to 100 million bbl of additional oil, recoverable via EOR.
And finally, Denbury believes production from most of its properties on the other side of the state, starting with its largest, the Heidelberg field in Jasper County, can be enhanced with CO2. In fourth-quarter 2000, Heidelberg produced around 7,980 b/d from average well depths of 5,000 ft (1,525 m). However, most Denbury properties there are still in primary and secondary depletion, and it will be several years before a tertiary EOR decision is made, Evans said.
But while crude oil production is a Denbury mainstay, it hasn't overlooked gas reserves. The company in July acquired Matrix Oil & Gas for about $158 million. The added output from Matrix raises the gas portion of Denbury's average projected 2001 production to nearly 50% annualized. Future Barnett Shale gas production should help keep the future mix for Denbury at about the same ratio.

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