Abby L. Harvey
GHG Monitor
5/8/2015
PITTSBURGH, Pa.— Motivation for investment in enhanced oil recovery (EOR) has taken a hit due to low oil prices and the shale gas revolution, which has provided the potential for quick income for investors, Steve Melzer, president of Melzer Consulting, said here last week at the 14th Annual Carbon Capture, Utilization and Storage Conference. EOR has been largely regarded as a means to develop a business case for carbon capture and storage. “The price of oil dropped from about $100 last year and the year before to about $50 now and so when we buy CO2 to make oil we obviously need to see about a half reduction in cost,” Melzer explained. The cost of CO2 capture, however, is unlikely to go down unless EOR can provide a business case for first generation demonstration projects.
Another significant barrier is that EOR projects are not quick money-makers, and it can take several years after investing in EOR for a field to turn a profit. This doesn’t fit with the current “fund and flip” attitude of Wall Street investors, Melzer explained. A much better fit for that mentality is shale gas projects that offer a much faster turn on investment, he said. “Where’s the competition for funding if you’re an oil company? Well, here is a west Texas horizontal unconventional shale project and … the time frames are dramatically shorter, this is a one year negative cash flow and … two years to pay out time frame. So if you’re on Wall Street and you bring me an EOR project or you bring me an unconventional shale project, which one are you going to buy? You’re going to go invest in the shorter term project, fund and flip,” Melzer said.
Lack of Skilled Workforce, Support from NGO’s Present Additional Trouble
Melzer went on to note that there are several additional obstacles to EOR that exist outside of the current market for the technology. The skilled workforce to develop these projects is not available and the process continues to face scrutiny from environmental organizations. “It really does take a talented engineering staff and sometimes that’s hard to find. The more experienced they are, the more expensive they are and so now you have to make a commitment as a company to this and they’re difficult to find. A little easier to find this year, I might add, than last year,” Melzer said.
