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