www.senergyltd.com/carbon

Revised Economic Assessment of CO2 EOR in Mature UK North Sea Fields

David S Hughes (david.hughes@senergyworld.com)

Carbon Storage SpecialistSenergy Alternative Energy

Background

UK Government committed to decarbonising UK electricity supply as part of its CO2 emissions reduction strategy (by at least 34% by 2020 and 80% by 2050 – from 1990 base)Carbon capture and storage at coal fired power stations is beginning in the UK with a 2 million tonne per year trial (from 2014)Longer term (2030s) once CCS becomes proven technology the amount of CO2 captured will likely exceed 100 million tonnes per yearFor the storage part of the CCS chain offshore depleted oil and gas fields are being considered as well as saline aquifersWith oil fields there is the opportunity to use the CO2 for enhanced oil recovery (EOR)

BGS February 2005

Geographic Information System for CO2 Sources and Sinks (GESTCO)

Issues Around Using CO2 for EOR in North Sea

Using CO2 for enhanced oil recovery (EOR) in UK North Sea oil fields is often held up as an opportunity to kick start the UK carbon storage industryTrue that supercritical CO2 is a good solvent and at the pressures and temperatures found in North Sea reservoirs can flush remaining oil from rocksBut no offshore applications of CO2 EOREven onshore only amounts to one third of one percent of worldwide oil production although now expanding rapidly

Also often mentioned that CO2 can be stored in our old oil fieldsBut nearly all have been developed by water injection with an approximate balance between amount of water injected and the amount of oil and water producedSo not opportunity for storage-only in oil fieldsBut gas fields developed by pressure depletion are the leading hydrocarbon field candidates for early storage projectsBut most perceived capacity is in saline water bearing formations (aquifers)

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Size of CO2 EOR Prize

Offshore UK oil in place 40-42 billion barrels, recovery to date 24 billion barrels from 220 fields

16 billion barrels from top 30 fields

DECC estimates of UK offshore CO2 EOR potentialup to 1 billion barrels incremental oil

up to 0.5 billion tonnes of CO2 stored

CO2 EOR Onshore vs. Offshore

Onshore AdvantagesCO2 supply networkHigh well density, pattern flood, relatively cheap to redrill/refurbishRelatively low secondary oil recovery (35-45%)Phased implementationLarge surface area available for facilities

Offshore ChallengesLimited CO2 supply at present but significant quantities likely to become available on 10-20 year timescaleFewer wells, peripheral flood, expensive new wells and workoversHigh secondary oil recovery (50-70%) therefore smaller targetSingle implementation (i.e. no chance to introduce the project in phases)Existing facilities mainly incompatible with high CO2 content in fluidsLimited weight and space for new facilities

Additional ~20 years from existing facilities

CO2 reception facilities and controls

Flow lines to injectors (CO2 and water) and control valves

Gas/liquid separation facilities capable of handling high content CO2 in produced fluids

Separation of CO2 and hydrocarbon gas (or just separate enough for fuel gas)

Dehydration and compression of produced gas for reinjection

Start-up CO2 pumps

Production well tubing needs replacing with stainless steel (to deal with produced CO2)

Baseline measurements for subsequent monitoring

Offshore CO2 EOR Implementation (Capex)

Attic oilOil trapped under shalesOnly partially

swept by water

Waterflood residual oil

Targets for CO2 Injection (SPE 78298)

Earlier screening study suggested Claymore is leading candidate for single field evaluationAround 1450 MMstb initially in place, around 46% recoverable from peripheral waterflooding (initial pressure and temperature ~3800 psi and 170°F)Scott and Buzzard were identified from screening as other possible candidates and together with Claymore comprise the clusterScott has around 950 MMstb initially in place, around 47% recoverable but is deeper and hotter than any CO2 project to dateBuzzard has around 1100 MMstb initially in place, around 50% recoverable but not clear that the CO2 would be miscible

Single Field and Cluster CO2 EOR Evaluations

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DECC website Exponential decline P70 CO2 P30 CO2

Claymore CO2 EOR Evaluation

CO2 miscible with reservoir oil at current operating pressure

Incremental oil recovery profiles constructed for 70% probability (1/7th remaining oil) and 30% probability (1/5th remaining oil)

Incremental oil 119 million barrels (8% of oil initially in place) for P70 and 163 million barrels (11% of oil initially in place) for P30

CO2 delivered 49 million tonnes

CO2 recycled 152 million tonnes

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Oil Recovery Rate

CO2 Injection Rate

Claymore CO2 EOR Economic Evaluation

Capital costs £1.1- 1.2 billion (new auxiliary CO2 platform, adaptation of existing platform, well upgrades, baseline monitoring)

Operating costs £90 million per annum (include requirements of measurement, monitoring and verification programme)

Price assumptionsOil £50 ($70) per barrel

CO2 neither cost nor subsidy

Discounted cash flow gives internal rate of return 12-16% (before tax)

Unrisked

Oil and CO2 prices subject to market forcesProject economics can be improved by reducing capital costs and risks associated with converting facilities and wells

$50-120 per barrel

€ -50 (cost) to €100 (subsidy) per tonne

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Sensitivity analysis (P30 case)

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CO2 Price/Subsidy

Oil Price

IRR (%)

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CO2 is miscible with reservoir oil at current operating pressure in Scott; more problematic in Buzzard

Incremental oil 237 million barrels for P70 and 331 million barrels for P30

Spread over 2018-2043

CO2 delivered 155 million tonnes at around 11 million tonnes per year for 13½ years from 2017

CO2 injection starts in Claymore and Scott in 2017 and in Buzzard in 2024

Oil Recovery Rate

Delivered CO2 Requirement

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Cluster CO2 Requirement

11 million tonnes/year

Cluster CO2 EOR Evaluation

Capital costs for converting facilities at Scott estimated at £1.2 billion and at Buzzard £700 million (total including Claymore £3.1 billion)Operating costs estimated at Scott £45 million per annum and at Buzzard £55 million per annum

Price assumptionsOil £50 ($70) per barrelCO2 neither cost nor subsidy

Discounted cash flow calculations give internal rate of return 13-18% (before tax)Unrisked

Oil price $50 to 200IRR 7% - 33% P70IRR 12% - 40% P30

CO2 cost/subsidy €-50 (cost) to €100 (subsidy) per tonne

IRR <0% – 38% P70IRR 6% – 41% P30

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IRR Sensitivities

Cluster CO2 EOR Economic Evaluation

Contrary to many expectations most North Sea oil fields cannot be used solely for CO2 storage because produced fluids have been replaced by waterThe redevelopment of a mature North Sea field for CO2 EOR is a major undertaking equivalent in complexity, scale and cost to the original developmentEach project will need to be the subject of detailed engineering design and economic appraisal including a full assessment of the risksUnrisked CO2 EOR may be viable in the North Sea fields at an oil price of $70 per barrel or aboveTaking risks into account, it is unlikely that CO2 EOR will viable in North Sea fields at an oil price less than $100 per barrelIf a subsidy is available for the CO2 stored then the project could be economic at an oil price significantly lower than $100 per barrelCO2 EOR has never been applied offshore so early projects will carry significant additional technical and financial risksDevelopment of a CCS infrastructure in the UK could lead to the application of CO2 EOR in some fields

Conclusions from Single Field and Cluster EOR Evaluations

EOR vs. Storage

Around 85% of oil is carbon, around 75-80% of gas is carbon

If burned, a barrel of oil (30°API) would release around 0.4 tonnes CO2 and the associated gas 0.02 to 0.1 tonnes

Net CO2 injected to produce an incremental barrel of oil ranges from 0.25 to 0.8 tonnes (the lower value corresponds to when WAG is used, higher value for continuous CO2 injection)

BUT net CO2 stored is less

Energy is consumed separating CO2 from produced gas, and dehydrating and compressing it for reinjection

This energy has associated CO2 emissions which need to be accounted for

Little Creek, MississippiDimensionless oil recovery

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CO2 injected in hydrocarbon pore volumes

Figure from Denbury Resources Inc presentation, 12th Annual CO2 Flooding Conf, Midland, Tx, Dec 2006

So what does the future hold in UKCS?

Supply of CO2 will develop from CCSInitial offshore projects will be storage only, but proximity and availability of CO2 likely to provide niche opportunities for EOR initially possibly in the smaller fieldsIf successful, redevelopment of larger mature (and abandoned?) fields may occurNew specialist CO2 operators may emergeOnce EOR phase complete some extra opportunity to store additional CO2 in ‘pressure space’ between operating pressure and original pressureAdjustment of tax regime may be needed to make offshore EOR economicRegulation around CO2 storage will be significant burden (CO2 is being both injected and produced)

In 1977 Prof. George Stewart of Heriot-Watt University was the first person to consider the use of EOR in UKCS fields. His study was funded by the then Department of Energy (now DECC)The conclusion of his report states: “Carbon dioxide miscible flooding is concluded to be the potentially most promising EOR technique for offshore application. The provision of the very large amounts of CO2 necessary for substantial enhanced recovery is technically feasible; in the long term the combustion of coal to provide electrical energy, low-grade heat and pure carbon dioxide for EOR may be the most attractive approach to an integrated energy and hydrocarbon resource policy.”

Nothing’s New!

Acknowledgements

The single field and cluster economic evaluations presented were undertaken by Senergy Alternative Energy as part of the “Opportunities for CO2 Storage around Scotland an integrated strategic research study” coordinated by the Scottish Centre for Carbon Storage (www.erp.ac.uk/sccs) and funded by both the Scottish Government and industryA summary of this study can be downloaded at http://www.scotland.gov.uk/Publications/2009/04/28114540/0Permission to present this material is gratefully acknowledgedDepartment of Energy and Climate Change (DECC) who have sponsored my visit here

Senergy CO2 Storage Training Course

One day training course

Introduction to the Geological Storage of Carbon Dioxide (CO2)Tuesday 29th September 2009

Mantra on Little Bourke, MelbourneCourse outline and registration at: www.senergyworld.com/training

Previously presented in Perth, Canada, USA and on seven occasions in UK