?Occidental Petroleum Corp., Los Angeles, (NYE: OXY) will invest up to $1.1 billion with SandRidge Energy Inc., Oklahoma City, (NYSE: SD) to develop a Pecos County, Texas-based gas-processing plant and related pipeline infrastructure to provide CO2 to Oxy’s enhanced oil-recovery projects. The new CO2 resources are expected to expand Oxy’s Permian Basin daily production by a minimum of 50,000 bbl. of oil within the next five years.


“This project will allow us to exploit at least 3.5 trillion cu. ft. of CO2 for our long-term use in enhanced oil-recovery projects throughout the Permian Basin and will allow us to develop approximately 500 million bbl. of reserves from currently owned assets at an attractive cost,” says Occidental chief executive Ray R. Irani.


Irani adds that the net cost of the CO2 from the new gas-processing plant is attractive. However, Oxy will continue to contract for and seek additional CO2 sources to further develop its existing Permian assets.


Total costs for the oil production from the new field development, including capital and operating costs, transportation and CO2, given the proximity to the Permian Basin, are expected to be several dollars below current levels.


Oxy will own and operate the new facilities. The gas-processing plant will have a CO2 takeaway capacity of at least 450 million cu. ft. per day. Oxy additionally will get another 50 million cu. ft. per day from existing SandRidge gas-processing plants. A 160-mile pipeline will be constructed from the plant, through McCamey, Texas, to a CO2 hub in Denver City, Texas.


SandRidge’s locally produced high-CO2-content gas will be processed at the Oxy plant with Oxy oil and gas produc?tion wells receiving the CO2 stream that is separated from the gas.


Subject to regulatory approvals, the gas plant and pipeline are expected to begin operating in 2011.?

-John A. Sullivan

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