CO2-EOR: Financial Game-Changer for North Sea CCS or Elusive Chimera – September 2015 Strathclyde Biannual

Written by Chris Gent from the British Geological Survey whose attendance at the UKCCSRC Strathclyde Biannual meeting on 8-9 September 2015 was funded by the UKCCSRC ECR Meeting Fund

Strathclyde University’s impressive new £90 million Technology & Innovation Centre provided a more than adequate setting for the UKCCSRC Biannual. The meetings first day was set in full swing with an interesting variety of talks on projects in the UK with the late afternoon session introducing the audience to the benefits, limitations, and barriers to the much debated topic of CO2-Enhanced-Oil-Recovery (EOR) in the North Sea. With the CO2-EOR seed freshly planted in everyone’s mind, we migrated to The Corinthian for an evening of discussion and pondering accompanied of course by plentiful food and drink.

The CO2-EOR technical session kicked off the next morning, allowing enough time for caffeine dependant minds to get warmed up for the well balanced series of talks.

Chair Andy Chadwick from the BGS echoed my own and many others interest and self-confessed naïvety in the field of CO2-EOR, with the speakers assembled in the front rows, the session got underway.

Continuing from his presentation on EOR the previous day, Prof Stuart Haszeldine started the session with a positive view on CO2-EOR potentially kick starting a renaissance in North Sea oilfields. Not only would the idea of creating more money by producing up to 10% more oil (over 500million barrels in the UKCS) attract investment from oil and gas companies, it also serves as the precursor for permanent storage after field depletion. From the exterior, this would strike most people as a win-win scenario. However, as Stuart explained all that glitters is not (black) gold. For the North Sea, Prof Haszeldine sights an undersupply of CO2 as the limiting factor, as for the EOR to take place, he quoted a supply of 4/5 million tonnes of CO2 to meet the EOR demand. Without long pipelines from major CO2 source areas such as Teesside this would need well organized CO2 shipping vessels from East England to be viable. Furthermore, with oil prices currently stagnating under $50 a barrel this could potentially force early closure for many potential CO2-EOR fields. However, Stuart wrapped up by citing BP’s CH4-EOR in the Magnus Field increasing recoverable oil by up to 40% as a plausible analogy for CO2 driven EOR, but stressed that petroleum economics, time and subsequent supply were concerning limiting factors.

In support of Prof Haszeldine, Mr Emrah Durusut‘s (Element Energy) expertise is concentrating on the role government, more specifically, how fiscal incentives could have on the overall economic picture of North Sea CO2-EOR. Mr Durusut made specific reference to a SCCS report in which his and Prof Haszeldine’s EOR assessments

The economic modelling was undertaken in 2013 and concentrated on a variety of economic scenarios, drivers and sensitivities, most importantly was the control on taxes. As CO2-EOR is inherently an expensive process and amongst other costs, old overcrowded rigs would need new compression facility upgrades, pipelines would need construction and in many cases new wells drilled. Currently, the taxation on oil production is very high and does not lend itself to encouraging further risky investment on mature fields, Mr Durusut concluded that for companies to overcome initial risk then fiscal incentives are an essential, with (given EOR success) potential windfall for Government tax maximised at £4bn (at $90/barrel). However, this study was undertaken in 2013 and even the more conservative of estimations were made at an oil price of $60/barrel.

Awash with positive vibes, the session had definitely chosen good news first, enter Steve Furnival from HoBoil Ltd. Mr Furnival’s talk was titled Offshore CO2-EOR: The Realists View, and it was a frank perspective of EOR from a reservoir engineers perspective. Steve started by going back to basics; the physical properties of oil, carbon dioxide and the reservoir, concluding that for efficient CO2-EOR the reservoir must be homogenous with a minimum of 20% remaining oil in place and the CO2 must then dissolve the remaining oil in place. Mr Furnival however pointed out that EOR is a viable technology, as proven in onshore Texas USA since 1972, and more recently in the chalk Halfden field in the Danish sector. From an economic point of view, Mr Furnival once again highlighted costs, retrofitting ageing rigs, CO2 supply, and investor risk as well as introducing the room to other potential costs: test wells and well spacing’s. Onshore wells are closely spaced to increase efficiency, offshore, drilling wells at onshore spacing would be a massive investment for an already fragile economic model. Furthermore, onshore EOR usually drill test wells to reduce risk which isn’t possible offshore, offshore, it’s all or nothing for an investment of hundreds of millions or even billions. Don’t worry, it’s not all doom and gloom! Onshore UK would be more suited to CO2-EOR, but the industry needs a ‘Next Generation’ technology, currently investigated by the US Department of Energy. However, if oil prices don’t bounce back soon and sustain 2010-2013 prices CO2-EOR seems to be nothing but a sinking ship in the UK offshore.