the economics of combining co2-eor with storage klaas van ...€¦ · the economics of combining co...

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

The Economics of CombiningCO2-EOR with Storage

Klaas van ’t Veld

University of Wyoming

Department of Economics & FinanceCenter for Energy Economics and Public Policy

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Outline

• Engineering-economics studies

• Economic study

• Effect of oil prices and CO2-storagesubsidies

• Common misconception

• Optimal policy

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Outline

• Engineering-economics studies

• Economic study

• Effect of oil prices and CO2-storagesubsidies

• Common misconception

• Optimal policy

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Outline

• Engineering-economics studies

• Economic study

• Effect of oil prices and CO2-storagesubsidies

• Common misconception

• Optimal policy

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Outline

• Engineering-economics studies

• Economic study

• Effect of oil prices and CO2-storagesubsidies

• Common misconception

• Optimal policy

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Outline

• Engineering-economics studies

• Economic study

• Effect of oil prices and CO2-storagesubsidies

• Common misconception

• Optimal policy

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Outline

• Engineering-economics studies

• Economic study

• Effect of oil prices and CO2-storagesubsidies

• Common misconception

• Optimal policy

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Engineering-Economics Studies• Ashgari, K., A. Al-Dliwe (2004) “Optimization of carbon dioxide sequestration and

improved oil recovery in oil reservoirs,” GHGT-7 Proceedings

• Babadagli, T. (2006) “Optimization of CO2 injection for sequestrationenhanced oilrecovery and current status in Canada,” In Lombardi et al., eds. Advances in theGeological Storage of Carbon Dioxide

• Forooghi, A., Hamouda, A.A. (2009) “Co-optimization of CO2 EOR andsequestration in a North Sea chalk reservoir,” SPE 125550

• Ghomian, Y. et al. (2010) “Efficient investigation of uncertainties in flood designparameters for coupled CO2 sequestration and enhanced oil recovery,” SPE139738

• Jahangiri, H.R., Zhang, D. (2011) “Optimization of the net present value of carbondioxide sequestration and enhanced oil recovery,” OTC 21985

• Jessen, K. et al. (2005) “Increasing CO2 storage in oil recovery,” EnergyConversion and Management 46: 293–311

• Kovscek, A.R., Cakici, M.D. (2005) “Geologic storage of carbon dioxide andenhanced oil recovery. II. Cooptimization of storage and recovery,” EnergyConversion and Management 46: 1941–1956

• Pamucku, Y.Z., Gumrah, F. (2009) “A numerical simulation study ofcarbon-dioxide sequestration into a depleted oil reservoir,” Energy Sources, PartA 31: 1348–1367

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Engineering-Economics Studies• Ashgari, K., A. Al-Dliwe (2004) “Optimization of carbon dioxide sequestration and

improved oil recovery in oil reservoirs,” GHGT-7 Proceedings

• Babadagli, T. (2006) “Optimization of CO2 injection for sequestrationenhanced oilrecovery and current status in Canada,” In Lombardi et al., eds. Advances in theGeological Storage of Carbon Dioxide

• Forooghi, A., Hamouda, A.A. (2009) “Co-optimization of CO2 EOR andsequestration in a North Sea chalk reservoir,” SPE 125550

• Ghomian, Y. et al. (2010) “Efficient investigation of uncertainties in flood designparameters for coupled CO2 sequestration and enhanced oil recovery,” SPE139738

• Jahangiri, H.R., Zhang, D. (2011) “Optimization of the net present value of carbondioxide sequestration and enhanced oil recovery,” OTC 21985

• Jessen, K. et al. (2005) “Increasing CO2 storage in oil recovery,” EnergyConversion and Management 46: 293–311

• Kovscek, A.R., Cakici, M.D. (2005) “Geologic storage of carbon dioxide andenhanced oil recovery. II. Cooptimization of storage and recovery,” EnergyConversion and Management 46: 1941–1956

• Pamucku, Y.Z., Gumrah, F. (2009) “A numerical simulation study ofcarbon-dioxide sequestration into a depleted oil reservoir,” Energy Sources, PartA 31: 1348–1367

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc economic assumption

Assumption: The producer’s goal, or “objective function,” is aweighted sum of oil production and CO2 storage

E.g., Kovscek and Cakici (2005):

w1 ×N∗

p

OIP︸︷︷︸Net oil

production

+ w2 ×V R

CO2

V R︸ ︷︷ ︸CO2

storage

with weights w1 = w2 = 0.5.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc economic assumption

Assumption: The producer’s goal, or “objective function,” is aweighted sum of oil production and CO2 storage

E.g., Kovscek and Cakici (2005):

w1 ×N∗

p

OIP︸︷︷︸Net oil

production

+ w2 ×V R

CO2

V R︸ ︷︷ ︸CO2

storage

with weights w1 = w2 = 0.5.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc economic assumption

Assumption: The producer’s goal, or “objective function,” is aweighted sum of oil production and CO2 storage

E.g., Kovscek and Cakici (2005):

w1 ×N∗

p

OIP︸︷︷︸Net oil

production

+ w2 ×V R

CO2

V R︸ ︷︷ ︸CO2

storage

with weights w1 = w2 = 0.5.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc economic assumption

Assumption: The producer’s goal, or “objective function,” is aweighted sum of oil production and CO2 storage

E.g., Kovscek and Cakici (2005):

w1 ×N∗

p

OIP︸︷︷︸Net oil

production

+ w2 ×V R

CO2

V R︸ ︷︷ ︸CO2

storage

with weights w1 = w2 = 0.5.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc economic assumption

Assumption: The producer’s goal, or “objective function,” is aweighted sum of oil production and CO2 storage

E.g., Kovscek and Cakici (2005):

w1 ×N∗

p

OIP︸︷︷︸Net oil

production

+ w2 ×V R

CO2

V R︸ ︷︷ ︸CO2

storage

with weights w1 = w2 = 0.5.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ sCO2qseqCO2︸ ︷︷ ︸

CO2sequestration

subsidies

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ sCO2qseqCO2︸ ︷︷ ︸

CO2sequestration

subsidies

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ sCO2qseqCO2︸ ︷︷ ︸

CO2sequestration

subsidies

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ sCO2qseqCO2︸ ︷︷ ︸

CO2sequestration

subsidies

− pCO2qpurCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ sCO2qseqCO2︸ ︷︷ ︸

CO2sequestration

subsidies

− pCO2qseqCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ sCO2qseqCO2︸ ︷︷ ︸

CO2sequestration

subsidies

− pCO2qseqCO2︸ ︷︷ ︸

CO2purchase

costs

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qpurCO2

= qseqCO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecqrecCO2︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crec(q injCO2− qseq

CO2)︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crec(q injCO2− qseq

CO2)︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crec(q injCO2− qseq

CO2)︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crec(q injCO2− qseq

CO2)︸ ︷︷ ︸

CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

qrecCO2

= q injCO2− qseq

CO2

↓

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓ ↘

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓ ↘

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓ ↘

profit = poilqprdoil︸ ︷︷ ︸

oilrevenues

+ (sCO2 − pCO2 + crec)qseqCO2︸ ︷︷ ︸

net CO2sequestration

revenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓ ↘

profit = poil︸︷︷︸weighton oilproduction

qprdoil + (sCO2 − pCO2 + crec)qseq

CO2︸ ︷︷ ︸net CO2

sequestrationrevenues

− crecq injCO2︸ ︷︷ ︸

gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓ ↘

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓ ↘

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

↓

Profit = poil︸︷︷︸weighton oilproduction

Qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crecQ inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− Coth︸︷︷︸othercosts

= profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

↓

Profit = poil︸︷︷︸weighton oilproduction

Qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crecQ inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− Coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

↓

Profit = poil︸︷︷︸weighton oilproduction

Qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crecQ inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− Coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

constant?↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

must fall over time↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

must fall over time↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crecq inj

CO2︸ ︷︷ ︸gross CO2recycling

costs

− coth︸︷︷︸othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crec︸︷︷︸

weighton CO2recycling

q injCO2− coth︸︷︷︸

othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crec︸︷︷︸

weighton CO2recycling

q injCO2− coth︸︷︷︸

othercosts

Profit = profit1 +

δ

profit2 +

δ2

profit3 + . . . +

δT

profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crec︸︷︷︸

weighton CO2recycling

q injCO2− coth︸︷︷︸

othercosts

Profit = profit1 + δprofit2 + δ2profit3 + . . . + δT profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crec︸︷︷︸

weighton CO2recycling

q injCO2− coth︸︷︷︸

othercosts

NPV = profit1 + δprofit2 + δ2profit3 + . . . + δT profitT

Qprdoil = qprd

oil,1 +

δ

qprdoil,2 +

δ2

qprdoil,3 + . . . +

δT

qprdoil,T

QseqCO2

= qseqCO2,1

+

δ

qseqCO2,2

+

δ2

qseqCO2,3

+ . . . +

δT

qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crec︸︷︷︸

weighton CO2recycling

q injCO2− coth︸︷︷︸

othercosts

NPV = profit1 + δprofit2 + δ2profit3 + . . . + δT profitT

Qprdoil = qprd

oil,1 + δqprdoil,2 + δ2qprd

oil,3 + . . . + δT qprdoil,T

QseqCO2

= qseqCO2,1

+ δqseqCO2,2

+ δ2qseqCO2,3

+ . . . + δT qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

NPV = poil︸︷︷︸weighton oilproduction

Qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

NPV = profit1 + δprofit2 + δ2profit3 + . . . + δT profitT

Qprdoil = qprd

oil,1 + δqprdoil,2 + δ2qprd

oil,3 + . . . + δT qprdoil,T

QseqCO2

= qseqCO2,1

+ δqseqCO2,2

+ δ2qseqCO2,3

+ . . . + δT qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

NPV = poil︸︷︷︸weighton oilproduction

Qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

NPV = profit1 + δprofit2 + δ2profit3 + . . . + δT profitT

Qprdoil = qprd

oil,1 + δqprdoil,2 + δ2qprd

oil,3 + . . . + δT qprdoil,T

QseqCO2

= qseqCO2,1

+ δqseqCO2,2

+ δ2qseqCO2,3

+ . . . + δT qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Economic Study

Leach, A., Mason, C.F., van ’t Veld, K. (2011) “Co-optimizationof enhanced oil recovery and carbon sequestration,” Resourceand Energy Economics 33: 893–912

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc engineering assumptions

Assumption 1: Oil production is an inverse U-shaped function ofthe CO2 injection fraction q inj

CO2/(q inj

CO2+ q inj

wat).

Assumption 2: CO2 sequestration is the product of the CO2injection fraction and oil production:

qseqCO2

=q inj

CO2

q injCO2

+ q injwat

× qprdoil

︸ ︷︷ ︸0.5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc engineering assumptions

Assumption 1: Oil production is an inverse U-shaped function ofthe CO2 injection fraction q inj

CO2/(q inj

CO2+ q inj

wat).

Assumption 2: CO2 sequestration is the product of the CO2injection fraction and oil production:

qseqCO2

=q inj

CO2

q injCO2

+ q injwat

× qprdoil

︸ ︷︷ ︸0.5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 0.1 0.2 0.3 0.4 0.5 0.625 0.7 0.8 0.9 10

0.02

0.04

0.06

0.08

0.1

0.1225

0.14

Flow rates as function of CO2 injection fraction

CO2 injection fraction

Ra

tes (

fra

ctio

n o

f re

ma

inin

g r

ese

rve

s/y

ea

r)

oil production

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc engineering assumptions

Assumption 1: Oil production is an inverse U-shaped function ofthe CO2 injection fraction q inj

CO2/(q inj

CO2+ q inj

wat).

Assumption 2: CO2 sequestration is the product of the CO2injection fraction and oil production:

qseqCO2

=q inj

CO2

q injCO2

+ q injwat

× qprdoil

︸ ︷︷ ︸0.5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc engineering assumptions

Assumption 1: Oil production is an inverse U-shaped function ofthe CO2 injection fraction q inj

CO2/(q inj

CO2+ q inj

wat).

Assumption 2: CO2 sequestration is the product of the CO2injection fraction and oil production:

qseqCO2

=q inj

CO2

q injCO2

+ q injwat

× qprdoil

︸ ︷︷ ︸0.5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Problem: ad hoc engineering assumptions

Assumption 1: Oil production is an inverse U-shaped function ofthe CO2 injection fraction q inj

CO2/(q inj

CO2+ q inj

wat).

Assumption 2: CO2 sequestration is the product of the CO2injection fraction and oil production:

qseqCO2

=q inj

CO2

q injCO2

+ q injwat

× qprdoil︸ ︷︷ ︸

0.5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 0.1 0.2 0.3 0.4 0.5 0.625 0.7 0.8 0.9 10

0.02

0.04

0.06

0.08

0.1

0.1225

0.14

Flow rates as function of CO2 injection fraction

CO2 injection fraction

Ra

tes (

fra

ctio

n o

f re

ma

inin

g r

ese

rve

s/y

ea

r)

oil production

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 0.1 0.2 0.3 0.4 0.5 0.625 0.7 0.8 0.9 10

0.02

0.04

0.06

0.08

0.1

0.1225

0.14

Flow rates as function of CO2 injection fraction

CO2 injection fraction

Ra

tes (

fra

ctio

n o

f re

ma

inin

g r

ese

rve

s/y

ea

r)

oil production

CO2 sequestration

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Profit objective function

Benefits of CO2 injection

fall over time↙ ↘

Costs

must fall over time↓

profit = poil︸︷︷︸weighton oilproduction

qprdoil +(sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

qseqCO2− crec︸︷︷︸

weighton CO2recycling

q injCO2− coth︸︷︷︸

othercosts

= profit1 + δprofit2 + δ2profit3 + . . . + δT profitT

Qprdoil = qprd

oil,1 + δqprdoil,2 + δ2qprd

oil,3 + . . . + δT qprdoil,T

QseqCO2

= qseqCO2,1

+ δqseqCO2,2

+ δ2qseqCO2,3

+ . . . + δT qseqCO2,T

etc.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 10 20 30 40 50

0

0.1

0.2

0.3

0.4

0.5

0.6

Baseline case

Time (years)

Flo

ws (

mill

ion b

l/year)

CO2 injection

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 10 20 30 40 50

0

0.1

0.2

0.3

0.4

0.5

0.6

Baseline case

Time (years)

Flo

ws (

mill

ion b

l/year)

CO2 injection

oil production

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 10 20 30 40 50

0

0.1

0.2

0.3

0.4

0.5

0.6

Baseline case

Time (years)

Flo

ws (

mill

ion b

l/year)

CO2 injection

oil production

CO2 sequestration

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Source: Davidson, C.L. et al. (2011) “A quantitative comparison of the cost of employing EOR-coupled CCS supplemented with

secondary DSF storage for two large CO2point sources,” Energy Procedia 4: 2361–2368

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

≈ $100→ $200 ≈ $1→ $5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

p $50/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

p $50/bl

p $100/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

p $50/bl

p $100/blp $150/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

p $50/blp $100/blp $150/blp $200/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p $50/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p $50/bl

p $100/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p $50/bl

p $100/blp $150/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p $50/blp $100/blp $150/blp $200/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterflood

p $50/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterflood

p $50/blp $100/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterfloodp $50/blp $100/blp $150/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterfloodp $50/blp $100/blp $150/blp $200/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Time (years)

Quantity

(m

illio

n b

l)

Cumulative oil production

waterflood

p $50/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Time (years)

Quantity

(m

illio

n b

l)

Cumulative oil production

waterflood

p $50/blp $100/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Time (years)

Quantity

(m

illio

n b

l)

Cumulative oil production

waterfloodp $50/blp $100/blp $150/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Time (years)

Quantity

(m

illio

n b

l)

Cumulative oil production

waterfloodp $50/blp $100/blp $150/blp $200/bl

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 0.1 0.2 0.3 0.4 0.5 0.625 0.7 0.8 0.9 10

0.02

0.04

0.06

0.08

0.1

0.1225

0.14

Flow rates as function of CO2 injection fraction

CO2 injection fraction

Ra

tes (

fra

ctio

n o

f re

ma

inin

g r

ese

rve

s/y

ea

r)

oil production

CO2 sequestration

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

subsidy $0/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

subsidy $0/tCO2

subsidy $40/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

subsidy $0/tCO2

subsidy $40/tCO2subsidy $80/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

subsidy $0/tCO2subsidy $40/tCO2subsidy $80/tCO2subsidy $120/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

subsidy $0/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

subsidy $0/tCO2

subsidy $40/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

subsidy $0/tCO2

subsidy $40/tCO2subsidy $80/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

subsidy $0/tCO2subsidy $40/tCO2subsidy $80/tCO2subsidy $120/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterflood

subsidy $0/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterflood

subsidy $0/tCO2subsidy $40/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterfloodsubsidy $0/tCO2subsidy $40/tCO2subsidy $80/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterfloodsubsidy $0/tCO2subsidy $40/tCO2subsidy $80/tCO2subsidy $120/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Time (years)

Quantity

(m

illio

n b

l)

Cumulative oil production

waterflood

subsidy $0/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Time (years)

Quantity

(m

illio

n b

l)

Cumulative oil production

waterflood

subsidy $0/tCO2subsidy $40/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Time (years)

Quantity

(m

illio

n b

l)

Cumulative oil production

waterfloodsubsidy $0/tCO2subsidy $40/tCO2subsidy $80/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Time (years)

Quantity

(m

illio

n b

l)

Cumulative oil production

waterfloodsubsidy $0/tCO2subsidy $40/tCO2subsidy $80/tCO2subsidy $120/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

≈ $100→ $200 ≈ $1→ $5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

≈ $100→ $200

≈ $1→ $5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

≈ $100→ $200

≈ $1→ $5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

≈ $100→ $200 ≈ $1→ $5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

≈ $100→ $200 ≈ $1→ $5

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 0.1 0.2 0.3 0.4 0.5 0.625 0.7 0.8 0.9 10

0.02

0.04

0.06

0.08

0.1

0.1225

0.14

Flow rates as function of CO2 injection fraction

CO2 injection fraction

Ra

tes (

fra

ctio

n o

f re

ma

inin

g r

ese

rve

s/y

ea

r)

oil production

CO2 sequestration

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

p $100/bl, tax $40/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

p $100/bl, tax $40/tCO2

p $200/bl, tax $40/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.1

0.2

0.3

0.4

0.5

0.6

Time (years)

Rate

(m

illio

n b

l/year)

Flow CO2 injection

p $100/bl, tax $40/tCO2

p $200/bl, tax $40/tCO2p $100/bl, tax $80/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p $100/bl, tax $40/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p $100/bl, tax $40/tCO2

p $200/bl, tax $40/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p $100/bl, tax $40/tCO2

p $200/bl, tax $40/tCO2p $100/bl, tax $80/tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

So . . .

. . . are high oil prices the environmentalist’s best friend?

• On the demand side: discourage oil use

• On the supply side: promote CO2 storage through EOR

Not necessarily, for two reasons:

• Increasing oil prices may reduce CO2 storage through EOR

• Promoting CO2-EOR may increase net CO2 emissions

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

So . . .

. . . are high oil prices the environmentalist’s best friend?

• On the demand side: discourage oil use

• On the supply side: promote CO2 storage through EOR

Not necessarily, for two reasons:

• Increasing oil prices may reduce CO2 storage through EOR

• Promoting CO2-EOR may increase net CO2 emissions

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

So . . .

. . . are high oil prices the environmentalist’s best friend?

• On the demand side: discourage oil use

• On the supply side: promote CO2 storage through EOR

Not necessarily, for two reasons:

• Increasing oil prices may reduce CO2 storage through EOR

• Promoting CO2-EOR may increase net CO2 emissions

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

So . . .

. . . are high oil prices the environmentalist’s best friend?

• On the demand side: discourage oil use

• On the supply side: promote CO2 storage through EOR

Not necessarily, for two reasons:

• Increasing oil prices may reduce CO2 storage through EOR

• Promoting CO2-EOR may increase net CO2 emissions

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

So . . .

. . . are high oil prices the environmentalist’s best friend?

• On the demand side: discourage oil use

• On the supply side: promote CO2 storage through EOR

Not necessarily, for two reasons:

• Increasing oil prices may reduce CO2 storage through EOR

• Promoting CO2-EOR may increase net CO2 emissions

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

So . . .

. . . are high oil prices the environmentalist’s best friend?

• On the demand side: discourage oil use

• On the supply side: promote CO2 storage through EOR

Not necessarily, for two reasons:

• Increasing oil prices may reduce CO2 storage through EOR

• Promoting CO2-EOR may increase net CO2 emissions

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV =

poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow CO2 injection

p growth 0%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow CO2 injection

p growth 0%

p growth 2.5%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow CO2 injection

p growth 0%

p growth 2.5%

p growth 5%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow CO2 injection

p growth 0%

p growth 2.5%

p growth 5%

p growth 7.5%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterflood

p growth 0%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterflood

p growth 0%

p growth 2.5%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterflood

p growth 0%

p growth 2.5%

p growth 5%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.02

0.04

0.06

0.08

0.1

0.12

Time (years)

Ra

te (

mill

ion

bl/ye

ar)

Flow oil production

waterflood

p growth 0%

p growth 2.5%

p growth 5%

p growth 7.5%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p growth 0%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p growth 0%

p growth 2.5%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p growth 0%

p growth 2.5%

p growth 5%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

0 5 10 15 20 25 30 35 40 45

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Time (years)

Qu

an

tity

(m

illio

n b

l)

Cumulative CO2 sequestration

p growth 0%

p growth 2.5%

p growth 5%

p growth 7.5%

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

So . . .

. . . are high oil prices the environmentalist’s best friend?

• On the demand side: discourage oil use

• On the supply side: promote CO2 storage through EOR

Not necessarily, for two reasons:

• Increasing oil prices may reduce CO2 storage through EOR

• Promoting CO2-EOR may increase net CO2 emissions

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

So . . .

. . . are high oil prices the environmentalist’s best friend?

• On the demand side: discourage oil use

• On the supply side: promote CO2 storage through EOR

Not necessarily, for two reasons:

• Increasing oil prices may reduce CO2 storage through EOR

• Promoting CO2-EOR may increase net CO2 emissions

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Common misconception

Emissions from incremental oil produced with CO2-EOR don’t matter.

“World oil production is determined by world oil demand andif CO2-EOR projects were not undertaken, some othersource of oil would step forward and fill the gap. Therefore,executing CO2-EOR projects will not result in incrementalaggregate refining and consumption emissions.”

Faltinson, J. and Gunter, B. (2011). “Net CO2 Stored in North American EOR Projects.” J. Can. Pet.

Technol. 50 (7/8): pp. 55–60.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Common misconception

Emissions from incremental oil produced with CO2-EOR don’t matter.

“World oil production is determined by world oil demand andif CO2-EOR projects were not undertaken, some othersource of oil would step forward and fill the gap. Therefore,executing CO2-EOR projects will not result in incrementalaggregate refining and consumption emissions.”

Faltinson, J. and Gunter, B. (2011). “Net CO2 Stored in North American EOR Projects.” J. Can. Pet.

Technol. 50 (7/8): pp. 55–60.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Common misconception

Emissions from incremental oil produced with CO2-EOR don’t matter.

“World oil production is determined by world oil demand andif CO2-EOR projects were not undertaken, some othersource of oil would step forward and fill the gap. Therefore,executing CO2-EOR projects will not result in incrementalaggregate refining and consumption emissions.”

Faltinson, J. and Gunter, B. (2011). “Net CO2 Stored in North American EOR Projects.” J. Can. Pet.

Technol. 50 (7/8): pp. 55–60.

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Demand

Supply

p∗

Q∗Qoil

poilOil market

x

x

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Demand

p∗

Q∗

Supply

Qoil

poilOil market

x

x

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Demand

p∗∗

p∗

Q∗

Supply

Qoil

poilOil market

x

x

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Demand

p∗∗

p∗

Q∗

Conventional

Conventional EOR

Supply

Qoil

poilOil market

x

x

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Demand

Supply

p∗

Q∗Qoil

poilOil market

x

x

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Demand

p∗

Q∗

Supply

Qoil

poilOil market

x

x

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Demand

p∗∗

Q∗∗

p∗

Q∗

Supply

Qoil

poilOil market

x

x

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Demand

p∗∗

Q∗∗

p∗

Q∗

Conventional

Conventional EORSupply

Qoil

poilOil market

x

x

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Common misconception

So displacement of conventional oil is not one-for-one

Moreover, . . .• wind• solar• ethanol• nuclear• etc.

also “displace” conventional oil

Does that make their net CO2 emissions negative?

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Common misconception

So displacement of conventional oil is not one-for-one

Moreover, . . .

• wind• solar• ethanol• nuclear• etc.

also “displace” conventional oil

Does that make their net CO2 emissions negative?

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Common misconception

So displacement of conventional oil is not one-for-one

Moreover, . . .• wind• solar• ethanol• nuclear• etc.

also “displace” conventional oil

Does that make their net CO2 emissions negative?

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Common misconception

So displacement of conventional oil is not one-for-one

Moreover, . . .• wind• solar• ethanol• nuclear• etc.

also “displace” conventional oil

Does that make their net CO2 emissions negative?

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

But if some CO2-EOR projects generate positive net emissions, whileothers generate negative net emissions, what then is the optimal wayof promoting it?

Do we need taxes for some, and subsidies for others?

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

But if some CO2-EOR projects generate positive net emissions, whileothers generate negative net emissions, what then is the optimal wayof promoting it?

Do we need taxes for some, and subsidies for others?

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

But if some CO2-EOR projects generate positive net emissions, whileothers generate negative net emissions, what then is the optimal wayof promoting it?

Do we need taxes for some, and subsidies for others?

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

The optimal policy to promote CO2-EOR is quite simply

• a tax on CO2 emissions

(equal to the per-unit emission damages)

which for CO2-EOR producers acts exactly like

• a subsidy on CO2 sequestration

(i.e., on avoided CO2 emissions)

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

The optimal policy to promote CO2-EOR is quite simply

• a tax on CO2 emissions

(equal to the per-unit emission damages)

which for CO2-EOR producers acts exactly like

• a subsidy on CO2 sequestration

(i.e., on avoided CO2 emissions)

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

The optimal policy to promote CO2-EOR is quite simply

• a tax on CO2 emissions

(equal to the per-unit emission damages)

which for CO2-EOR producers acts exactly like

• a subsidy on CO2 sequestration

(i.e., on avoided CO2 emissions)

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

The optimal policy to promote CO2-EOR is quite simply

• a tax on CO2 emissions

(equal to the per-unit emission damages)

which for CO2-EOR producers acts exactly like

• a subsidy on CO2 sequestration

(i.e., on avoided CO2 emissions)

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

The optimal policy to promote CO2-EOR is quite simply

• a tax on CO2 emissions

(equal to the per-unit emission damages)

which for CO2-EOR producers acts exactly like

• a subsidy on CO2 sequestration

(i.e., on avoided CO2 emissions)

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

The optimal policy to promote CO2-EOR is quite simply

• a tax on CO2 emissions

(equal to the per-unit emission damages)

which for CO2-EOR producers acts exactly like

• a subsidy on CO2 sequestration

(i.e., on avoided CO2 emissions)

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Optimal policy

The optimal policy to promote CO2-EOR is quite simply

• a tax on CO2 emissions

(equal to the per-unit emission damages)

which for CO2-EOR producers acts exactly like

• a subsidy on CO2 sequestration

(i.e., on avoided CO2 emissions)

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + ( tCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either

{vent its CO2

⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf

⇒ lose nothing

︸ ︷︷ ︸pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either

{vent its CO2

⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf

⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2

⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf

⇒ lose nothing

︸ ︷︷ ︸pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either

{vent its CO2

⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf

⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothing

capture it at cost of $1/mcf and sell at $1/mcf

⇒ lose nothing

︸ ︷︷ ︸pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either

{vent its CO2

⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf

⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf

⇒ lose nothing︸ ︷︷ ︸pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either

{vent its CO2

⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf

⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf⇒ lose nothing

︸ ︷︷ ︸pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either

{vent its CO2

⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf

⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf⇒ lose nothing︸ ︷︷ ︸

pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either

{vent its CO2

⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf

⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf⇒ lose nothing︸ ︷︷ ︸

pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either

{vent its CO2 ⇒ lose $3/mcf

capture it at cost of $1/mcf and sell at $−2/mcf

⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf⇒ lose nothing︸ ︷︷ ︸

pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either{vent its CO2 ⇒ lose $3/mcf

capture it at cost of $1/mcf and sell at $−2/mcf

⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf⇒ lose nothing︸ ︷︷ ︸

pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either{vent its CO2 ⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf

⇒ lose $3/mcf︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf⇒ lose nothing︸ ︷︷ ︸

pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either{vent its CO2 ⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf⇒ lose nothing︸ ︷︷ ︸

pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either{vent its CO2 ⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf⇒ lose $3/mcf

︸ ︷︷ ︸pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Numerical example

Without a tax on its CO2 emissions, an ammonia plant can either{vent its CO2 ⇒ lose nothingcapture it at cost of $1/mcf and sell at $1/mcf⇒ lose nothing︸ ︷︷ ︸

pCO2

With a $60/tCO2 ≈ $3/mcf emissions tax, the plant can either{vent its CO2 ⇒ lose $3/mcfcapture it at cost of $1/mcf and sell at $−2/mcf⇒ lose $3/mcf︸ ︷︷ ︸

pCO2 − tCO2

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + (−

[

pCO2

− tCO2 ]

+ crec)︸ ︷︷ ︸weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + (−[pCO2 − tCO2 ] + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + ( tCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + (sCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

CO2-EOR profits

NPV = − I︸︷︷︸up-front

investmentcost

+ poil︸︷︷︸weighton oilproduction

Qprdoil + ( tCO2 − pCO2 + crec)︸ ︷︷ ︸

weighton CO2

sequestration

QseqCO2− crec︸︷︷︸

weighton CO2recycling

Q injCO2− Coth︸︷︷︸

othercosts

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Summary

• Engineers and economists need to collaborate

• NPV-maximizing CO2-injection rates tend to fall over time

• Oil prices drive CO2 storage more than storage subsidies do

– but not necessarily positively

• Emissions from consumption of incremental EOR barrels domatter

• The optimal policy to promote CO2-EOR is a tax on CO2emissions

– but producers may not benefit from such a tax

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Summary

• Engineers and economists need to collaborate

• NPV-maximizing CO2-injection rates tend to fall over time

• Oil prices drive CO2 storage more than storage subsidies do

– but not necessarily positively

• Emissions from consumption of incremental EOR barrels domatter

• The optimal policy to promote CO2-EOR is a tax on CO2emissions

– but producers may not benefit from such a tax

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Summary

• Engineers and economists need to collaborate

• NPV-maximizing CO2-injection rates tend to fall over time

• Oil prices drive CO2 storage more than storage subsidies do

– but not necessarily positively

• Emissions from consumption of incremental EOR barrels domatter

• The optimal policy to promote CO2-EOR is a tax on CO2emissions

– but producers may not benefit from such a tax

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Summary

• Engineers and economists need to collaborate

• NPV-maximizing CO2-injection rates tend to fall over time

• Oil prices drive CO2 storage more than storage subsidies do

– but not necessarily positively

• Emissions from consumption of incremental EOR barrels domatter

• The optimal policy to promote CO2-EOR is a tax on CO2emissions

– but producers may not benefit from such a tax

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Summary

• Engineers and economists need to collaborate

• NPV-maximizing CO2-injection rates tend to fall over time

• Oil prices drive CO2 storage more than storage subsidies do– but not necessarily positively

• Emissions from consumption of incremental EOR barrels domatter

• The optimal policy to promote CO2-EOR is a tax on CO2emissions

– but producers may not benefit from such a tax

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Summary

• Engineers and economists need to collaborate

• NPV-maximizing CO2-injection rates tend to fall over time

• Oil prices drive CO2 storage more than storage subsidies do– but not necessarily positively

• Emissions from consumption of incremental EOR barrels domatter

• The optimal policy to promote CO2-EOR is a tax on CO2emissions

– but producers may not benefit from such a tax

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Summary

• Engineers and economists need to collaborate

• NPV-maximizing CO2-injection rates tend to fall over time

• Oil prices drive CO2 storage more than storage subsidies do– but not necessarily positively

• Emissions from consumption of incremental EOR barrels domatter

• The optimal policy to promote CO2-EOR is a tax on CO2emissions

– but producers may not benefit from such a tax

Engineering studies Economic study Effect of oil prices and CO2-storage subsidies Common misconception Optimal policy

Summary

• Engineers and economists need to collaborate

• NPV-maximizing CO2-injection rates tend to fall over time

• Oil prices drive CO2 storage more than storage subsidies do– but not necessarily positively

• Emissions from consumption of incremental EOR barrels domatter

• The optimal policy to promote CO2-EOR is a tax on CO2emissions

– but producers may not benefit from such a tax

Oil market CO2 market Flow schematic

Supply

Demand

p∗

Q∗Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Supply

Demand

Q∗

p∗∗cons

p∗∗prod = p∗

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Supply

Demand

Q∗

p∗∗cons

p∗∗prod = p∗

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Supply

Demand

Q∗

p∗∗cons

p∗∗prod = p∗

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

p∗

Q∗Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supplyp∗∗cons

p∗∗prod = p∗

Q∗∗ = Q∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supplyp∗∗cons

p∗∗prod = p∗

Q∗∗ = Q∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supplyp∗∗cons

p∗∗prod = p∗

Q∗∗ = Q∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

p∗

Q∗Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

Q∗

p∗∗cons = p∗

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

Q∗

p∗∗cons = p∗

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

Q∗

p∗∗cons = p∗

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

p∗

Q∗Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

p∗

Q∗

p∗∗cons

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

p∗

Q∗

p∗∗cons

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

p∗

Q∗

p∗∗cons

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supplyp∗

Q∗

p∗∗cons

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supplyp∗

Q∗

p∗∗cons

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supplyp∗

Q∗

p∗∗cons

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

p∗

Q∗

p∗∗cons

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

p∗

Q∗

p∗∗cons

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

Demand

Supply

p∗

Q∗

p∗∗cons

p∗∗prod

Q∗∗

carbon tax

Qoil

poilOil market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

Aquifer

demand

QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

Aquifer

demand

Supplyp∗

Q∗QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

Aquifer

demand

Supply

Q∗

p∗∗prod = p∗

p∗∗cons

Q∗∗

carbon tax

QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

Aquifer

demand

Supply

Q∗

p∗∗prod = p∗

p∗∗cons

Q∗∗

carbon tax

QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

Aquifer

demand

Supply

Q∗

p∗∗prod = p∗

p∗∗cons

Q∗∗

carbon tax

QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

Aquifer

demand

Supply

p∗

Q∗QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

Aquifer

demand

Supply

p∗

Q∗

p∗∗prod

p∗∗cons

Q∗∗

carbon tax

QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

Aquifer

demand

Supply

p∗

Q∗

p∗∗prod

p∗∗cons

Q∗∗

carbon tax

QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

0

EOR

demand

Aquifer

demand

Supply

p∗

Q∗

p∗∗prod

p∗∗cons

Q∗∗

carbon tax

QCO2

pCO2CO2 market

x

x

Oil market CO2 market Flow schematic

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injwat qinjCO2

↓↓

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injwat qinjCO2

↓↓

qprdoil

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injCO2↓

qprdoil

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injCO2↓

qprdoil

→

↑

qrecCO2 ←←

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injCO2↓

qprdoil

→

↑

qrecCO2 ←← CO2recycling

plant

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injCO2↓

qprdoil

→

↑

qrecCO2 ←←

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injCO2↓

qprdoil

→

↑

qrecCO2 ←←

qseqCO2

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injCO2↓

qprdoil

→

↑

qrecCO2 ←←

qseqCO2

qpurCO2

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injCO2↓

qprdoil

→

↑

qrecCO2 ←←

qseqCO2

qpurCO2

qpurCO2 = qseqCO2

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injCO2↓

qprdoil

→

↑

qrecCO2 ←←

qseqCO2

qpurCO2

CO2-EOR Flows

xx

xx

Oil market CO2 market Flow schematic

q injCO2↓

qprdoil

→

↑

qrecCO2 ←←

qseqCO2

qpurCO2

qrecCO2 = qinjCO2 − qseqCO2

CO2-EOR Flows

xx

xx