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Oil for Another 80 Years: The Significant Appeal of Carbon Capture

In recent years, oil majors have been investing heavily in carbon capture and storage (CCS) technology, ostensibly to offset the CO2 emissions from the energy commodities they produce. Environmentalists have largely dismissed these efforts as pure greenwashing, with experts warning that CCS technology has not been proven to achieve meaningful carbon reductions at current scales. Perhaps the environmentalists were right all along, as new research reveals that carbon capture can extend the productivity of near-depleted oil fields for decades. Menghui Zhao, a senior geological consultant based in Calgary, conducted an AAPG Journal study on the use of CCS in enhanced reservoir recovery. He analyzed more than 22 years of production data from the Weyburn Midale field in Saskatchewan, which has been receiving CO2 injection since 2000, making it the world’s longest-running EOR project. Without CO2 injection, the field would have stopped producing crude oil in 2016, Zhao concluded, but “enhanced oil recovery could potentially extend the life of the field to 39 or even 84 years.” While Zhao acknowledged that he was focused on a specific project in Canada, he said he expects to see “similar results” for large CCS projects around the world.

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Zhao’s claim may not be an exaggeration: The Denver Unit CO2 EOR project at the Wasson Field increased crude oil production almost sevenfold after CO2 injection.

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The findings come at a time when the governments of Canada and Alberta are offering more than $15.3 billion in tax credits to the country’s largest oil sands producers to support CCS projects. Canada is not alone. The British government has pledged £20 billion in subsidies for CCS, and U.S. oil and gas producers receive a tax credit of $85 per ton of CO2 buried in geological formations (this credit drops to $60 per ton if the CO2 is used for EOR).

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Last year, E&P giant ExxonMobil (NYSE:XOM) acquired CCS solutions developer Denbury Inc. (NYSE:DEN) in a stock deal valued at $4.9 billion. Denbury recycles CO2 through its EOR operations and uses it to produce environmentally friendly, carbon-negative Blue Oil. Denbury, now a subsidiary of ExxonMobil, owns the largest CO2 pipeline network in the U.S. at 1,300 miles, including nearly 925 miles of CO2 pipelines in Louisiana, Texas and Mississippi, and 10 onshore storage sites. Last year, ExxonMobil signed a long-term contract with industrial gas company Linde Plc. (NYSE:LIN). The contract covers the output of CO2 produced by Linde’s planned clean hydrogen project in Beaumont, Texas. ExxonMobil will transport and permanently store up to 2.2 million metric tons of CO2 per year.

Meanwhile, ExxonMobil’s oilfield services peer Schlumberger Ltd recently formed the SLB New Energy unit to invest specifically in five niche areas, including CCS. According to Gavin Rennick, president of SLB New Energy, the minimum addressable market for each of the five areas is $10 billion per year.

CCS for EOR

Crude oil production in U.S. oil fields typically includes three different stages: primary, secondary and tertiary (or enhanced) recovery. During the primary recovery phase, oil is pushed into the wellbore using gravity, the reservoir’s natural pressure, and artificial lift techniques. This initial phase typically recovers only about 10% of the reservoir’s original oil volume. Secondary recovery techniques are used to extend the field’s production life through water or gas injection, typically recovering 20% ​​to 40% of the original oil volume in the reservoir.
However, much of the easily accessible oil in U.S. oil fields has already been produced, forcing producers to turn to several tertiary or enhanced recovery (EOR) techniques. EOR techniques offer the prospect of ultimately recovering 30% to 60% or more of the reservoir’s original oil volume.

Three main categories of EOR techniques have found commercial success: gas injection, chemical injection, and thermal recovery. Gas injection is the most common EOR technique in the United States, accounting for nearly 60% of the country’s EOR production. Gas injection uses gases such as carbon dioxide, natural gas, or nitrogen to expand in the reservoir, pushing additional oil toward the producing wellbore while other gases dissolve in the oil, helping to reduce viscosity and improve flow rates. CO2 injection has been successfully used in the Texas Basin in West Texas and the Berman Basin in Eastern New Mexico, as well as in Kansas, Mississippi, Wyoming, Oklahoma, Colorado, Utah, Montana, Alaska, and Pennsylvania.

The U.S. Department of Energy is currently investigating novel technologies that could significantly improve economic performance and expand CO2 injection to a wider population of reservoirs. The U.S. Department of Energy estimates that next-generation CO2-EOR has the potential to produce more than 60 billion barrels of crude oil that would otherwise be trapped in rock.

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