Moving CO2 EOR Offshore Requires Higher Prices

The Gulf of Mexico (GoM) Outer Continental Shelf (OCS), an important domestic petroleum province, accounts for about 20% of total domestic crude oil production. Since reaching a peak of 1.54 MMbbl/d in 2003, OCS oil production has declined to 1.23 MMbbl/d as of mid-2013. While there is optimism that new discoveries in the deep and ultradeep waters of the OCS will reverse this decline, another option seems to offer even more promise—the application of CO₂ EOR. Under the Outer Continental Shelf Lands Act, the U.S. Department of Interior’s (DOI’s) Bureau of Ocean Energy Management (BOEM) has statutory authority to permit the use of CO₂ EOR on existing oil and gas leases on the OCS.

Significant benefits

The use of CO₂ EOR in the OCS would provide numerous benefits, including:

• Increasing the volumes of economically viable domestic oil reserves and production, including adding significant federal royalty and tax revenues;
• Providing a market for CO₂ emissions from Gulf Coast electric power and industrial plants, helping “buy down” the costs of CO₂ capture; and
• Providing secure locations for storing CO_2.

In addition to the benefits above, the U.S. Department of Energy (DOE) recognizes that offshore storage of CO₂ provides several key advantages over storage on land:

• Locating sequestration sites away from heavily populated onshore areas avoids storing material beneath a populated area and reduces the difficulty of establishing surface and mineral rights for storage sites;
• Offshore storage reduces risks to underground sources of drinking water; and
• Offshore CO₂ pipelines could use already existing corridors and oil and gas infrastructure, thus reducing upfront capital costs.

The OCS prize

Three distinct resource targets exist in the GoM OCS for CO₂ EOR: (1) mature shallow-water oil fields; (2) more recently discovered deepwater oil fields; and (3) undiscovered oil fields, primarily in deep and ultradeep waters. While current CO₂-EOR technology applied to the OCS would yield significant improvements in production and recovery factors, with “next-generation” CO₂-EOR technology, the offshore GoM offers a substantial prize—nearly 15 Bbbl of additional oil recovery (Table 1) and storage for 3.9 gigatonnes of CO₂ (equal to 40 years of CO₂ capture from 20 GW-size coal-fired power plants),

The estimates of oil recovery and CO₂ demand from applying CO₂ EOR to discovered shallow- and deepwater GoM oil fields are based on detailed reservoir-by-reservoir analyses. The estimates of oil recovery and CO₂ demand from applying CO₂ EOR to undiscovered GoM oil fields are based on extrapolation of results from existing deepwater oil fields to the BOEM’s assessment of undiscovered GoM OCS oil resources.

Economic viability

The CO₂-EOR potential in the Gulf of Mexico is governed by three key factors:

• The performance level of CO₂-EOR technologies, current and next-generation;
• The cost of CO₂ delivered to the offshore oil field. The most recent study by DOE’s National Energy Technology Laboratory (NETL) uses $50/mt (consisting of a CO₂ purchase price of $30/mt plus $20/mt for offshore CO₂ transportation); and
• The world oil price. NETL examined the CO₂ EOR and CO₂ storage potential using an oil price of $90/bbl and a future, higher oil price of $135/bbl.

Technology, other factors

NETL’s in-depth reservoir-by-reservoir analysis shows that the volumes of economically viable oil recovery and CO₂ demand vary by nearly an order of magnitude, depending on the efficiency and sophistication of available offshore CO₂-EOR technology.

• Current CO₂-EOR technology. With today’s moderate-performance CO₂-EOR technology (current technology), an oil price of $90/bbl and a CO₂ cost of $50/mt, economically viable oil recovery and CO₂ demand from the GoM OCS are modest:
  • 810 MMbbl of incremental oil, and
  • 310 million mt of CO₂ demand.
• Next-generation CO₂-EOR technology. Substituting higher performing next-generation CO₂-EOR technology (oil price of $90/bbl and CO₂ cost of $50/mt), the economically viable oil recovery and CO₂ demand from the GoM OCS increase by more than tenfold:
  • 14,920 MMbbl of incremental oil, and
  • 3,910 million mt of CO₂ demand.

While next-generation technology improves oil recovery efficiency by about half, the great bulk of the impact is from the much greater number of offshore oil fields that become economically viable. The combination of more efficient use of CO₂ and higher recovery per well are the main reasons for the sharp increase in the number of economically viable oil fields under next-generation technology.

In reviewing these results, it is useful to recognize that a major portion of the oil fields holding substantial original oil in place (OOIP) were screened out as being too small or too lean for CO₂ EOR. Specifically, for the shallower water areas, 80% of the oil fields holding nearly half of the OOIP were screened out; for the deepwater, half of the oil fields holding about a third of the resource were screened out.

Higher oil prices of $135/bbl would materially improve the oil recovery and CO₂ demand potential that would result from applying CO₂ EOR to OCS oil fields. Figures 1 and 2 illustrate the oil recovery and CO₂ storage potential from the use of current vs. next-generation CO₂-EOR technologies at both $90/bbl(*) and at $135/bbl(**).

The U.S. Energy Information Agency’s Annual Energy Outlook 2013 projections indicate an oil price of $135/bbl would be reached by the year 2030. In addition, conversion of empty offshore natural gas pipelines to CO₂ transportation could lower CO₂ costs by $10/mt or more. Most importantly, incentives for capturing and storing CO₂ with EOR could make large volumes of affordable, market-competitive Gulf Coast CO₂ supplies available for the GoM offshore EOR industry.

Need for prompt action

There is considerable urgency for implementing CO₂ EOR in the offshore oil fields of the OCS.

• Shallow-water oil fields are nearing abandonment. The great bulk of the shallow-water (less than 305 m [1,000 ft] of water depth) GoM oil fields are mature and near abandonment, having produced 95% or more of their original proved reserves. Once these fields are abandoned and their platforms removed, the costs of conducting CO₂ EOR or storing CO₂ in these oil fields increases significantly.

• Deepwater oil fields would benefit from early CO2-EOR implementation. Much of the oil resource in the deep waters of the GOM is in newly discovered (or still undiscovered) oil fields. As illustrated by the case study of the super-giant Lula oil field in the ultradeep waters of offshore Brazil, early implementation of CO₂ EOR at newly discovered oil fields appears to offer significant economic benefits, including higher volumes of economically viable oil recovery and accelerated opportunities for storing CO₂.

While the move to offshore CO₂ EOR in the GoM will await increased oil prices, it is imperative that industry and government prepare the way. Recent studies by DOE and DOI are doing that. To access the most recent DOE report, go to: http://netl.doe.gov/research/energy-analysis/publications/details?pub=e185884c-2423-47bb-a295-23614b4df5d3