UK Oil and Gas Reserves – Getting the Best from the Rest

UK World Energy Council Workshop London 26 November 2013

Maximising oil recovery with stored CO2:

A win-win for the North Sea

James Lorsong, 2Co Energy Limited

Outlook to 2050 World Energy Council, October 2013

• Global energy demand continues to increase, potentially doubling

• No shortage of fossil fuels, technology application has increased reserves

• Fossil fuels remain vital to the energy mix, demand flat or increasing

• Climate goals unattainable without carbon capture & storage (CCS)

Context

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Enhanced oil recovery with carbon dioxide (CO2 EOR) brings these together

in a win-win for the North Sea

Implications for the North Sea basin:

Continuing high demand for oil production

CCS for power and industrial applications

Maximising oil recovery with stored CO2

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Enhanced oil recovery in the North Sea

Maximising oil production with CO2

CO2 EOR challenges in the North Sea

EOR + CCS value chains

CO2 injection well in west Texas

Courtesy Bruce Hill, Clean Air Task Force

EOR technologies for the North Sea

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PILOT EOR screening (2012)

6 billion barrels EOR potential EOR Process

Potential (billion bbl)

Gas Miscible CO2 5.7

Miscible Hydrocarbon 5.4

Nitrogen & Flue Gas 0.5

Ch

em

icals

Surfactant + Polymer 4.8

Polymer 2.1

Colloid Dispersal Gel 3.1

Bright Water 3.1

Low Salinity Water 2.0

Heat

In-Situ Combustion 0.7

Steam 0.6

EOR Process Prize Barriers to Application

Low Salinity 2.0 • technical understanding • brownfield retrofits • timing

Chemicals 4.8 • high P, T in some reservoirs • high operating cost

Miscible Gas 5.7 • access to large volumes of cheap gas

Miscible gas EOR offers greatest reserves and lowest

technical risks

Successfully applied in North Sea, but limited gas supply

CCS could provide large supplies of miscible gas (CO2) for North Sea EOR

source: PILOT 2012, DECC EOR Screening Tool

source: PILOT 2013

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Miscible gas EOR – 38 years North Sea experience

N Sea EOR Pilots

1975-2005

(Awan et al., 2008)

EOR tests with enriched

hydrocarbon gas

• 18 North Sea field tests 1975-2005

• 17 considered technically and

economically successful

Full-scale field developments

• Ula (1998) and Magnus (2002)

• More than a decade of successful

operation

• Stranded gas key to deveolpment

Full-scale EOR has been limited by lack of large, low-cost

supplies of solvent (hydrocarbons or CO2)

Numerous CO2 studies since 1979

• Forties, Miller, Claymore, Gullfaks, etc.

• BP, Shell, Statoil, Apache,

ConocoPhillips, etc.

• Advanced designs for multiple CO2

EOR projects (e.g., Miller)

UKCS CO2 EOR targets

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EOR potential by field

CO2

Chemical

Low Salinity

source: PILOT, DECC SENEOR Tool

PILOT screening

>20 fields with >50 million barrels potential

incremental recovery from CO2 EOR

Fields suitable for CO2 are widely distributed in

the Central and Northern N Sea

Many fields are accessible by pipeline from

proposed CCS capture plants

after: Hughes, 2013 (PILOT) Map scale distorted

UKCS CO2 targets and potential sources

CO2 EOR process overview

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cap rock

imported

CO2

recycled

CO2 CO2

compression

produced fluid

separation exported

oil

produced water

CO2 injection wells oil production wells

CO2 plume mixing zone

oil/water contact oil bank

unswept oil

JAL 2013

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Incremental oil recovery typically 10-

15% of the oil originally in place

(compare 30-60% for water flood)

Wertz Field, Texas (from Lake & Walsh, 2008)

EOR

incremental

recovery

Water

flood

recovery

8

Production of oil and CO2 from EOR

Some injected CO2 is eventually produced along with oil, water and natural gas

present in the reservoir

Produced CO2 is separated from other fluids and re-injected into the reservoir

(recycled)

The remainder is trapped in the rock or mixed with reservoir fluids not produced

Nearly all imported CO2 remains in a closed system that is eventually sealed,

like any other storage

Ultimate EOR recovery is typically

2.5-3.5 barrels per tonne of CO2

imported

Is CO2 really stored?

CO2 EOR today

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Full scale operations since 1972

US CO2 EOR production

~300,000 b/d, 6-8% of total

In 2011, ~72 Mt of CO2 was

injected for N American EOR

(24% captured) (EPSA, 2012)

from NEORI, 2012

Most CO2 captured for CCS (86%) is

stored in EOR sites

Operating in North America

CCS + EOR planned for China,

Middle East and North Sea 1 Mtpa

Operating

Under Construction

Define (FEED)

Planned

Modified after The Global Status of CCS 2012, Global CCS Institute

Bringing CO2 EOR to the North Sea

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CO2 EOR potential

• Among a range of EOR technologies, CO2 offers the greatest technical potential

• CO2 EOR is well established and widely applied (North America, onshore)

• Principal limitation is access to CO2 - large supplies at low-cost

• CO2 for EOR is increasingly sourced from CCS projects

North Sea challenges

• EOR performance uncertainty

• Facilities suitability and retrofit

• Moving CO2 EOR offshore

• Commercial

• CO2 supply Oiceana.org

EOR performance challenges

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Large well spacing drives higher capex and lower/slower recovery

• Some N Sea fields are similar spacing to onshore EOR

• Larger N Sea spacing compensated by better reservoir quality

Flow assurance with CO2 (hydrates, asphaltenes, wax and scale)

• Effectively managed on and offshore; higher offshore costs unlikely to be significant

No CO2 pilot projects in the North Sea

• Wide range reservoir properties in >130

analogue CO2 floods

• Many EOR projects in reservoirs similar to

North Sea

• Successful North Sea miscible gas EOR

developments with hydrocarbon gas Magnus Field

miscible gas EOR oiilrigphtos.com

Facilities challenges

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Additional facilities and equipment (mainly gas treatment and recycle)

• New space creates opportunity for cost efficiency and value add – improved safety,

efficient construction and operation, access to satellites

CO2 safety offshore – confined spaces, evacuation, venting

• Specific N Sea project designs have managed these issues

Life extension – ageing structures and equipment

• Indications that many structures are likely to be suitable

• Extensive experience of materials and equipment from existing CO2 projects

• Economic benefit of deferring decommissioning cost

Re-use of wells with CO2

• Workovers likely required to install new materials and equipment

• Significant component of capital cost; may drive field selection

Moving CO2 offshore

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CO2 EOR has been

successfully conducted

offshore in 12 projects,

including:

• Deep water, far offshore

• Large-scale injection

• Produced gas recycling

• Extended operation Offshore CO2 injection

Lula Field, offshore Brazil

• pilot from 2011, injecting CO2

separated from produced gas

• full-scale production start June 2013 en.mercopress.com

Commercial challenges

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Investment case for CO2 EOR is difficult

• Several studies suggest economic, but not commercial

• Expected returns probably too low to compete for capital,

considering first-mover risks

• Large capital investments for field re-development

• To secure CO2, developers must collaborate with capture,

different industries and novel counterparty risks

Improving EOR economics

• Early projects have little scope to reduce facility costs

• Storage fees limited (by capture subsidy and non-EOR storage costs)

• Tax incentives are probably most effective (cf. recent field allowances for brown

field developments)

• Tailored measures are likely to produce incremental tax revenue - EOR oil would

not be produced otherwise

Scottish Enterprise

CO2 EOR Economics

Study, 2012

CO2 supplies for North Sea EOR

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0

20

40

60

80

100

120

140

160

180

200

£/M

Wh

Source: Mott Macdonald for DECC, UK Electricity

Generation Costs Update June 2010

CCS can enable EOR and vice versa

• Capture plants are only source of CO2

• EOR revenues can offset CCS costs (6-16%

cf. CCS Cost Reduction Task Force, 2013)

• EOR may make CCS competitive with other

low-carbon electricity

Integrating CO2 capture and EOR

• EOR must accept storage obligations

o Monitoring, leakage liability, post-injection care

• ‘Take or pay’ for EOR plus ‘send or pay’ for capture

• EOR must assure high availability for CO2 off take (excess injection capacity)

• EOR economics will not support (large) payments for CO2 (limited by incentives)

• CO2 transfer price is likely to be near zero (compared non-EOR storage fee)

Maximising North Sea recovery with stored CO2

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CO2 EOR is technically attractive for the North Sea

• Many candidate fields - more than 5 billion barrels of incremental production

• Technology is well established with CO2 from natural sources

• Technical challenges entail costs and commercial risks, but are well understood

Early EOR projects require incentives

• Projects are likely to be economic, but not commercial

• Tax incentives can offset first-mover risks and attract essential participation

from North Sea operators

CO2 EOR realises maximum value in integrated CCS value chains

• CCS is the only source of CO2 to unlock vast EOR reserves

• CCS deployment will create large, low-cost CO2 supplies for EOR

• Coordinated policy to deliver both CCS and EOR could create sufficient

incremental production tax to substantially offset CCS costs

www.donvalleypower.com

www.2coenergy.com

The Don Valley CCS Project is co-financed by the European Union’s

European Energy Programme for Recovery. The sole responsibility for this

publication lies with the authors. The European Union is not responsible for

any use that may be made of the information contained therein.