DENBURY WRAPS CONSTRUCTION ON CO2 PIPELINE IN ROCKIES

Tamar Hallerman
GHG Monitor
1/11/13

Denbury Resources recently finished construction of a 232 mile-long pipeline in the Rocky Mountain region that will soon begin delivering CO2 to a depleted oil field in Montana for enhanced oil recovery operations. A spokesman for the Plano, Texas-based oil company confirmed that Denbury finished laying pipe for its $285 million Greencore CO2 Pipeline last month. The pipeline system aims to initially transport 50 million cubic feet of CO2 per day (MMcf/d) from ConocoPhillips’ Lost Cabin natural gas processing facility in central Wyoming northeast to Denbury’s Bell Creek oilfield in southeast Montana. Denbury built the pipeline over a two-year period in multiple phases.

ConocoPhillips is currently installing the equipment necessary to deliver the CO2 from the Lost Cabin to Greencore, said Jack Collins, executive director of investor relations at Denbury. “We currently expect that [installation] be done in the first quarter of 2013. The pipeline then needs to be filled with CO2 and pressured up, a 30- to 45-day process. From there, we expect the first delivery of CO2 to Bell Creek to happen in the first half of the year,” he told GHG Monitor this week.

Denbury Continues Rockies Expansion

Greencore’s completion greatly expands Denbury’s reach in the Rocky Mountain region, one of the company’s stated areas of strategic focus. Collins said Denbury already has plans for further expansion of Greencore. Even though the pipeline will only initially carry 50 MMcf/d of CO2, it has the capacity to accommodate up to 725 MMcf/d. Denbury owns another oilfield about 150 miles away from Bell Creek that it hopes to flood with CO2 from the pipeline beginning in 2017, Collins said, as well as a field in western Wyoming that could soon see EOR operations.

Denbury also hopes to soon extend the pipeline to two assets picked up in a key deal with Exxon Mobil Corp. in September, Collins said. The company purchased the rights to roughly one-third of the naturally-occurring CO2 from Exxon’s LaBarge gas field in southwest Wyoming, the equivalent of 115 MMcf/d of CO2, for roughly $300 million. Collins said Denbury will soon aim to connect Greencore to that CO2 source. “We have additional supplies that we’re developing in southwestern Wyoming at the LaBarge field, so we expect to fill the pipeline or increase the throughput greatly as we develop those additional sources,” he said. Also acquired in the Exxon deal was the depleted Hartzog Draw oilfield in northeast Wyoming’s Powder River Basin that is located within miles of the pipeline route. Denbury said it is also looking to use a portion of the $1.6 billion in cash it made in deal for acquiring additional oilfields in the region.

Denbury’s expansion strategy in the Rockies follows its rapid trajectory in the Gulf Coast region, the company’s major hub. Denbury’s main pipeline system, the 325-mile Green Pipeline, transports natural and anthropogenic CO2 from southeast Louisiana to its Hastings oilfield south of Houston. “If you look at what we’ve done in the Gulf Coast with the build out of infrastructure, CO2 supply and the acquisition of additional oilfields, CO2-EOR is something that can be done in a lot of different regions,” Collins said. “The limiting factor for us is always going to be access to CO2 supply and the ability to transport that CO2 to the oilfields.”

Denbury Eyes Midwest as Potential Third Hub

Denbury is also currently eyeing the possibility of a third pipeline network in the Midwest that could eventually link with the Green system. Denbury completed a feasibility study of the region in 2009, focusing particularly of the transport of CO2 from planned industrial facilities in southern Indiana and Illinois 600 miles south to the Gulf Coast. Plans, though, will essentially remain dormant until the industrial facility developers make final investment decisions. “We’re not going to build a pipeline if there’s no supply,” Collins said.

As of last fall, Denbury was in talks with Leucadia Energy to form some sort of joint venture over its planned Indiana Gasification project the latter is pursuing in Rockport, Ind. Collins would not confirm if that facility was one of the facilities that could drive the development of the Midwest pipeline. “We need three things: a CO2 supply, an infrastructure and oilfields. To the extent that those three things exist in areas we can secure, then that would be something that we’re interested in doing,” he said.