Prepared For: SSEB's 52nd Annual Meeting Vello A. Kuuskraa, President ... · Prepared For: SSEB's...

September 21, 2012 JAF2012_089.PPT

Oklahoma Rising: Opportunities from Clean Energy Development

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Prepared For: SSEB's 52nd Annual Meeting

Prepared By: Vello A. Kuuskraa, President

ADVANCED RESOURCES INTERNATIONAL, INC. Arlington, VA

September 24, 2012 Oklahoma City, OK



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After several decades of decline, Oklahoma’s oil and gas industry is in revival, with production of natural gas and petroleum liquids (crude oil, lease condensate and NGLs) steadily rising.

Pursuit of “clean energy technologies” such as utilization (and storage) of CO2 with enhanced oil recovery and shale gas/“tight oil” could further boost Oklahoma’s oil and gas industry.

Natural Gas Production (Dry)

Petroleum Liquids Production

(Bcfd) (Barrels/Day)

2005 4.3 172,000

2011 4.9 204,000

Mid-2012 5.2 238,000



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•  Whiting Petroleum has a major CO2-EOR project, providing over 15,000 barrels of oil per day, underway in the Postle (Morrow) oil field of western Oklahoma. The company has steadily expanded the CO2 flood to 39,000 acres today.

•  Chaparral Energy also has a CO2-EOR project in western Oklahoma at Camrick (Morrow) oil field, producing nearly 2,000 barrels per day. In addition, the company has a miscible and an immiscible CO2 flood at Sho-Vel-Tum in southern Oklahoma.

•  Two additional CO2-EOR projects are underway in the N.E. Purdy and Bradley units of the Golden Trend in south-central Oklahoma.

Numerous firms, such as Whiting and Chaparral, are already actively using CO2-EOR in Oklahoma.



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There are currently six CO2-EOR floods in Oklahoma:

Current CO2-EOR Floods

Current CO2-EOR Flood

  Two CO2 floods are in the Postle and Camrick field areas in the Oklahoma panhandle.

  Four CO2 floods are in the Sho-Vel-Tum and Golden Trend fields in central Oklahoma.



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Over 400 miles of CO2 pipelines already exist in Oklahoma.   A new 50+ mile, 50 MMcfd pipeline is under construction linking the Coffeyville Fertilizer Plant with the Burbank oil field.

  Western Oklahoma CO2-EOR projects are linked to natural as well as anthropogenic CO2 supplies.

Oklahoma’s CO2 Pipelines

Arkalon Ethanol Plant

Agrium Fertilizer Plant

Coffeyville Fertilizer Plant

Koch Fertilizer Plant

Source: Chaparral Energy, 2012

Existing CO2 Pipelines

Planned CO2 Pipelines

Proposed CO2 Pipelines



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•  Chaparral Energy budgeted $83 million in 2011 and $127 million in 2012 for CO2–EOR, including the CO2 flood in the one billion plus barrel (OOIP) Burbank oil field area.

•  Overall, Chaparral has identified a large number of oil fields, holding nearly four billion barrels (OOIP), as favorable for CO2-EOR. Chaparral anticipates 200 million barrels (net) of oil recovery from applying CO2-EOR in these fields.

In addition to existing projects, numerous additional CO2-EOR floods are being considered for Oklahoma.

Chaparral’s stated corporate goals are “long-term growth through CO2-EOR” and productive use of anthropogenic CO2.



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•  A large number of Oklahoma’s large oil fields are technically favorable for CO2-EOR, under today’s “State of Art” Technology:

–  No. of Large Fields 87

–  Original Oil In-Place 30 billion

•  Application of “Next Generation” CO2-EOR Technology, which includes chemicals/fluids to lower miscibility pressure and “near-miscible” CO2-EOR (plus other advances), would expand the number of oil fields and the size of the oil resource favorable for CO2-EOR in Oklahoma:

–  No. of Large Fields 99

–  Original Oil In-Place 34 billion

Our company’s recent studies show that the CO2-EOR potential for Oklahoma is quite promising:



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The volume of economically recoverable oil (assuming $90/B oil price, a $40/mt CO2 price and a 20% ROR (before tax)) depends greatly on CO2-EOR technology:

Application of CO2-EOR to the numerous smaller Oklahoma oil fields would substantially increase these numbers.

As a point of comparison, Oklahoma crude oil proved reserves (end of 2010) were 0.7 billion barrels.

•  State of Art 5.1 Billion Barrels

•  “Next Generation” 9.3 Billion Barrels



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The economically feasible CO2-EOR potential creates a major market demand for CO2, which can only be meet by anthropogenic CO2 -- capture of CO2 from natural gas plants, industrial sources, power plants and coal-to-liquids facilities.

Assuming a flat 35 year demand for CO2, the annual CO2 requirements would be as follows:

•  State of Art 1,660 MMmt

•  “Next Generation” 2,510 MMmt

MMmt/Yr Bcfd No. of 1 GW Size Power Plants

State of Art 47 2.5 8

“Next Generation” 72 3.8 12



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The single largest constraint to expanded use of CO2-EOR in Oklahoma is having sufficient, affordably priced supplies of CO2.

Other actions that would expand the use of CO2-EOR in Oklahoma include:

*Melzer Consulting, Advanced Resources International and the Oklahoma State University have made a proposal to RPSEA to study the ROZ potential in Oklahoma.

•  Improving the fundamental data base on oil, gas and water production, on reservoir characteristics and on unitization status.

•  Testing the applicability (and impact) of “next generation” CO2-EOR technology at various Oklahoma oil fields.

•  Assessing the oil resource (and production potential) in residual oil zones (ROZ) below and beyond Oklahoma oil fields.*

•  Facilitating construction of CO2 pipelines.



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•  Cana Woodford Shale play

•  Mississippi Lime “tight oil” play

•  Granite Wash liquids-rich “tight gas” play

•  Marmaton and Cleveland “tight oil” plays

Oklahoma also has significant shale gas and “tight oil” resources in the Anadarko, Arkoma and Ardmore basins.

The Anadarko Basin is home to a series of emerging unconventional oil and gas plays, including:



  The Cana Woodford Shale offers a large, multi-resource (dry gas, wet gas and oil/ condensate) opportunity.

  Started in 2007/2008 with Devon Energy’s drilling of 23 Hz wells.

  As of end of 2011, 314 Hz wells have been drilled with Cimarex, Continental, Marathon and Newfield active.

  During 1Q-2012, 46 rigs were in use, with oil and gas production at 90,000 BOED, (primarily wet gas).

The Devonian/Mississippian-age Cana Woodford Shale Play is currently centered in Canadian and Blaine counties.



  Conversion of a vertical well to a highly productive Hz well “tight oil” play. –  About 14,700 vertical wells

–  Nearly 1,000 Hz wells

  SandRidge and Chesapeake are two major operators with 45 rigs; Devon/Sinopec have entered the play with 6 rigs.

  Operators are looking to extend the Mississippian Lime play eastward in Oklahoma and northward into Kansas.

The Mississippian-age horizontal well “tight oil play” in the Mississippi Lime is a wet gas and oil play located on the northern border of Oklahoma.



  This deep (10,000’ to 15,000’) “tight gas” play contains a sequence of sands within a 1,500’ thick intervals.

  Starting in 2008, Hz well drilling has replaced vertical wells, particularly in Oklahoma.

  Apache, with its acquisition of Cordillera, is the dominant lease holder, followed by Chesapeake and Forest Oil.

  1Q-2012 production is in excess of 1 Bcfed, with about 25% condensate and 75% wet gas.

The Pennsylvanian-age Granite Wash liquids-rich “tight gas” play is located in Beckham, Roger Mills and Washita counties of western Oklahoma.



  While overshadowed by the Granite Wash and other Anadarko Basin plays, the Cleveland/Tonkawa is under active development.

  Chesapeake and EOG, plus a series of technically savvy independents (Jones Energy, Mewbourne Oil and Holmes Exploration), are the largest lease holders.

  Other stacked unconventional gas and oil plays in this area include the Marmaton and Hogshooter.

The vertically stacked Pennsylvania-age Cleveland and Tonkawa “tight oil” plays are also located in western Oklahoma.



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•  Nearly 48 Tcf of dry gas (after NGL removal and gas shrinkage)

•  About 4.4 billion barrels of light oil/condensate

•  About 6.1 billion barrels of natural gas liquids (assuming high efficiency cryogenic gas processing)

Our company’s recent assessments indicate that the technically recoverable oil, gas and natural gas liquids resources (from these four Anadarko Basin shale gas and “tight oil” plays) are considerable:

The recoverable shale gas and oil resources in the Arkoma and Ardmore (Woodford Shale) plays would add to these totals.



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•  Long-term oil and gas prices plus drilling, stimulation and other service costs

•  Accessible markets, particularly for natural gas and natural gas liquids

•  Advances in technology that improve recoveries (EURs) per well and reduce costs (e.g., improved drilling efficiencies, recycling of produced water, pad drilling).

The economically feasible portion of this technically recoverable “unconventional hydrocarbon resource” will be less but still quite substantial, depending on:



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The Oklahoma energy industry can benefit greatly from participating in “clean energy development.”

•  Capture and sale of CO2 to the EOR industry can create a source of revenues for Oklahoma’s fertilizer, gas processing and power industries.

•  Successful pursuit of enhanced oil recovery in Oklahoma’s mature oil fields depends on having access to large, new sources of CO2.

•  Oklahoma’s numerous shale gas and “tight oil” plays provide major new development opportunities for Oklahoma’s oil and gas industry.

•  Advances in CO2-EOR, shale gas and “tight oil” technologies will improve the “size of the price” and its economics.



Advanced Resources

International www.adv-res.com

Office Locations Washington, DC 4501 Fairfax Drive, Suite 910 Arlington, VA 22203 Phone: (703) 528-8420 Fax: (703) 528-0439

Houston, Texas 11490 Westheimer, Suite 520 Houston, TX 77042 Phone: (281) 558-6569 Fax: (281) 558-9202

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