SPE/DOE 20269

A Flue Gas Huff 'n' Puff Process for Oil Recovery From Shallow Formations

SPE/DOE Society of

Petroleum Entin",. u.s. Department

of Energy

H.R. Johnson, * L.D. Schmidt, and L.D. Thrash, consultants to ICF Resources Inc. SPE Member

Copyright 1990, Society 01 Petroleum Engineers Inc.

This paper was prepared lor prasenlatlon at the SPE/DOE Seventh Symposium on Enhanced 011 Recovery held In Tulsa, Oklahoma, April 22-25, 1990.

this paper was selected lor presentation by an SPE Program Committee following review 01 information contained in an abstract submitted by the author(s). Contents of the paper, as presented, have not been reviewed by the Society 01 Petroleum Engineers and are subject to correction by the author(s). The material, as presented, does not necassarlly reflect any position of the Society 01 Petroleum Engineers, its officers, or members. Papers presented at SPE meetings are subject to publication review by Editorial Committees of the Society of Petroleum Engineers. Permission to copy Is restricted to an abstract 01 not more than 300 words. Illustrations may not be copied. The abstrect should contain conspicuous aCknowledgment 01 where and by whom the paper is presented. Write Publications Manager, SPE, P.O. Box 833836, Richardson, TX 75083-3836. Telex, 730989 SPEDAL.

ABSTRACf Troutman Oil Co., Inc. of LaCygne, Kansas has de-veloped a low-cost process for recovery of oil from shallow oil formations. The process (named "TWINC02") relies on immiscible displacement of oil through the injection of flue gas in a cyclic injection program. It was first installed in the LaCygne-Cadmus field located in Linn County, Kansas. The project has been in continuous use since 1979. Oil production rates have stabilized and the project has proven to be cost-effective given its small investment requirements and low operating costs.

Flue gas is generated by burning natural gas in an internal combustion engine. The exhaust gas is treated and is compressed to around 250 psi for injection into the reservoir. Following injec-tion, the same well is converted to production and the well flows oil, water, and gas into sur-face separating units.

The economics associated with this oil recovery process as reported in the paper have been updated to reflect 1989 prices and conditions.

References and figures at end of paper.

Johnson, now at BDM International, Inc., McLean, VA

Schmidt, now at Argas Corp., Independence, KS Thrash, now Independent Oil Producer,

Bartlesville, OK

933

This analysis assumes that the oil producing wells and related oil production infrastructure are in place. The analyzed project area con-tained 51 wells in 225 acres. Incremental cost to install a system in 1989 similar in scale to that employed by Troutman Oil is estimated to be approximately $100,000. For the Troutman Oil scale of operations, the operating costs are esti-mated at $37,400 per year.

Cash flow and profitability depend on the level of oil production, posted prices, and net revenue interest in a lease. For example, at a posted price of $20 per barrel and average oil produc-tion of 15 barrels per day, the annual cash flow from the entire project is estimated at $43,000 assuming an 80 percent net revenue interest. This level of cash flow will payback the initial investment in 2.3 years (undiscounted) and yields an internal rate of return of 42 percent over a 10 year project life. Economic parameters are presented in this report which will enable the reader to estimate the economics associated with applicatio.n of the process at a particular property, including the minimum oil production required to cover operating costs and repay the initial capital investment.

PROJECTLOCATlON

The Troutman Oil Company flue gas, oil recovery project is located about 50 miles south of Kansas City, Kansas (see Figure 1). Fifty-one oil pro-ducing wells are included in the project on the

2 FLUE GAS PROCESS SPEIDOE 020269 Balcer, North Baker, and Harvey leases in the south half of Section 5, 1'20S, R23E, Linn County, Kansas (see Figure 2). The project covers approximately 225 surface acres with an aver-age spacing of 4.4 acres per well.

RESERVOIR CHARACfERIS1lCS The lease area lies within the LaCygne-Cadmus oil field. The target formation is the Peru sand-stone found at a depth of about 250 to 300 feet. The sand is blanket-like in this area with a total thickness of 15 to 30 feet, and it averages about 25 feet in the project area. Reservoir perme-ability is erratic and averages about 35 millidar-cies on the leases used in the flue gas recovery project. The corresponding porosity is 19 per-cent. Produced oil averages 29 degrees API gravity with a viscosity of 20 to 30 centipoises. Reservoir temperature is estimated to be about 78 degrees F. No distinct gas/oil or oil/water contacts have been identified in this field.

wm.J: COMPLETION METHODS Each well has been completed using two-inch casing cemented to the surface. The oil produc-tive interval was perforated and hydraulically fractured using a conventional gelled water fracture fluid with about 3,500 pounds of sand proppant. The operator reports that the wells have required no remedial work since the flue gas injection was started over 10 years ago. FLUE GAS GENERATION

The flue gas is generated by burning natural gas (or propane) in a 4-cycle, 150 HP internal com-bustion engine. Exhaust gas from the engine is circulated through a platinum catalytic treater to remove corrosive oxygen and nitrogen oxides from the gas. The gas is cooled from 1,100 de-grees F to 135 de-grees F, cycled through a liq-uid/gas separator and then introduced into a compressor where it is compressed to pressures that range from 240 to 300 psi. Compression heats the gas to 350 degrees F and a second cooling system is used to cool the gas exiting the compressor to approximately 135 degrees F.

Approximately 11 thousand cubic feet (Mcf) per day of natural gas is required for the current op-eration which generates over 100 Mcf per day of flue gas. This is a sufficient amount of flue gas to treat 6 wells at a time at an average injection rate of 17 Mcf per day per well. During the period of injection (21 days) each well receives approximately 350 Mcf of flue gas. The flue gas, conditioned for injection, consists of approxi-mately 87 percent nitrogen and 13 percent C02 and inerts.

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INJECTION evq E

Flue gas is injected for a period of three weeks, or until the well head pressure reaches 300 psi. Following injection, each well is allowed to. "soak" for approximately one day. The well is then opened and the produced fluids flow to the sur-face and into the water/oil separators through the same one-inch flow lines used to inject the flue gases. About one-half of the injected gas is produced with the oil and water during the flow-back period, and this gas is vented. The re-maining unrecovered gas becomes dispersed into the formation.

A typical gas injection/oil production cycle for 48 wells requires the injection of flue gas into six wells over a three week period and then placing each of the six wells on flowing production for approximately 21 weeks. As these wells are produced, the remaining 42 wells are stimulated in groups of six and placed on production. After all 48 wells have been stimulated, flue gas is in-jected into the initial six wells and the process is repeated. After startup, 42 wells are being pro-duced at all times while 6 wells are being treated.

OIL PRODUCDONBESPQNSE Initial primary oil production was established on the Baker lease in 1964, on the Harvey lease in 1965, and on the North Baker lease in 1971. Primary oil production peaked at about 8,000 barrels per year in 1966 then fell rapidly (see Figure 3). By the end of 1967, both the Baker and Harvey leases were virtually shut-in. The leases were acquired and water injection was started on the Baker lease in 1968. The peak waterflood oil production rate occurred in 1968 at about 12,000 barrels per year. Water was injected through 1978 in an effort to continue to assist oil recovery from the area.

Troutman Oil acquired the leases and installed the flue gas generator to test the production response. The Harvey lease was selected to test the flue gas process. This lease averaged less than 1 barrel of oil per week prior to the test. However, following flue gas injection in 1979, oil production rose sharply to 120 barrels per week and then declined to about 40 barrels per week. Cumulative oil production totaled nearly 600 barrels of oil over the 15-week test period.

After the successful test of the system on the Harvey Lease, Troutman Oil expanded the use of the flue gas process to ultimately incorporate 51

SPE/DOE 020269 H.R. Johnson, L.D. Schmidt, L.D. Thrash

wells on the Harvey, Baker, and North Baker leases. Oil production increased and repeated cycles of the process stabilized the oil production rate at about 4,300 barrels per year for the ten years from 1979 through 1988.

Through 1978, the leases now subjected to the flue gas huff-and-puff process yielded 57,000 barrels of oil by primary and secondary oil re-covery operations. From 1979 through 1988, oil production totaled 43,000 barrels. Forty-three percent of the 100,000 barrels of total oil pro-duced through 1988 (see Figure 3) is related to the flue gas injection process. The flue gas pro-cess extended the productive life of the leases which would most likely have been abandoned following waterflood operations.

PRQCRSSECQNOMICS Capital Inyestment

This economic analysis assumes that the oil pro-ducing wells have been drilled and are capable of production. In addition, it is assumed that the basic oil production infrastructure is also in place, including flow lines and tank battery. While oil production is possible, it is assumed that oil production has declined to the point where the operator has decided to install and operate the flue gas system in an effort to attempt to increase production. Each lease will require different capital expenditures, depend-ing on the equipment on hand and the condition of the lease. For this paper, the one-time capital costs to install a system in 1989 similar in scale to that used by Troutman Oil is estimated to total about $100,000, with the costs distributed as shown in Table 1.

0peratin& Costs

Annual operating costs of the flue gas system have been estimated at $37,375 per year from the Troutman Oil Company data. For their system, about 11 Mcf/day of gas is required at a cost of $1.50/Mcf (a total cost of about $6,000 per year). Only one pumper is needed to main-tain the system, including monitoring and repair of the 48 active injection and/or producing wells, the tank battery, and the generating system. Labor costs are estimated to be $20,160 per year. Electricity costs are estimated at $4,400/year and repairs at $2,000/year. Gen-eral and administrative expenses are calculated to be 15 percent of the sum of the other operat-ing expenses.

935

The distribution of annual operating costs is pre-sented in Table 2.

Cash Flow Example

This cash flow example assumes that the oil pro-duction is 15 barrels per day (5,400 bar-rels/year) and that the oil can be sold for $20 per barrel. The annual revenue generated under these conditions totals $86,400 to an 80 percent net revenue interest in the property (see Table 3). Operating costs and various state taxes (here es-timated at 7 percent of the revenue) are sub-tracted from the revenue to calculate an annual before income tax cash flow of $42,977 per year. Cumulative cash flow combines the annual cash flow from operations with the initial capital costs of the system ($100,000). Payout occurs at that point in time where the cumulative cash flow becomes positive. In this example, payout (undiscounted) occurs in 2.3 years. The internal rate of return for this example is 42 percent.

Process Economics

Process economics were examined by expanding the assumptions used to create the Cash Flow Example in Table 3. The economic analysis pre-sented in Figures 4 and 5 use three levels of posted oil prices ($15, $20, and $25 per barrel), three levels of oil production (10, 15, and 20 barrels per day), and three levels of net revenue interest (72, 80, and 87.5 percent). These levels were selected to bracket the probable economic outcomes associated with the use of the flue gas injection process as applied to a property similar to that of Troutman Oil Company.

The annual cash flow calculations are presented in Figure 4. The middle panel in this Figure contains a data point from the Cash Flow Example. That is, at 15 barrels/day, $20/barrel, and a net revenue interest of 80 percent, the annual cash flow is about $43,000 per year. Similar estimates can be made directly from this figure for a wide range of economic assumptions. Payout of the investment can also be directly estimated from the data in this figure (for the Cash Flow Example, $100,000 investment/ $43,000 per year cash flow = 2.3 year payout).

Each set of economic conditions will result in a cash flow and a corresponding internal rate of return before income taxes. These internal rates of return are displayed in Figure 5 and can be

3

4 FLUE GAS PROCESS SPF.JI)OE 020269

Examination of the Figure 5 results show that the internal rate of return is zero (no profit) under certain conditions of oil price and oil production. While most of these lower levels generate a positive cash flow, the cash flow is not adequate to both repay the initial capital costs and to pay for operations. A minimum annual revenue of about $38,000 is required to breakeven using this system.

Breakeyen Oil Production

The minimum oil production needed to cover the cost of operations ranges from 5.1 to 10.4 barrels per day (see Table 4). Each of the data entries in Table 4 will generate a revenue of about $38,000 per year, which is adequate to pay the estimated operating costs.

In addition to operating costs, repayment of the initial capital costs must also be considered. However, the rate of capital repayment can range from months to years, depending on the objectives of each producer. For example, a producer may choose to repay the $100,000 capital investment over as-year period, or $20,000 per year (this will be greater if loan interest is also considered). The oil pro-duction needed for capital repayment can be es-timated from the Table 4 data. For a 72% net revenue interest and $15 per barrel, 10.4 barrels per day will generate $38,000 per year. By pro-portion, about 5.5 barrels of oil per day is needed to generate the $20,000 per year capital payment, calculated as follows:

10.4 bid Oil Production = ------------ x $20,000 = 5.5 bid

$38,000

Under these example conditions, the IDlDlmum oil production would need to total 15.9 barrels per day to both cover operating costs (10.4 bid) and to repay the capital investment over a period of five years (5.5 bid). These minimum requirements would be greater if interest and/or the time value of money were considered in the calculations.

APPUCABUJTY OF TIlE FLUE GAS PROCESS TO ODIERfORMADONS

The U.S. Department of Energy sponsored a state-of-the-art review of nitrogen and flue gas oil recovery methods in 1980 (Ref. 1). The re-view included both laboratory analyses of the

processes and the results of field applications. Ten flue gas projects were reviewed, all of which were aimed at deep oil reservoirs (from a few thousand to 12,000 feet deep) using relatively high injection pressures (thousands of psi). Field applications of flue gas to recover oil from shal-low oil reservoirs were not available. However, the study concluded that:

"Flue gas flooding may be a good alterna-tive for shallow heavy oil reservoirs." (1. pg. 112)

" ... the C02 component of the flue gas dissolves in oil and reduces the oil's vis-cosity. Nitrogen provides the energy for pressure build-up and "chases out" the oil. However, flue gas flooding creates operat-ing problems due to its corrosive nature." (1, pg. 3)

The TWINC02 flue gas huff-and-puff system has only been used in one shallow formation. Its application in other areas has yet to be tested, but shallow oil reservoirs of a similar nature exist in numerous areas within the United States.

Based on the ten years of continuous application documented in this study, sufficient amounts of flue gas can be injected into shallow (+/- 300 feet deep) reservoirs to cause flowing oil pro-duction. Injection pressures can be increased as the formation depths increase. However, wells may need to be pumped if the process is applied to reservoirs significantly deeper than 300 feet. thereby increasing both capital and operating costs.

To fully utilize the capacity of the TWINC02 flue gas system installed by Troutman Oil, about 48 wells are required. This limitation can be over-come by appropriate equipment sizing or by use of the equipment on an intermittent, rather than full-time basis. The number of wells required to achieve a specified level of increased oil produc-tion will vary from lease to lease. Troutman Oil developed its injection/production cycle through trial and error. Other leases will most likely re-quire a similar approach. Changes to the process may improve the efficiency of the process in other applications and/or formations. Changes such as higher injection pressure and/or tem-perature, and greater gas volumes have not been analyzed for this paper.

SPEIDOE 020269 H.R. Johnson, L.D. Schmidt, L.D. Thrash

CONQ.,USIONS

With over ten years of continuous operations, the use of the flue gas huff-and-puff system on the Troutman Oil leases has demonstrated that:

1. Injection of a sufficient amount of gas is possible at a pressure which causes wells to flow from a depth of about 300 feet,

2. The process is relatively simple, low in maintenance, and is not labor intensive,

3.

4.

Gas conditioning and the control over gas temperature have been effective in reducing corrosion normally associated with recovery processes that use carbon dioxide,

The availability of a low cost fuel supply is important to overall project eco-nomics, and

5. The process can be cost-effective at moderate oil prices and relatively low oil production rates.

The flue gas huff-and-puff method can most likely be economically applied to some shallow reservoirs even at current (1989) posted oil prices. However, each project will need to be evaluated on its own merits.

TABLE 1 - CAPITAL COST ESTIMATES FOR FLUE GAS SYSTEM

1989 DOLLARS

GENERATOR SYSTEM FUEL SUPPLY LEASE MODIFICAnoNS MISCELLANEOUS

TOTAL

$ 70,000 10,000 10,000 10,000

$100,000

ACKNOWI BPGEMENTS

This analysis was undertaken for the U.S. De-partment of Energy (DOE), Bartlesville Project Office as a part of an effort to identify enhanced oil recovery projects that are particularly suit-able for use by independent oil producers at cur-rent (1989) economic conditions. Overall project direction for this analysis was provided by Dr. J.P. Brashear and project management by Mr. Alan B. Becker, both of ICF Resources, Incor-porated of Fairfax, V A. The work was performed under DOE Contract No. DE-AC22-86BCI4oo0.

The authors acknowledge, with thanks, the assistance of Mr. Lester L. Troutman, President, Troutman Oil Co., Inc. for providing the informa-tion needed for this analysis. As the developer of the flue gas huff-and-puff process described in the report, Mr. Troutman has additional tech-nical details available concerning the process and may be reached at R.R. 2, Box 109, LaCygne, Kansas 66040.

REfFRENCE

(1) Harish R. Anada. "State-of-the-Art Review of Nitrogen and Flue Gas Flooding in En-hanced Oil Recovery." U.S. Department of Energy, DOE/MC/08333-2, December 1980.

TABLE 2 - ANNUAL OPERAnNG COST ESTIMATE

1989 DOLLARS

LABOR PURCHASED GAS ELECTRIC REPAIRS GENERAL & ADMIN.

TOTAL

$ 20,160 5,940 4,400 2,000 4,875

$ 37;375

TABLE 3 - CASH FLOW EXAMPLE YEAR 6 TOTAL THRU OR

YEAR 0 YEAR 1 YEARtl YEAR I YEAR" YEAR I YEAR 10 AVERAGE

PRODUCTION, BBLS 6400 6400 6400 6400 6400 27000 54000 OIL PRICE. $/BBL 20.00 20.00 20.00 20.00 20.00 20.00 20.00 REVENUE, $ 8O%N.R.I. 1l6400 Il6400 Il6400 Il6400 Il6400 432000 1l64OO0

INVESTMENT. $ 100000 100000 OPERATING COSTS, $ 37375 37375 37375 37375 37375 186875 373750 STATE TAXES. $ 6048 6048 6048 6048 6048 30240 60480

CASH FLOW.$" -100000 42977 42977 42977 42977 42977 214885 329770 CUMULATIVE CASH FLOW. $" -100000 57023 -14Q.48 28931 71908 114885 329770

BEFORE INCOME TAX

937

5

TABLE 4 - BREAKEVEN OIL PRODUCTION

NET REVENUE INTEREST

72.0 % 80.0 87.5

POSTED OIL PRICE

$15 $20 $25 Dally 011 Production

Needed to Cover Operating Costs of About $38,OOO/Year 10.4 9.3 8.5

15 ,

MilES

7.8 7.0 6.4

30 ,

6.2 5.6 5.1

Fig. 1 - Flue Gas Recovery Project Is Located Fifty Miles South Of Kansas City, Kansas

938

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AIIMJAL 011. PRODUCTION

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CUllUATTVE OL PffOOUCTION

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fig. 3 - Water Injactlon HIla BHn folloWed By o.alnJ_tlon to Incr .... 011 Raoovary on a.kar, North a.ker, and Hervey ........ linn Co .. KS

938

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V4 X4

V6 X6

V8 X8

V10 X10

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Q: $15 Per Barrel ~ $15 Per Barrel ffi a.: ~ Net Revenue .... Net Revenue ~ ~ ffi ~ Q., ~ ~ Q: $20 Per Barrel $20 Per Barrel ~ Revenue ffi Interest Q.,

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~ $25 Per Barrel ffi Q.,

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BARRELS PER DAY BARRELS PER DAY

Fig. 4 - Annual Cash Flow Estimates, Fig. 5 -Internal Rate of Return Estimates, Flue Gas Recovery Process Flue Gas Recovery Process

940