ADVOCATES SEE POTENTIAL FOR ENHANCED OIL RECOVERY OFFSHORE

Tamar Hallerman
GHG Monitor
1/11/13

Given the success of enhanced oil recovery operations in regions like the Permian Basin and the northern plains in recent decades, some of the technology’s proponents are beginning to look offshore for new opportunities. Producers have been flooding their depleted oil fields with CO2 for the better part of four decades, but the practice in recent years has especially helped buoy the carbon capture and storage industry in North America even as markets crashed and the prospect for climate legislation dimmed. Advanced Resources International (ARI), which conducts much of the EOR research on behalf of the Department of Energy, estimates that current EOR technologies produce 281,000 barrels of domestic oil per day—an estimated 6 percent of U.S. crude oil production—and could economically produce an additional 60 billion barrels of oil from depleted fields.

But in recent speeches, some CCS advocates have indicated that the real action for EOR may lie offshore. Offshore EOR is “starting to emerge, and clearly worldwide that’s where the prize is,” ARI President Vello Kuuskraa said in a speech last month at a CO2 management conference in Midland, Texas. DOE Assistant Secretary for Fossil Energy Chuck McConnell also suggested that depleted offshore reservoirs could be promising. “The prize might be ocean-based [EOR] activity,” he said in remarks at the same conference. “The geology offshore may often times offer a more rapid deployment for enhanced oil recovery.” 

High Capital Costs, Lack of CO2 Remain Barriers

Researchers have discussed the possibility of offshore EOR operations for decades, according to Stuart Haszeldine, a professor of CCS at the University of Edinburgh who is evaluating the technology’s potential for the North Sea in partnership with the research group Scottish Carbon Capture and Storage. However, serious discussions about the technology did not surface until about 10 or 15 years ago, when the prospect of a CCS industry became more of a reality, he said.

In the U.S., researchers saw real potential for many of the aging oil fields in the Gulf of Mexico, where production began tapering off after decades of production. Several oil companies like Shell and Exxon Mobil conducted pilot EOR work in the region and achieved technical success, according to ARI Vice President Mike Godec. But their work also proved that the technology was not yet economically viable, he added. As most U.S.-based companies began looking elsewhere for cheaper oil, other developers considered pilot projects in countries like Brazil, Vietnam and Malaysia in recent years, Godec said, but most work has largely stalled.

The lack of large quantities of CO2 at an affordable price caused most potential operators to balk at the idea despite the money-making potential of the additional barrels of oil that could be produced from the depleted offshore wells. “The big blockage has always been the availability of industrial quantities of CO2,” Haszeldine said in an interview. The high capital cost for building the infrastructure for offshore operations has also stymied most development in recent years. The offshore platforms needed for EOR are prohibitively expensive, according to Godec. EOR operations also require a separate CO2 processing facility, which is also costly and too physically large to fit on most offshore platforms, he said. Potential developers would need to either further expand the platform to accommodate the facility or run the CO2 back and forth from an onshore recycling facilities via pipeline, both of which being costly options. “The opportunity is clearly there and it’s technically feasible, it’s just economically challenging,” Godec said. “Everything offshore, of course, is going to be more expensive.” 

As a result of those limiting factors, most potential developers have aimed to pursue more economic oil production opportunities elsewhere. But proponents are assured that once other options are exhausted, offshore EOR projects could build up rapidly. “People will eventually find ways to make it work,” Haszeldine said. “The prize is huge.” ARI estimates that the size of the prize for offshore EOR in the U.S. to be as much as one billion additional barrels of economically recoverable oil.

Europe Could be Hotbed for Offshore Development

Undoubtedly, though, northern Europe has expressed the most interest in offshore EOR. CCS project developers in recent years have viewed the North Sea’s long-producing oilfields as promising hosts for EOR operations. Further, public acceptance for onshore CO2 sequestration is relatively low, leaving offshore reservoirs as the only option for CO2 storage for most project developers. The Dutch government in 2010 voted to ban onshore CO2 storage due to public opposition, and sour public opinion of CCS in Germany has effectively created a de-facto ban. “It’s pretty clear at the moment that offshore storage of CO2 is the only politically viable way of doing this because of public opinion,” Haszeldine said.

While the EOR industry is still largely in its infancy in Europe, several pro-CCS groups have pushed to develop a market in the North Sea. In May, the Scottish government and two area universities created the Center for North Sea Enhanced Oil Recovery with CO2, a program aimed at gauging the potential for offshore EOR in region. Preliminary data released by the group indicates that the Nor Sea has the potential to produce roughly three billion additional barrels of oil using EOR, with a total projected value of $300 billion. “There are about 20 quite large fields in the North Sea with several hundred million barrels of oil each that could be recovered by CO2-EOR,” Haszeldine said. “The challenge is that there are no obvious sources of CO2 at the present time, but that could change in the next two or three years if CCS gets up-and-running in the U.K.”

2Co Looks to Offshore EOR

Several U.K.-based CCS projects developed for the European Union’s New Entrants Reserve (NER 300) clean energy competition aimed to eventually take advantage of EOR in the North Sea (all were required to pitch offshore storage sites under contest rules). 2Co Energy’s Don Valley project, one of Britain’s entrants into the competition that was later dropped by the government, was in talks with Talisman Energy to inject more than five million tons of CO2 annually from a new integrated gasification combined cycle plant into two of the oil company’s central North Sea oilfields.

Nearly half of the project’s massive £5 billion ($8.1 billion) price tag would have gone to building the offshore infrastructure for the project’s storage aspect, including a 250 mile-long pipeline. But Jim Lorsong, 2Co’s director of Exploration and Production, said in an interview that despite the large price tag, the company sees offshore EOR as an economic long-term decision. “The whole objective is to make money for the project, and we think we can achieve returns that are commensurate with other types of petroleum investments offshore,” Lorsong said. “It’s expensive, but you can also produce a lot of oil, so once you make the commitment to spend that amount money and access those reserves, then actually the unit metrics are really quite competitive.” 2Co is currently evaluating Don Valley’s future given that the U.K. government said it would not financially support the project in NER 300 or its domestic CCS funding competition.