In Search Of ‘Carbon Negative Oil’

It’s a classic case of unlikely bedfellows. The idea that a downstream industrial asset such as a corn-ethanol plant could become a meaningful contributor to the upstream side of the energy complex, such as in enhanced oil recovery (EOR) activities, might seem far-fetched, but it’s one that’s garnered the attention of one upstream oil and gas company in an effort to produce “carbon negative oil.”

That company is Australia-based Elk Petroleum Ltd., which is actively exploring the idea of sourcing CO₂ from a corn-ethanol plant to feed into its EOR activities in Nebraska. CO₂ is one of a series of coproducts during the production of fuel-grade ethanol.

An oil and gas producer and developer listed on the ASX (Australian Securities Exchange) with assets located in the northern Rocky Mountains (U.S.), Elk Petroleum is focused on applying established EOR technologies to mature oil fields.

To demonstrate the possibility of producing “carbon negative oil,” the company recently sponsored a peer-reviewed research paper on the subject in the “International Journal of Greenhouse Gas Control.”

The research was initiated when Elk Petroleum entered Nebraska in 2013 with the signing of a CO₂ purchase agreement with Bridgeport Ethanol LLC, a 50-million-gallon-per-year corn-ethanol plant located in Bridgeport, Neb. Elk Petroleum subsequently acquired the nearby Singleton Unit, an oil field that’s deemed favorable for EOR activities using CO₂.

The CO₂ contract is for 10 years, with CO₂ purchases starting in late 2016. The agreement includes a lease option on a five-acre parcel adjacent to the Bridgeport ethanol plant where the CO₂-dehydration and compression facilities would be constructed.

Source: Elk Petroleum Ltd.

Elk Petroleum noted that it has a three-year option period before starting CO₂ purchase from Bridgeport Ethanol. During that time, CO₂ compression facilities and a CO₂ pipeline would be constructed.

Elk Petroleum acquired a 100% working interest in the Singleton Unit in Nebraska and became the operator of the unit in May 2014. The unit has produced 10.9 million barrels of oil and has 18 wells that can be used in an EOR project.

By using the CO₂ sourced from the corn-ethanol plant in a CO₂-EOR project, Elk Petroleum is planning an economically profitable CO₂-EOR carbon sequestration project. Until now, no research has been published in scientific literature that establishes a method of calculating the carbon intensity of oil produced from a corn-ethanol-sourced CO₂-EOR project, a process dubbed “bio-CO₂-EOR.”

Carbon credit monetization, profit potential

A driving force prompting Elk Petroleum to pursue this option is the likely scenario of capitalizing on carbon credit incentives for the production of low-carbon intensity fuels, especially in key markets on the U.S. West Coast, according to the company.

The first carbon market was created in California with the enactment of its “low-carbon fuel standard” (LCFS) in 2007, and similar legislation has since been enacted in Oregon, Washington and British Columbia, Canada.

Carbon credits are awarded based on the carbon intensity (CI) of the finished fuel product. The lower the CI of the fuel, the more carbon credits are assigned to the fuel. The carbon credits are traded so that producers of low-CI fuels can receive an enhanced income from the sale of these products.

In order to receive the credits, the manufacturer of the fuel needs to establish a fuel “pathway” that quantifies all the greenhouse-gas emissions created in producing, refining and consuming the fuel.

The research sponsored by Elk Petroleum “proves a methodology for the calculation of the carbon intensity of oil produced by a bio-CO₂-EOR project with CO₂ sourced from a corn-ethanol plant, which is what Elk plans to implement at the Singleton Unit in Nebraska,” according to the company in a statement.

“The manufacturer of carbon negative oil will have a large early revenue stream from the carbon credits for this type of oil once the fuel pathway for bio-CO₂-EOR is established in the LCFS markets on the west coast of the U.S.,” Elk Petroleum noted.

In a typical CO₂-EOR project, a large amount of CO₂ is injected into the oil reservoir early in the life of the project, before substantial amounts of oil are produced. This carbon sequestration phase of the project “results in a petroleum fuel that is highly carbon negative if the CO₂ is sourced from ethanol-fermentation emissions, with the result that a large amount of carbon credits would be assigned to the fuel on a per-barrel basis in an LCFS system,” Elk Petroleum explained.

“The early revenue stream form the carbon credits in a bio-CO₂-EOR project would make projects that have a corn-ethanol source for the CO₂competitive with EOR projects that are based on fossil sources of CO₂ like the one that Elk is developing at the Greive project in Wyoming,” the company further noted.

Broader market implications

Interestingly, the research paper points out not only how bio-CO₂-EOR opportunities benefit Elk Petroleum’s project with Bridgeport Ethanol in Nebraska, but how they might also apply to similar projects in the U.S. and globally.

For example, the paper explains that the amount of oil that can be produced with corn-ethanol fermentation emissions (i.e. CO₂) is dependent upon the CO₂ utilization efficiency.

“If all of the existing corn-ethanol CO₂ emissions were transported to regions with values of [CO₂ utilization efficiency] of 20 [million square feet-per-barrel or Mscf/bbl], like Louisiana or Mississippi, where CO₂-EOR projects have a low-efficiency, then the 40 million metric tons of CO₂fermentation emissions produced annually would result in production of almost 40 million barrels of carbon negative oil per year,” according to the study.

“If the fermentation emissions are utilized in areas that have a value of [CO₂utilization efficiency] of 8.3 Mscf/bbl, resulting in carbon neutral oil, then as much as an incremental 100 million barrels of oil per year could be produced. The U.S. produced 2.4 billion barrels of oil in 2012, so this incremental oil production would increase oil production by 1.6% to 4% if all current U.S. fermentation emissions were utilized,” the report noted.

The U.S. is the largest ethanol producer, followed by Brazil, Europe and China. If bio-CO₂-EOR projects were to be implemented worldwide, the opportunity for CO₂ emission reductions would be further amplified, the report observed.

“The size of international sink capacity for EOR projects is 370 billion metric tons of CO₂. At current ethanol production rates, this represents over 5,000 years of available storage capacity for CO₂ fermentation emissions,” according to the report.

“Clearly, the implementation of bio-CO₂-EOR projects can only serve to build the initial CCS [carbon capture and storage] infrastructure that other technologies will utilize in the future once these other technologies have been commercialized,” the report concluded.

Bryan Sims can be reached at bsims@hartenergy.com.