The Economics of Enhanced Oil Recovery: Estimating Incremental Oil Supply and CO2 Demand in the Powder River

Basin
Klaas van t Veld* and Owen R. Phillips**

Expanding the use of CO2-enhanced oil recovery (EOR) promises to both signicantly increase recovery from existing U.S. oil reserves and possibly form a bridge to large-scale CO2 capture and sequestration. An important input into planning for such expansion are estimates of how both the supply of incremental oil and the derived CO2 demand from EOR are likely to vary with the prices of oil and CO2. We demonstrate how the analog method of predicting oil and CO2 ows can be used to readily generate such estimates, and apply the method to Wyomings Powder River Basin. 1. INTRODUCTION As the policy issues of energy security and climate change have taken center stage in recent years, the technique of CO2-enhanced oil recovery (CO2EOR) has received increasing attention from industry and government.1 One reason is that the technique promises signicant increases in oil recovery from existing, mature oil elds. Typically, the primary phase of oil extraction from a new
1. See for example the statistics on CO2-EOR growth in the biennial Oil & Gas Journal surveys of EOR, the royalty relief and tax credits for CO2-EOR in the Energy Policy Act of 2005, the requirement to study pipeline construction for CO2-EOR in the Lieberman-Warner Climate Security Act of 2008, and the further tax credits for CO2-EOR in the Emergency Economic Stabilization Act of 2008 (the $700 billion federal bailout package for the nancial industry). For a discussion of CO2EORs role in overall energy policy see Grifn (2009). The Energy Journal, Vol. 31, No. 3, Copyright * ** 2010 by the IAEE. All rights reserved.

Corresponding author. Department of Economics & Finance, University of Wyoming, Dept 3985, 1000 E. University Ave., Laramie, Wyoming 82071-3985. E-mail: klaas@uwyo.edu. Department of Economics & Finance and Enhanced Oil Recovery Institute, University of Wyoming.

We thank J. Michael Boyles for laying much of the groundwork for this study, and Brian F. Towler and Vladimir Alvarado for helpful discussions. We also thank the editor, associate editor, and three anonymous referees for many comments that improved our paper.

31

32 / The Energy Journal eld, which utilizes the reservoirs natural pressure to bring oil to the surface, extracts about 520% of the estimated original oil in place. The secondary phase, which usually involves injection of water into the reservoir to augment or maintain its pressure, extracts another 1020%. After the primary and secondary phases of extraction, about two thirds of the original oil is left stranded. According to a recent Department of Energy study (DOE, 2008), the tertiary method of CO2-EOR is technically able to recover about a third of this stranded oil, or an additional 20% of the original oil in place. For all U.S. reservoirs combined, this amounts to 87.1 billion barrels, of which the study estimates that (at an oil price of $70 per barrel and a CO2 price of $45 per metric ton) 45 billion barrels are economically recoverable.2 CO2-EOR recovers this additional oil by injecting slugs of CO2 at high pressure into the reservoir, usually alternated with slugs of water. The injected CO2 mixes with the reservoir oil, thereby reducing capillary forces that trap the oil in pores of the rock and allowing oil that would otherwise remain stranded to ow towards production wells.3 Most of the CO2 resurfaces with the recovered oil and is separated, recompressed, and reinjected. In every pass through the reservoir, however, a fraction of the CO2 remains sequestered underground. In order to maintain a given CO2 injection rate, operators of CO2-EOR projects4 therefore need reliable sources of CO2 over extended periods of timeit is common for an EOR project to take 20 years or longer. As a result, EOR creates a derived demand for relatively pure CO2 gas. This steady demand for, and ultimately sequestration of, CO2 provides the second reason for the recent interest in EOR. Realistically, the total amount of CO2 that EOR projects might be able to sequester is limited: Dahowski et al. (2005) estimate the sequestration capacity of depleted U.S. oil reservoirs (including those depleted through EOR) at 10 GtCO2, which amounts to just over two years worth of current U.S. CO2 emissions (EPA, 2008). Nevertheless, EOR may
2. To put these gures in perspective, technically recoverable reserves in the Arctic National Wildlife Refuge (ANWR) are estimated by the U.S. Geological Survey at 10.4 billion barrels. See the USGS National Assessment of Oil and Gas Resources Update (December, 2007) at http:// certmapper.cr.usgs.gov/data/noga00/natl/tabular/2007/ summary_07.pdf. 3. To avoid fracturing the caprock overlying the reservoir, a small number of CO2-EOR projects are operated at pressures too low for the CO2 to mix with the oil. These so-called immiscible CO2 oods generally recover signicantly less of the stranded oil. 4. Hereafter, we drop the qualier CO2 as understood. The term EOR is more generally used to denote a variety of processes that enhance oil recovery beyond levels attained through primary and secondary methods, including injection of steam, liquid chemicals, and gases other than CO2. According to the Oil & Gas Journals most recent biennial survey of EOR (Moritis, 2008), CO2-EOR is the fastest-growing EOR technique in the U.S., generating 250,000 barrels per day (bo/d) from 105 projects spread throughout the country. This amounts to about 5% of total U.S. oil production, and is up from just 30,000 bo/d in 1986. So-called thermal EOR, which uses injections of mostly steam, is slightly more prevalent in terms of production volume, generating 293,000 bo/d from currently 45 projects. Use of this method is almost entirely limited to heavy-oil elds in California, however, and the aggregate production volume has steadily declined from a peak of 469,000 bo/d in 1986.

The Economics of Enhanced Oil Recovery / 33 jump-start the building of pipelines and other infrastructure required for ultimately much larger-scale sequestration in unmineable coal seams and saline aquifers. If indeed EOR is to play a major role in expanding U.S. oil output as well as providing a bridge to large-scale geological sequestration of CO2, an important input into planning for the required infrastructure are estimates of how both the supply of incremental oil and the derived CO2 demand from EOR are likely to vary with the prices of oil and CO2. To our knowledge, very few such estimates are currently available. Holtz et al.s (2001) study of EOR potential in Texas, for example, uses only physical screening criteria to identify reservoirs suitable for EOR, and then applies rule-of-thumb multipliers to estimate the incremental oil that can be recovered and the CO2 that can be sequestered in these reservoirs, without any reference to economics. Similar methods also are used to estimate EORs sequestration potential (without accompanying oil recovery estimates) in the DOEs Carbon Sequestration Atlas of the United States and Canada (DOE, 2007). The above-cited study by Dahowski et al. (2005) does estimate a cost curve for CO2 sequestration in 220 oil plays5 in the U.S., but does so for just three oil prices, namely $15, $23, and $38/bo. It is also again based on ruleof-thumb multipliers, adjusted only for API gravity6 and average depth of each play. Finally, the above-cited DOE (2008) study uses physical screening criteria to identify 1,111 large oil reservoirs amenable to EOR, and then uses reservoirsimulation software to predict oil and CO2 ows for each reservoir. In principle, this approach could be used to generate full oil supply and CO2 demand curves, but the study in fact examines only four price scenarios.7 In this paper, we introduce a procedure for estimating incremental oil supply and CO2 demand curves that is based on the so-called analog method of predicting oil and CO2 ows for a given reservoir. The method is more sophisticated than simple rule-of-thumb multipliers, while avoiding a key drawback of using reservoir-simulation software. This drawback is that reservoir simulations require reservoir-specic relative permeability curves as inputs, to predict the rates at which different uids (oil, water, CO2) will move through a given reservoirs rock as their concentration levels in the reservoir change over time. Data required to determine these curves are rarely available. The analog method, explained in detail in the appendix to this paper, is not new to reservoir engineers. Jarrell et al. (2002) discuss it, for example, in their monograph on CO2 ooding published by the Society of Petroleum Engi5. An oil play is a grouping of geologically similar reservoirs in a given oil-producing region. 6. A standard measure of oil density introduced by the American Petroleum Institute. 7. A now dated study by the National Petroleum Council (NPC, 1984) used very similar procedures. The main difference lies in the software used to predict CO2 and oil ows: whereas the NPC study used the CO2PM package developed by Scientic Software-Intercomp, the DOE study uses the more versatile CO2Prophet package later developed by the Texaco Exploration and Production Technology Department. (Both packages are available from the DOEs National Energy Technology Laboratory website, http://www.netl.doe.gov.)

34 / The Energy Journal neers. The method also underlies a spreadsheet model made available by Kinder Morgan, Inc., which allows oil-eld operators to estimate the likely protability of applying EOR to a given reservoir.8 The method is not widely known by energy economists, however. Nor has it, to our knowledge, ever been used to estimate incremental oil supply curves and derived CO2 demand curves for all reservoirs in an entire region or basin, as we do in this paper. In essence, the analog method scales the historical production and injection ows observed at some existing, mature EOR project (the analog) to predict those of a new, proposed EOR project. The validity of doing so relies on a central assumption of the method, namely that all the various dimensions across which reservoirs may differlithology, area, thickness, porosity, permeability, etc.are relevant to incremental oil and CO2 production only insofar as they affect two key scaling factors: (i) per-pattern hydrocarbon pore volume and (ii) injectivity. The term pattern refers to a (typically square) sub-area of a reservoir centered on a single injection well and bordered by production wells;9 hydrocarbon pore volume (HCPV) is the space originally occupied by oil in that sub-area of the reservoir before any of the oil was produced; and injectivity is the rate at which uids can be injected into the reservoir, expressed in units of HCPV per unit time. Specically, the analog method predicts that if the proposed EOR project happens to have the same per-pattern HCPV and injectivity as the EOR analog project, each of its patterns will generate roughly the same incremental oil and CO2 ows over time as the analog project did historically. More generally, the proposed project will differ from the analog project in terms of either HCPV or injectivity, in which case the predicted ows are scaled accordingly. If, for example, the proposed project has twice the per-pattern HCPV but the same injectivity, it is predicted to cumulatively produce twice as much from each pattern as the analog project did at any given time after switching to EOR; if, on the other hand, the proposed project has the same per-pattern HCPV but twice the injec-

8. The model is available at www.kindermorgan.com/business/co2/tech.cfm. It requires the operator to enter engineering parameters for a proposed EOR project (e.g., the reservoir dimensions, the current rate and decline rate of oil production, the number of existing and planned injection and production wells) as well as economic parameters (e.g., the price of oil and CO2 anticipated by the operator, royalty and tax rates, discount rate). The model then uses the analog method to project incremental oil and CO2 ows for a single pattern (an injection well surrounded by production wells) of the proposed project, multiplies these ows by the number of planned patterns, and combines the result with the economic parameters to predict the projects NPV. Although the model uses a very similar approach to ours, its implementation as a spreadsheet limits its application to a single project at a time. The model is also cruder than ours in several respects. For example, it terminates the project at an exogenously determined time, rather than optimally as in our model. 9. Common patterns are the ve-spot, which has four production wells at the corners of the square, and the nine-spot, which has four additional production wells at the square sides. These patterns are typically repeated more or less regularly to cover the entire reservoir area, whereby neighboring injection wells share the production wells on their common pattern borders.

The Economics of Enhanced Oil Recovery / 35 tivity, it is predicted to cumulatively produce as much as the analog project did, but in half the time; etc. Note that if the methods central assumption held exactly, all EOR projects would literally trace out the same normalized production and injection paths. A single analog project would therefore sufce to predict EOR ows at any and all proposed projects, regardless of any differences between project reservoirs besides per-pattern HCPV and injectivity. In practice, of course, the assumption holds only approximately. For example, even if two project reservoirs have similarly high injectivity levels, injectivity for project A may be uniformly high throughout its reservoir, whereas that for project B may be concentrated in highly permeable streaks or zones. If so, then in project A, injected CO2 is likely to push oil uniformly towards production wells, whereas in project B, CO2 may ow preferentially through the permeable zones, bypassing oil elsewhere in the reservoir. As a result, incremental oil recovery from project B is likely to be lower, and would be overpredicted by a model using project A as an analog.10 For reasons such as these, the analog method is considered more reliable the more closely the reservoir characteristics of a proposed project match those of the analog used.11 By way of illustration, we apply our procedure to the Wyoming portion of the Powder River Basin (PRB). This basin, which covers the northeast corner of the state, is a major oil-producing region in the US, with currently about 500 actively producing elds or (since many elds produce from several reservoirs) over 700 actively producing eld-reservoir combinations (FRCs). To date, 1.9 billion barrels of oil have been extracted from these elds, almost all through primary and secondary recovery. Enhanced oil recovery is just getting underway in the PRB. On the western edge of the basin, in the Salt Creek Field, one operator has been applying EOR since 2004. Several other oil-eld operators have plans to begin EOR projects in the near future. Not all FRCs are suitable for EOR, however. For a given FRC, the size and geological properties of the reservoir are factors that decide the protability of EOR, along of course with expected revenues from incremental oil production and costs related to CO2 injection and recycling. As oil prices increase or CO2 prices decline, more FRCs become protable for EOR, giving rise to the incremental oil supply and derived CO2 demand schedules that we map out for the basin.

10. Similarly, even if two project reservoirs have the same original HCPV, they may experience different degrees of compaction over time as uids are removed during the various recovery phases. This too might differentially impact EOR performance, although the effect would likely be small. 11. Consistent with this, Kinder Morgan provides two different versions of its spreadsheet model: one uses the Denver Unit project in the San Andres formation of West Texas as its analog, while the other uses an unspecied project in the Morrow formation of western Kansas and the Oklahoma Panhandle. Unfortunately, the Morrow projects history is quite short, which reduces its usefulness for predicting the lifetime performance of candidate EOR projects.

36 / The Energy Journal 2. THE DATA AND MODEL Extensive data were collected on all FRCs in the Wyoming portion of the Powder River Basin. These data describe the geology, oil composition, and production and injection history of identied FRCs. Our data were collected from numerous primary sources, including the Wyoming Geological Association, the Wyoming Oil and Gas Conservation Commission, and the proprietary IHS data bank. Journal descriptions of a number of FRCs were consulted to ll gaps. Considerable work continues in updating and checking these data against different source materials. To estimate the potential CO2 demand for enhanced oil recovery in the PRB and the corresponding supply of incremental oil, we examined all FRCs that met two criteria. First, given the large up-front capital costs of EOR projects, we required the elds to be large. The cutoff chosen was an FRC that had cumulative production of at least 5 million barrels of oil (MMbo) through the end of 2005. Smaller reservoirs were included if another reservoir in the same eld met the 5-MMbo cumulative production criterion. This is because reservoirs in the same eld can share capital facilities required for EOR. A total of 138 FRCs met the rst criterion. The second criterion is that a complete set of data had to be available for the demand analysis. Key data were unavailable for 38 of the 138 FRCs, leaving 100 FRCs. For each of these 100 FRCs, we rst determined whether the reservoir passed a key physical hurdle, namely the capability to be pressured to a level at which injected CO2 mixes with the oil. If this so-called minimum miscibility pressure (MMP), which depends on the reservoirs temperature and the oils API gravity, exceeds the maximum pressure that the reservoirs caprock can withstand, then using CO2 for EOR becomes far less attractive.12 This was found to be the case for 3 FRCs. Table 1 lists the remaining 97 FRCs, together with their original oil in place (OOIP)the estimated total amount of oil originally present in the reservoir before any extraction took placeand their cumulative production up to mid2009. The accompanying Figure 1 shows the FRCs locations.

12. As pointed out in footnote 1, CO2-based EOR projects can be operated at pressures below MMP, but their performance drops signicantly.

The Economics of Enhanced Oil Recovery / 37 Table 1. Field-reservoir combinations evaluated, with estimated original oil in place (OOIP, from various sources including McDaniel (1991), the DOEs TORIS database, and estimates of HCPV) and cumulative oil production up to mid-2009 (Cum., from the IHS PI/Dwights PLUS database)
OOIP # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FieldReservoir Combination AlphaMinnelusa C Ash CreekShannon Barber CreekFerguson Big HandMinnelusa Big MuddyDakota Bone PileMinnelusa B Buck Draw NorthDakota Camp CreekMinnelusa B Cellars RanchTensleep ClaretonMuddy Cole CreekDakota Cole Creek SouthDakota Cole Creek SouthLakota CollumsMuddy Coyote CreekDakota Coyote Creek SouthDakota Coyote Creek SouthTurner Culp & Heldt DrawShannon Dead Horse CreekFerguson Dead Horse CreekParkman Dillinger RanchMinnelusa A Donkey CreekDakota Donkey CreekMinnelusa Dry GulchMinnelusa A Duvall RanchMinnelusa A EdselMinnelusa B Fiddler CreekMuddy Fiddler CreekNewcastle 13.2 17.3 19.6 9.0 11.7 15.6 36.0 10.5 34.1 149.0 30.0 47.3 34.3 23.6 54.4 11.4 9.2 28.3 16.1 26.4 24.1 23.9 10.4 9.1 24.9 9.5 25.9 55.9 (MMbo) 5.7 4.6 1.5 6.1 7.3 8.9 24.4 4.9 6.2 3.2 1.1 1.5 5.4 4.4 13.3 5.4 1.2 13.8 1.5 2.0 8.0 3.8 4.7 5.2 14.6 5.6 2.9 1.2 (continued) Cum.

38 / The Energy Journal Table 1. Field-reservoir combinations evaluated, with estimated original oil in place (OOIP, from various sources including McDaniel (1991), the DOEs TORIS database, and estimates of HCPV) and cumulative oil production up to mid-2009 (Cum., from the IHS PI/Dwights PLUS database) (continued)
OOIP # 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 FieldReservoir Combination Finn-ShurleyTurner Finn-ShurleyWall Creek Gas DrawMuddy Glenrock SouthDakota Glenrock SouthMuddy GutheryMinnelusa B Upper HalversonMinnelusa A HammMinnelusa B Lower Hartzog DrawShannon HilightMuddy House CreekSussex Jepson-Holler DrawShannon KayeTeapot KittyMuddy KummerfeldDakota KummerfeldMinnelusa B Lance CreekLeo Lance Creek EastDakota Little Mitchell Creek Minn. B M-DMinnelusa B MaysdorfMinnelusa A Meadow CreekFrontier Meadow CreekLakota Meadow CreekShannon Meadow CreekTensleep Mellott RanchMinnelusa Mikes DrawTeapot Miller CreekDakota 250.0 15.5 50.6 80.0 62.1 12.5 40.7 20.3 353.3 110.0 67.0 49.7 86.1 133.4 12.8 15.0 121.0 21.1 13.0 12.0 11.5 7.2 9.4 34.0 40.5 19.1 23.0 17.0 (MMbo) 16.1 1.4 23.2 15.1 19.4 3.8 8.3 8.1 114.9 74.3 38.2 6.0 9.3 16.5 3.3 6.4 15.7 1.4 8.3 5.8 5.4 2.3 2.1 5.4 13.8 5.0 14.6 4.4 (continued) Cum.

The Economics of Enhanced Oil Recovery / 39 Table 1. Field-reservoir combinations evaluated, with estimated original oil in place (OOIP, from various sources including McDaniel (1991), the DOEs TORIS database, and estimates of HCPV) and cumulative oil production up to mid-2009 (Cum., from the IHS PI/Dwights PLUS database) (continued)
OOIP # 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 FieldReservoir Combination Moorcroft WestDakota Moorcroft WestMinn. A Moorcroft WestNewcastle Mule CreekLakota Mush CreekNewcastle North ForkTensleep OsageNewcastle Pine TreeShannon Poison DrawTeckla Prong CreekMinnelusa Raven CreekMinnelusa RecluseMuddy ReelMinnelusa RenoMinnelusa Robinson RanchMinnelusa RozetMinnelusa RozetMuddy Rozet WestMinnelusa Sand DunesFrontier Sandbar EastMinnelusa B ScottParkman ScottTeapot SemlekMinnelusa B Semlek WestMinnelusa B Skull CreekNewcastle SlatteryMinnelusa SlatteryMuddy Springen RanchMuddy 28.9 0.7 28.9 10.0 35.0 55.6 69.0 14.5 13.4 14.0 73.8 64.5 20.0 41.2 14.7 44.9 71.9 22.7 2.5 32.1 250.0 51.4 11.6 21.0 30.0 28.5 1.4 22.8 (MMbo) 4.5 0.2 1.7 1.0 2.8 21.5 17.2 9.5 7.6 6.4 43.0 13.6 7.4 6.4 5.8 9.1 13.6 9.8 0.9 9.0 17.6 0.4 5.4 8.3 5.2 11.9 0.4 8.8 (continued) Cum.

40 / The Energy Journal Table 1. Field-reservoir combinations evaluated, with estimated original oil in place (OOIP, from various sources including McDaniel (1991), the DOEs TORIS database, and estimates of HCPV) and cumulative oil production up to mid-2009 (Cum., from the IHS PI/Dwights PLUS database) (continued)
OOIP # 85 86 87 88 89 90 91 92 93 94 95 96 97 FieldReservoir Combination StewartMinnelusa B SussexFrontier SussexShannon SussexSussex SussexTensleep Sussex WestShannon TerraceMinnelusa B Timber CreekMinnelusa Timber CreekMuddy UteMuddy WallaceMinnelusa B Well DrawTeapot Winter DrawMinnelusa 40.9 5.4 4.6 11.7 25.0 35.0 13.8 34.1 6.4 43.9 18.3 95.0 9.2 (MMbo) 11.1 0.3 2.1 3.5 5.4 13.4 6.5 11.7 0.2 9.7 7.9 33.5 6.5 Cum.

An overview of the model For each of the 97 FRCs, we estimated both the baseline net present value NPV bas of continuing with secondary oil recovery using water injection,
T bas

NPV bas
t 1

p o Qop,bas (1 t

s R ) (1 s SP ) (1 r) t

C o ( Qt p,bas )

and the net present value NPV eor of switching to EOR,

Teor o

NPV

eor t

p Qop,eor(1 sR)(1 sSP) pcQcm Cr(Qcp) Co(Qt p,eor) t t t K. (1 r)t 1

In these expressions, po represents the price of oil (assumed constant over the lifetime of the project), Qop,bas , projected baseline oil recovery in period t under t the continued waterood, and Qop,eor , projected oil recovery in that same period t were the project to switch to a CO2 ood. To arrive at net operating prots in each period, we subtract from pre-tax oil revenues any royalties at rate sR , as well

The Economics of Enhanced Oil Recovery / 41 Figure 1. Location of eld-reservoir combinations listed in Table 1. Circle areas are proportional to projected incremental oil supply at our reference oil price of $100/bo and CO2 price of $3/Mcf.

as severance and property taxes at combined rate sSP . For the EOR project, we we also subtract the projected cost of CO2 purchases, equal to the CO2 purchase price pc (also assumed constant over the lifetime of the project) times the projected quantity purchased, Qcm , as well as the projected cost Cr of recycling and t re-injecting CO2. This cost depends on the quantity Qcp of CO2 that is produced t together with the oil. Lastly, we subtract other operating costs Co , which depend in part on the total amount of liquids produced. For the baseline without EOR, liquid production Qt p,bas is just the sum of water and oil produced; for the EOR project, Qt p,eor is the sum of water, oil, and CO2 produced, since before recycling the CO2 is mixed in with the oil. The remaining net operating prots are discounted to the present at the internal rate of return r required by the FRC operator. The economic lifetime of the project, denoted Tbas for the continued waterood and Teor for the CO2 ood, is reached when operating prots turn negative. Switching to EOR in addition involves an up-front investment cost K. We assume that this entire cost is incurred

42 / The Energy Journal immediately at time 0.13 Switching is optimal if and only if NPV eor exceeds NPV bas .14 Predicting the response to EOR Implementing the above estimation of NPV requires estimates of an FRCs response to EORessentially a production function that projects time paths of incremental oil recovery and CO2 production. As noted, we use the analog method laid out in the appendix to generate these estimates. Two analog schedules are necessary to calculate NPV eor . One schedule predicts incremental oil production Qop,inc , which is then added to predicted baseline production to obtain overall t EOR production. The other schedule predicts CO2 production Qcp , all of which t is assumed to be recycled and re-injected. Carbon purchases Qcm are calculated t by subtracting predicted production from CO2 injection. Completing the analysis Completing the economic analysis (for a given oil price and CO2 price) requires combining the predicted production, recycling, and purchase paths with cost data. There are a number of cost categories that enter in the NPV calculation. Investment costs are the up-front expenditures needed to get an EOR project underway; they are the variable K in the expression for NPV eor and are typically large. Apart from the cost of constructing spur pipelines to connect a project with trunk pipelines for CO2 and oil (a cost not included in our analysis), the three main cost components are those of (i) drilling new wells, (ii) reconguring (working over) well equipment, and (iii) constructing a CO2 recycling plant. Costs of drilling new wells are typically very high. This is particularly true in older elds, where many original wells may have been capped because their secondary-phase production declined to unprotable levels. The spacing between the remaining, active wells may then be too large for an EOR project. Wellworkover costs include the costs of replacing tubing in existing wells with tubing that can resist the corrosion by carbonic acid created when CO2 mixes with water, as well as the costs of laying new pipelines in the eld to pump CO2 to individual wells. Lastly, CO2 recycling plant costs must be incurred to process the CO2 that eventually comes back to the surface through producing wells. Incremental operating costs for EOR projects also have three main components. They consist of (i) standard operating costs for incremental liquid pro13. Realistically, converting an oil eld currently under secondary recovery to EOR may take considerable time, and therefore the investment of K could be spread over several months, or even years. Our analysis does not account for this possibility. 14. Our analysis does not consider possible alternative methods of EOR, such as injection of methane or nitrogen. In principle, nothing prevents operators from trying such methods even after completing a CO2 ood. In practice, however, this is unlikely to occur, as the CO2 ood would leave little or no oil that these alternative (and generally more expensive) methods would be able to recover.

The Economics of Enhanced Oil Recovery / 43 duction and incremental wells, (ii) costs of purchasing CO2, and (iii) costs of recycling CO2. Standard operating costs are those of labor, maintenance, and fuel required for both waterooding and EOR operations. Some of these are roughly proportional to the amount of liquids produced, others to the number of wells operated. CO2 purchasing costs cover the costs of CO2 production and compression at its source, and transportation from the source to the FRC. CO2 recycling costs consist largely of the costs of energy (electricity or gas) required to fuel the recompression pumps in the recycling plant, together with some labor and maintenance costs associated with that plant. 3. INCREMENTAL OIL SUPPLY AND CO2 DEMAND FOR THE PRB The results of running the model to predict both the incremental oil supply and the derived demand for CO2 from EOR in the PRB are shown in Figures 2 and 3. More specically, Figure 2 shows, for oil prices plotted on the vertical axis and a CO2 price of $3 per thousand cubic feet (Mcf),15 the projected

Figure 2. Cumulative incremental oil supply at CO2 price pc $3 /Mcf using the Lost Soldier-Tensleep analog (LST) and the Denver Unit-San Andres analog (DSA)

15. Mcf is the standard quantity unit used by U.S. oil eld operators for gases. Because the volume of a gas depends on its temperature and pressure, the unit is dened at a reference pressure of 60

44 / The Energy Journal Figure 3. Cumulative CO2 demand at oil price po $100 /bo using the Lost Soldier-Tensleep analog (LST) and the Denver Unit-San Andres analog (DSA)

cumulative incremental oil recovery, denoted Qo and measured in millions of barrels per year (MMbo), for all FRCs that at these prices could protably switch to EOR. In other words, Qo represents the difference between projected cumulative oil recovery from these FRCs were they to continue waterooding and projected cumulative oil recovery were they to switch to CO2 ooding. Similarly, Figure 3 shows, for CO2 prices on the vertical axis and an oil price of $100 per barrel, the corresponding cumulative deliveries of CO2, denoted Qc and measured in billions of cubic feet (Bcf). Note that, because the schedules show projected cumulative volumes rather than rates, they are not supply or demand curves in the standard sense (although we shall refer to them as such for brevity). The projected time frame over which the cumulative volumes are realized varies signicantly across FRCs and depends also on the oil and CO2 price, but is usually on the order of several decades. The main message of Figures 2 and 3 is that oil supply and CO2 demand projections using the analog method are highly sensitive to the analog used. In
degrees Fahrenheit and a reference temperature of 14.7 psi (1 atmosphere). The actual pressure at which pipelines deliver CO2 to oil elds is typically much higher, between 1250 and 2250 psi (McCoy and Rubin, 2008). At these pressures and ambient temperatures, the CO2 is either a liquid or a supercritical uid, where the latter has properties of both a liquid and a gas.

The Economics of Enhanced Oil Recovery / 45 both gures, the curve on the left is derived using the Lost Soldier-Tensleep (LST) project in Wyoming as analog, whereas the curve on the right is derived using the Denver Unit-San Andres (DSA) project in West Texas as analog. Figure 4 plots the dimensionless curves generated from the LST and DSA projects historical EOR performance. It shows that, at the point in time when cumulatively one HCPV worth of CO2 and water had been circulated through the LST project after it switched to EOR, the project had produced cumulatively 0.059 HCPV worth of incremental oil. In contrast, the DSA project had at that same point produced 0.108 HCPV, and was therefore 1.8 times more productive. A number of differences between the LST and DSA projects may be relevant to explaining their quite dissimilar EOR performance. One difference concerns timing. According to Brokmeyer et al. (1996), CO2 ooding of the LST project commenced when 44.3% of OOIP had been recovered in the primary and waterooding stages, and when the waterooding oil cut (the share of oil in overall liquid production) had dropped to as little as 3%. In contrast, CO2 ooding at the DSA project commenced when according to Hsu et al. (1997) only 35.5% of OOIP had been recovered, and when according to Tanner et al. (1992) the oil cut was still 14%. However, Jarrell et al. (2002) note that reservoir simulation studies of west Texas reservoirs have shown that the rate of incremental oil recovery to CO2 ooding is only slightly sensitive to the stage of waterooding Figure 4. Comparison of the dimensionless curves for incremental oil production for the Lost Soldier-Tensleep analog (LST) and the Denver Unit-San Andres analog (DSA)

46 / The Energy Journal when CO2 ooding starts, as long as the reservoir pressure is well above the thermodynamic MMP. Both the LST and DSA projects satisfy the latter condition. More important, perhaps, is the difference in lithology of the project reservoirs: whereas the Tensleep formation is a sandstone, the San Andres formation is a carbonate. Several review studies of existing EOR projects (Holtz et al., 1999; Christensen et al., 2001; Hustad, 2004) have noted that CO2 ooding tends to yield somewhat higher incremental recovery rates in carbonate reservoirs than in sandstone ones. Hustad (2004), for example, notes that of 115 worldwide CO2 oods in a database maintained by the Norwegian consulting rm SINTEF Petroleum Research, average incremental oil recoveries for sandstone and carbonate reservoirs are 12% and 17% of OOIP, respectively. A third difference concerns the degree of fracturing of the two reservoirs, which is much higher for the Tensleep. Injected CO2 is more likely to ow to production wells through such fractures, bypassing much of the oil and hence reducing incremental oil recovery. This may explain why the LST projects ultimate recovery appears to below the sandstone average (its dimensionless curve in Figure 4 asymptotes to roughly 9%). Lastly, the injection history of the two projects has been quite different as well. Whereas the LST project has consistently maintained a 1:1 ratio of water to CO2 (commonly referred to as the water-alternating-gas or WAG ratio), the DSA project started out injecting pure CO2, and thereafter gradually increased the WAG ratio. Whatever the full explanation for the differential EOR performance of the two analog projects may be, it is evident that the choice of analog signicantly affects estimates of how much incremental oil the examined candidate projects in the PRB will produce, how much CO2 they will demand, and thereby how protable they are likely to be. At the individual project level, this is illustrated in Figure 2 by the rightward jump in both oil supply curves when CO2 ooding of the large Finn-Shurley Turner eld becomes protable. If the LST analog is used, this is estimated to require an oil price of at least $113, and the eld is then estimated to cumulatively produce 20.8 million incremental barrels of oil over its economic lifetime. But if the DSA analog is used, the same eld is estimated to become protable when the oil price is only $93, and to cumulatively produce as much as 56.5 million barrels. At the aggregate level, Figure 2 shows that at our reference oil price of $100 and CO2 price of $3, estimated incremental oil supply for the basin as a whole is more than three times as high if the DSA analog is used than if the LST analog is used (although the ratio is smaller at both lower and higher oil prices). Figure 3 shows that estimated CO2 demand is higher with the DSA analog as well. As noted in the previous section, the analog method is considered more reliable the more closely the reservoir characteristics of a proposed project match those of the analog used. Since all elds in our study produce from sandstone

The Economics of Enhanced Oil Recovery / 47 rather than carbonate reservoirs16 and a handful in fact produce from reservoirs that are part of the Tensleep formation, our estimates based on the LST analog are perhaps more likely to be predictive. That said, many (about a third) of the elds in our study produce from the Minnelusa formation, a carbonate-rich sandstone that tends to be much less fractured than the Tensleep. For these elds, the LST analog may well turn out to underpredict EOR performance.17 As for the maturity of the elds in our study (insofar as this matters for EOR performance, despite Jarrell et als assertion to the contrary), the median current recovery factor for the FRCs in our study is 30% of OOIP, which is closer to that of the DSA project when it switched to EOR, but the median oil cut is 7%, which is closer to the initial oil cut of the LST project. More generally, the considerable heterogeneity of reservoirs in the PRB implies that the true aggregate curves are likely to differ from both of the curves plotted. Nevertheless, subject to these caveats and inevitable data constraints,18 the results presented here provide at least a rough, order-of-magnitude estimate of EOR market conditions, illustrating the potential usefulness of the analog method. To put the incremental oil supply estimates in perspective, cumulative oil production to date from all 97 FRCs in our study combined is 978 MMbo, or about 25% of their combined OOIP of 3.9 Bbo. Current combined oil production is 5.9 MMbo/yr, but is declining: at our baseline oil price of $100, we estimate cumulative future production under continued waterooding to be just 63 MMbo. Figure 2 shows that at our baseline CO2 price of $3/Mcf and using the LST analog, estimated cumulative future production from EOR is 74.5 MMbo higher, or 137.5 MMbo in total. In Figure 1, FRCs that can protably switch to EOR at these reference prices are plotted as circles, with the circle areas proportional to each FRCs projected incremental oil supply. Note that similar maps showing each FRCs CO2 demand under various price scenarios could be used, for example, to plan the trajectory of CO2 pipelines. 4. SENSITIVITY ANALYSIS In practice, many of the geological and engineering parameters used in the analog method (as listed in Table 3 of the appendix) are measured quite imprecisely. For example, measures such as reservoir depth, thickness, and permeability are typically only available as averages for a given FRC, ignoring pos16. Some elds in the PRB do produce from carbonate reservoirs, but none of these met the cumulative production hurdle for being part of our study. 17. Personal communication with J. Michael Boyles, a geologist previously with the Enhanced Oil Recovery Institute at the University of Wyoming. 18. Better data will not be forthcoming until individual operators actively contemplate switching to EOR, at which point they will want to invest in detailed geological studies and modeling exercises for their specic FRC.

48 / The Energy Journal sibly signicant heterogeneity in these measures across different sections of the reservoir. The key scaling parameter of injectivity is usually estimated from historical per-well water injection rates, even though these rates may be highly variable both across wells and over time. As for HCPV, the other key scaling parameter, this is sometimes based on published estimates of an FRCs original oil in place; sometimes on a volumetric calculation combining estimates of the reservoirs area, thickness, porosity, and residual oil saturation; and in rare cases on simple extrapolation from cumulative extraction to date. All three methods have drawbacks, and the resulting estimate should not be taken as more than a rough guess. Fortunately, for most of these parameters there is no reason to suspect a systematic bias in one direction or another across all FRCs in a basin. As a result, when it comes to estimating aggregate oil supply or CO2 demand for all FRCs combined, it is reasonable to expect that errors will tend to cancel out. To investigate how sensitive our estimates are to variations in key geological and engineering parameters, we performed a Monte Carlo analysis, the results of which are presented in the top panel of Table 2. Each of the parameters listed in the rst column was randomized by selecting, independently for each FRC, 200 values from a symmetric beta distribution with mean li equal to our central estimate of the parameter for the i-th FRC, support (0,2 li ) , and 95% Table 2. Results of sensitivity analysis using the Lost Soldier-Tensleep analog. Geological/engineering parameters were varied independently across FRCs to generate 95% condence intervals for oil supply and CO2 demand. Cost and other parameters were varied by 50% in the same direction for all FRCs simultaneously.
Change in oil supply Geological/engineering parameters Injectivity Original oil in place Reservoir area Cost parameters Royalties, severance & property taxes Well drilling costs Well conversion costs Gas processing costs (xed) Gas processing costs (variable) Other operating costs Other parameters Reference CO2 price Reference oil price Internal rate of return Maximum pattern size 95% conf. intvl. 7.4% 9.4% 2.7% f 50% 23.5% 20.9% 15.5% 5.6% 7.4% 7.6% f 50% 18.4% 39.5% 34.3% 19.1% 35.5% 9.1% 11.0% 12.9% F 50% 21.1% 11.7% 9.7% 3.7% 5.4% 4.1% F 50% 21.0% 74.9% 92.0% 57.2% Change in CO2 demand 95% conf. intvl. 12.9% 12.5% 8.3% f 50% 53.1% 38.1% 36.2% 14.0% 19.1% 20.6% f 50% 62.4% 33.2% 81.9% 11.9% 11.1% 36.9% F 50% 41.3% 15.8% 17.2% 9.2% 12.2% 13.2% F 50%

The Economics of Enhanced Oil Recovery / 49 condence interval (0.5 li ,1.5 li ) . The second and third columns show the resulting 95% condence intervals for incremental oil supply. The intervals are expressed as percentage deviations from our Qo estimate shown in Figure 2, LST after averaging these deviations over the oil-price range shown (but dropping values at which supply is zero). The fourth and fth columns show the analogous 95% condence intervals for CO2 demand. The rst row of the Table therefore shows, for example, that if the uncertainty about injectivity rates is represented by the above-described beta distributions, then incremental oil supply lies between 7.4% below and 9.1% above the Qo estimate shown in Figure 2 for 95% LST of the simulation trials. Error independence across FRCs is of course not a reasonable assumption for the cost parameters discussed in Section 2; deviations from our central estimates for these parameters will clearly affect all FRCs in the same way. The second panel of Table 2 therefore shows, for each of the cost categories listed in the rst column, the average effects on incremental oil supply and CO2 demand of simply reducing or increasing the relevant per-unit costs by 50%. The rst row of the panel shows, for example, that if the royalty rate as well as severance and property tax rates were to be simultaneously reduced (increased) by 50%, the resulting incremental oil supply would on average increase by 23.5% (drop by 21.1%) relative to the Qo estimate shown in Figure 2. Clearly, the relative LST magnitudes of the induced changes are reective of the different cost categories share of overall EOR costs. Next to taxes, the up-front investment costs associated with drilling new wells are the most important cost category, followed by the upfront costs associated with converting and equipping wells for EOR use. The third panel of Table 2 shows the effects of varying four other key parameters by 50% in either direction. Doing so for our reference CO2 price of $3/Mcf has an effect on oil supply comparable in magnitude to that of varying taxes or drilling costs. Dropping our reference oil price from $100/bo to $50/bo shifts in the CO2 demand curve by 74.9% on average, whereas increasing the reference price to $150/bo increases demand by 62.4% on average. A further parameter of particular interest is the discount rate applied by oil-eld operators in calculating a proposed projects NPV, i.e., their internal rate of return (IRR). According to industry contacts, a common IRR applied to prots net of royalties, severance taxes, and property taxes but gross of income taxes is 20%; this is the rate used in the simulations underlying Figures 2 and 3. Note that the rate is considerably above conventional riskless rates of return, reecting the high level of project failures in the oil industry. The next-to-last row of Table 2 reports the average effects of reducing the IRR for all FRCs to 10%, or raising it to 30%. A nal parameter considered in our sensitivity analysis is the maximum pattern size applied to EOR oods. Because many oil elds in the PRB are approaching the economic limit of their secondary recovery phase, it is not uncommon for operators to either temporarily or permanently shut down wells of underperforming patterns. Were these operators to switch to EOR, however, they

50 / The Energy Journal may well bring temporarily abandoned wells back into operation, or even drill new wells to achieve a desired well conguration. Our baseline simulations assume that operators will do so up to the point where the average EOR pattern size is at most 80 acres.19 Reducing this maximum pattern size has two opposing effects on EOR protability. On the one hand, it reduces protability, by increasing the number of new wells that must be drilled and thereby the up-front capital cost of switching to EOR. On the other hand, reducing the pattern size also increases the rate at which CO2 cycles through a reservoir, thereby speeding up incremental oil recovery and increasing protability.20 We nd, however, that the former effect dominates over the price ranges for oil and CO2 considered: reducing the maximum pattern size to 40 acres shifts in the oil supply curve by 34.3% on average, while increasing the pattern size to 120 acres shifts out supply by 35.5% on average. 5. CONCLUDING DISCUSSION In this paper, we have shown how, given sufciently detailed data on the geology and extraction history of FRCs, along with the documented experiences of mature or completed EOR projects, it is possible to forecast which FRCs in an oil-producing region can protably implement EOR at given prices for oil and CO2. Aggregating these forecasts generates region-wide incremental oil production and CO2 demand schedules. The availability of such forecasts has clear benets to EOR development. Knowing the location of other candidate EOR projects facilitates cost sharing and coordination of CO2 and oil shipments by projects in proximity to each other. Knowing the derived demand for pure CO2 allows emitters to consider locating closer to points that will demand CO2 as a commodity. It may also help pipeline authorities to more efciently design delivery systems connecting emitters to EOR projects. The analog method used to generate the forecasts essentially extrapolates experience at an existing, mature EOR projectthe analogto new, candidate projects. Not surprisingly, we nd that the forecasts are quite sensitive to the specic choice of analog. Ideally, this choice should be driven by the geological properties of each candidate project, which should match those of the analog as closely as possible. Currently, however, only a small number of analogs for both incremental oil production and CO2 circulation are available. This problem should diminish over time, as EOR becomes more widely applied.

19. For the common ve-spot pattern (see footnote 9) this corresponds to an average well spacing of 40 acres. 20. In terms of Figure 4, halving the pattern size halves the time by which, for example, 1 HCPV worth of CO2 and water can be injected into the reservoir, thereby halving the time by with 0.059 HCPV worth of incremental oil is recovered.

The Economics of Enhanced Oil Recovery / 51 An important set of questions we leave for future work is how potential subsidies for CO2 sequestration might affect market conditions for EOR, and how the analog method might be adapted to forecast these effects. As noted for example by Jessen et al. (2005), EOR operators may turn to co-optimization of oil recovery and CO2 sequestration, by adjusting the CO2 content of their injection stream. They may also choose to continue CO2 injection even after incremental oil has been extracted. Although such changes would not invalidate the analog method used in this paper, they would imply a need for adjustments. Specically, given that existing EOR projects have been operated if anything with the aim of minimizing CO2 sequestration, dimensionless curves based on such projects experience are likely to become less accurate as predictors of future projects performance. Instead, new dimensionless curves will have to be developed, possibly based on reservoir simulations. REFERENCES
Brokmeyer, R. J., D. C. Borling, and W. T. Pierson (1996). Lost Soldier Tensleep CO2 Tertiary Project, Performance Case History: Bairoil, Wyoming. Paper # SPE 35191. Christensen, J. R., E. H. Stenby, and A. Skauge (2001). Review of WAG Field Experience. SPE Reservoir Evaluation & Engineering, 4(2): 97106. Dahowski, R. T., J. J. Dooley, C. L. Davidson, S. Bachu, and N. Gupta (2005). Building the Cost Curves for CO2 Storage: North America. Report 2005/3, IEA Greenhouse Gas R&D Programme. DOE (2006). Basin Oriented Strategies for CO2 Enhanced Oil Recovery: Rocky Mountain Region. Washington, DC: Department of Energy, Ofce of Fossil Energy, Ofce of Oil and Natural Gas, Prepared by Advanced Resources International. DOE (2007). Carbon Sequestration Atlas of the United States and Canada. Washington, DC: Department of Energy, Ofce of Fossil Energy, National Energy Technology Laboratory. DOE (2008). Storing CO2 with Enhanced Oil Recovery. Washington, DC: Department of Energy, National Energy Technology Laboratory, Prepared by V. Kuuskraa, R. Ferguson, Advanced Resources International, DOE/NETL-402/1312/02-07-08. EIA (2006). Oil and Gas Lease Equipment and Operating Costs 1988 Through 2006. Energy Information Administration. Document available online at http://www.eia.doe.gov/pub/oil_gas/ natural_gas/data_publications/cost_indices_equipment_production/current/coststudy.html. Emera, Mohammed K. and Hemanta K. Sarma (2005). Use of Genetic Algorithm to Estimate CO2Oil Minimum Miscibility PressureA Key Parameter in Design of CO2 Miscible Flood. Journal of Petroleum Science and Engineering, 46(12): 3752. EPA (2008). Inventory of U.S. greenhouse gas emissions and sinks: 19902006. Washington, DC: Environmental Protection Agency, EPA 430-R-08-005. Fox, Charles E. (1995). Cost Estimation Parameters. University of Texas of the Permian Basins Center for Energy & Economic Diversication (CEED) CO2 Flooding Shortcourse No. 2, September 12, 1995, Section F. Grifn, James M. (2009). A Smart Energy Policy: An Economists Rx for Balancing Cheap, Clean, and Secure Energy. New Haven, CT: Yale University Press. Holtz, Mark H., Peter K. Nance, and Robert J. Finley (1999) Reduction of Greenhouse Gas Emissions through Underground CO2 Sequestration in Texas Oil and Gas Reservoirs. Digital Publication Series, 99-01, Gulf Coast Carbon Center (GCCC). Holtz, Mark H., Peter K. Nance, and Robert J. Finley (2001). Reduction of Greenhouse Gas Emissions through CO2 EOR in Texas. Environmental Geosciences, 8(3): 187199. Hsu, C-F., J. I. Morell, and A. H. Falls (1997). Field-scale CO2-Flood simulations and their impact on the performance of the Wasson Denver Unit. SPE Reservoir Engineering, 12(1): 411.

52 / The Energy Journal

Hustad, Carl-W. (2004). Large-Scale CO2 Sequestration on the Norwegian Continental Shelf: A Technical, Economic, Legal and Institutional Assessment. Project No., 151393/210, Norwegian Research Council. Jarrell, P. M., C. E. Fox, M. H. Stein, and S. L. Webb (2002). Practical Aspects of CO2 Flooding. SPE Monograph Series. Society of Petroleum Engineers. Jessen, Kristian, Anthony R. Kovscek, and Franklin M. Orr, Jr. (2005). Increasing CO2 storage in oil recovery. Energy Conversion and Management, 46(2): 293311. Lucken, J. E. (1969). Raven Creek. WGA Earth Science Bulletin, 2(4): 2427. Mack, J. C. and M. L. Duvall (1984). Performance and Economics of Minnelusa Polymer Floods. Paper # SPE 12929. McCoy, Sean T. and Edward S. Rubin (2008). An Engineering-Economic Model of Pipeline Transport of CO2 with Application to Carbon Capture and Storage. International Journal of Greenhouse Gas Control, 2(2): 219229. McPherson, Brian J. O. L., Weon Shik Han, and Barret S. Cole (2008). Two Equations of State Assembled for Basic Analysis of Multiphase CO2 Flow and in Deep Sedimentary Basin Conditions. Computers & Geosciences, 34(5): 427444. Moritis, Guntis (2008). More US EOR projects start but EOR production continues decline. Oil & Gas Journal, 106(15): 4146. NPC (1984). Enhanced Oil Recovery. Washington, DC: National Petroleum Council. Tanner, C. S., P. T. Baxley, J. G. Crump, III, and W. C. Miller (1992). Production Performance of the Wasson Denver Unit CO2 Flood. Paper # SPE 24156.

APPENDIX In this appendix, we illustrate the analog method using a medium-sized eld in our study area, Raven Creek-Minnelusa (RCM), as a worked example.21 Table 3 lists the data required for applying the analog method, although strictly speaking the list contains some redundancies. Reservoir HCPV, for example, can be estimated either as OOIPBoi or as Ah Soi 43,560(ft2/acre)/5.615(ft3/rb). Similarly, injectivity can be estimated either from past water injection rates or from reservoir thickness h and permeability k. Step 1: Estimate per-pattern HCPV. Mack and Duvall (1984) provide a direct estimate of RCMs OOIP, so we estimate HCPV for the reservoir as a whole as OOIPBoi 81,169,000 rb. (The alternative formula Ah Soi 43,560/5.615 would yield a somewhat higher estimate of 85,052,000 rb.) Assuming that 80% of the total reservoir area will be covered with 80-acre patterns (our baseline maximum pattern size) the CO2 ood will have n ceil(0.82,975/80) 30 patterns. Letting H denote per-pattern HCPV, we therefore have H 2,706,000 rb. Step 2: Estimate water and CO2 injection rates. We assume that, averaged over the water and CO2 injection cycles, per-well injectivity for the EOR wi project is equal to that for the waterood, so qi, eor q0 36,833 bl/ptn-mnth. Assuming equal-sized alternating slugs of water and CO2 will be injected (i.e., a

21. Readers interested in further detail are referred to a presentation available from the University of Wyomings Enhanced Oil Recovery Institute (EORI), at http://eori.gg.uwyo. edu/downloads/ CO2_Conf_2009/Presentation%20PDF/ProtableCO2ProWyo092909.pdf. The results shown in that presentation are based on less recent production/injection data and cost gures, however.

The Economics of Enhanced Oil Recovery / 53 Table 3. Data requirements for the analog method, with example values for the Raven Creek-Minnelusa eld
Variable OOIP Boi Boc API T MMP BCO2 pf d h A k Soi np c nic nta op Q0 d wp Q0 wi q0 R
a b

Value Original oil in place Oil formation vol. factor (initial) Oil formation vol. factor (current) Oil gravity Temperature Minimum miscibility pressure CO2 formation vol. factor Fracture pressure Depth Thickness Area Porosity Permeability Oil saturation (initial) Existing producer wells Existing injector wells Temporarily abandoned wells Oil production (end of waterood) Oil production decline rate (e.o.w.) Water production (e.o.w.) Water injection per well Gas-oil ratio 73,790,000 1.1 1.089 33 200 3,082 0.7001 5,548 8,380 37 2,975 0.12 50 0.83 15 13 12 6,833 0.45 396,536 36,833 0 stba rbb/stb rb/stb API F psi rb/Mcf psi ft ft acres (fraction) md (fraction)

Source Mack and Duvall (1984) TORISc TORIS TORIS TORIS Derivedd Derivede WOGCCf Lucken (1969) Lucken (1969) Lucken (1969) Lucken (1969) Lucken (1969) TORIS WOGCC WOGCC WOGCC IHSg (estimated) h IHS (estimated) i IHS (estimated) j IHS (estimated) k IHS (estimated) l

stb/mo %/mo bl/mo bl/wl-mo Mcf/bl

Stock-tank barrels (42 gallons U.S. at 60 F and 14.7 psi). Reservoir barrels (42 gallons U.S. at reservoir temperature and pressure). c Total Oil Recovery Information System database, U.S. Department of Energy, National Petroleum Technology Ofce.http://www.netl.doe.gov/technologies/oil-gas/Software/database.html. d Derived from API and T using DOE (2006) correlation MWC 5 4247.98641API 0.87022 combined with Emera and Sarma (2005) correlation MMP 0.00726538 T1.164 (MWC 5 ) 1.2785 . e Derived from T and MMP using sw_SPECIFIC_DENSITY.m Matlab subroutine provided by McPherson et al. (2008) at http://www.iamg.org/documents/oldftp/VOL34/v34-05-01.zip f Wyoming Oil and Gas Conservation Commission. http://wogcc.state.wy.us. g IHS PI/Dwights PLUS database. http://energy.ihs.com. h op Predicted end value Q0 from linear regression logQop dt of log monthly oil production on a t time trend t 35, 34,...0 for the most recent 36 months of production data. i Estimated coefcient on t in above regression. j Estimated using same procedure as that for oil production, but using log monthly water production. k Median water injection rate per actively injecting well since 1985. l Median ratio of monthly hydrocarbon gas production to oil production for the most recent 36 months of production data.

1:1 WAG ratio), the average rate of water injection will then be qwi, eor 0.5 qi, eor 18,416 bl/ptn-mnth, while that of CO2 will be qci 0.5 qi, eor / BCO2 41,788 Mcf/ptn-mnth.

54 / The Energy Journal Step 3: Estimate time paths of incremental oil and CO2 production using the dimensionless curves. Dividing qi, eor by H gives a total injectivity of 0.01361 HCPV/ptn-mnth. Cumulating this for any given number of months after starting the CO2 ood yields a point on the horizontal axis of the dimensionless curve for incremental oil production (see Figure 4). Reading off the corresponding point on the vertical axis yields cumulative incremental oil production by that same number of months in HCPV/ptn, or, after multiplying by H/ Boc , in stb/ptn. Differencing the cumulative values yields the corresponding time path of incremental oil production rates, qop,inc , in stb/ptn-mnth. Lastly, multiplying by the number of t patterns n yields the predicted time path of incremental oil production for the eld as a whole, Qop, inc , in stb/mnth. Applying the same steps to the dimensionless t curve for CO2 production (but multiplying cumulative production in HCPV/ptn on the vertical axis by H/ BCO2 ) yields the predicted time path of CO2 production, Qcp , in Mcf/mnth. t Step 4: Estimate time paths of baseline and EOR oil production, water production, non-CO2 (hydrocarbon) gas production, and EOR purchases of CO2. Baseline oil production Qop, bas from a continued waterood is assumed to cont op tinue declining at rate d, so Qop, bas Q0 e dt . EOR oil production is then t op, eor op, bas op, inc Qt Qt Qt . Overall water production is assumed to change in a manner that keeps overall liquids (oil plus water plus possibly CO2) production at reservoir conditions constant over time, and equal to overall liquids injection. wp op Baseline water production is therefore Qwp, bas Q0 Q0 (1 e dt ) Boc . EOR t wp, eor i, eor op, eor cp water production is Qt nq Qt Boc Qt BCO2 . Hydrocarbon gas production is assumed to maintain a constant ratio to oil production, so Qgp, bas RQop, bas and Qtgp, eor RQtop, eor . For RCM, no gas production is ret t ported, however, which we interpret to imply that R 0 . Lastly, CO2 purchases Qcm are calculated as the difference between CO2 production (all of which is t recycled) and injection, so Qcm Qcp nqci . t t Step 5: Estimate up-front costs of well drilling, conversion, and equipment. With on average one injector and one producer for each of n 30 patterns, the CO2 ood will require 2 n np nic nta 20 new wells to be drilled, at c (given RCMs depth in the PRB) $1.31 million per well.22 Converting and equipping any kind of well (newly drilled, existing injector, existing producer, or temporarily abandoned) for use as a CO2-ood injector cost $152,000 plus $19/ft; converting and equipping wells for use as CO2-ood producers cost $142,000 for existing producers, and $325,000 plus $19/ft for newly drilled wells or existing non-producers.23 Total costs sum to about $45.0 million. Step 6: Estimate the up-front capital cost of gas recycling. The required capacity of the gas recycling plant is determined by the peak of projected com22. Based on personal communication with Bob King, engineer at Wold Oil Properties, Inc., in Casper, Wyoming. All costs are for the year 2006, the most recent year for which oil-industry cost indices are available from the Energy Information Administration (EIA, 2007). 23. Based on personal communication with Charles E. Fox, Vice President of Operations and

The Economics of Enhanced Oil Recovery / 55 bined production of CO2 and (in this case zero) hydrocarbon gas, which for RCM is 36.9 thousand Mcf/day. We assume the gas plant operates at inlet pressure ps 225 psi, and that the CO2 ood is operated at a reservoir injection pressure of max( pf 200,MMP) 5,348 psi. Subtracting from this the pressure gain of 0.28(psi/ft) 8,380 2,346 psi obtained from the CO2 column in the injection well yields the plants required discharge pressure, pd 3,001 psi. Based on a rule-of-thumb formula provided by Fox (1995), the gas throughput capacity and pd / ps ratio combined yield an estimated power requirement for the plant of 6,361 hp, which at a cost per hp of $1,52024 yields a capital cost for the recycling plant of about $9.7 million. Step 7: Estimate operating costs of gas recycling. Labor and maintenance operating costs for gas recycling are $80 per hp-year. Electricity costs, at 7,000 kWh/hp-year and Wyomings electricity price for industrial users of 4.03 cents/ kWh, amount to an additional $282 per hp-year. The overall gas recycling operating cost is about $2.30 million/year. Step 8: Estimate other operating costs. Based on data in EIA (2007), operating costs were the waterood to continue are estimated at $0.233 per barrel of total liquids produced plus $31,000 per well-year for each of RCMs current 28 wells. Based on a rule of thumb given in Fox (1995), the corresponding costs for the CO2 ood are assumed to be 10% higher, whereby the per-well costs apply to the CO2 oods 60 wells. Step 10: Determine the terminal times for the continued waterood and CO2 ood. At our reference oil price of $100, oil revenues net of 16% royalty, 6% severance tax, and 6% property tax drop below operating costs after Tbas 20.5 years of continued waterooding. At the same oil price and our reference CO2 price of $3/Mcf, net revenues from the CO2 oods total oil production (i.e., baseline and incremental oil production combined) drop below operating costs, including the cost of CO2 purchases, after Teor 13.5 years. Step 11: Compare the NPV of the continued waterood and CO2 ood. At the reference prices and our baseline internal rate of return of r 0.20 , the NPV bas of continuing the waterood is $15.1 million, while the NPV eor of switching to a CO2 ood, net of initial capital costs, is substantially higher, at $89.6 million. Switching is therefore optimal. Step 12: Calculate cumulative incremental oil production and CO2 demand. Cumulative oil production under the continued waterood, up to Tbas , is 1.016 million barrels, while that under the CO2 ood, up to Teor , is 6.870 million barrels. Incremental production is therefore 5.854 million barrels, or 7.9% of OOIP. Cumulative CO2 demand is 50.4 Bcf.

Technology at Kinder Morgan CO2 Company, LP in Houston, Texas, updating gures given in Fox (1995). 24. Based on personal communication with Mark Nicholas, President of Nicholas Consulting Group in Midland, Texas.

56 / The Energy Journal