CO2 in the United States (Revised Jan 2008)

The use of CO2 for EOR appears to have initiated in the United States during the early 1960´s, as documented in one article we have come across from 1964 in the Journal of Petroleum Technology by Ramsay and Small entitled "Use of Carbon Dioxide for Water Injectivity Improvement". Much has happened since that early era.

Injection of CO2 is based upon the mechanism of miscibility whereby the CO2 mixes with oil remaining in the reservoir at the right pressure and temperature and helps improve oil production in the final (tertiary) phase of oil reservoir life. Essentially the CO2 allows operators to recover oil that would normally be left in the ground when a field reaches the end of its conventional (post-waterflood) economic life.

World-wide there are an estimated ~100 registered CO2-floods that in 2006 produced around ~250,000 bpd, but almost ~90 of these are located in the USA and Canada, primarily in the regions illustrated by the map below covering the Permian Basin of Texas and New Mexico, the Bighorn Basin of Wyoming, the Rangely Field of Colorado and the Mississippi Salt Basin. In North Dakota CO2 from the Great Plains Coal Gasification project is injected into the light oil field at Weyburn in Saskatchewan in Canada.

The unique properties of CO2 were first commercially exploited in the mature fields of the Permian Basin, West Texas during the early 1970’s, using anthro-pogenic CO2. At that time CO2 separated from natural gas production was being vented to atmosphere and was therefore readily available for tertiary oil recovery use. Projects were subsequently stimulated through special tax and regulatory incentives as well as some pioneering work undertaken by Shell Western E&P and Mobil Producing Company in a period when United States domestic oil production was beginning to decline rapidly.

Active CO2-floods in
North America (2006)

Region	Oil (bpd)
Texas	168,000
Wyoming	17,600
New Mexico	15,000
Mississippi	11,800
Colorado	11,600
Oklahoma	9,600
Rest of USA	3,600
Canada	7,200

CO2-floods also gradually evolved in Oklahoma (1982), Mississippi (1985), Colorado (1986) and Wyoming (1986). Since year 2000 activities have also grown in new regions such as Michigan, Kansas, California and most significantly along the Gulf Coast where Denbury Resources Inc. has now emerged as a major pipeline operator and EOR participant through developing its assets in Mississippi and Louisiana. 

To defray higher costs associated with implemen-tation of CO2 for EOR projects, the United States tax code has since 1979 (when crude oil was still under price controls) included 'tertiary incentives'.

Initially, under prevailing Dept. of Energy price controls, there was a volume price exception that allowed CO2-EOR crude to be sold at then free market prices. Subsequently there was an exemption from the US Windfall Profits Tax, (and a credit for production fuels from non-conventional sources). Finally, the US Federal EOR Tax Incentive was codified in 1986. There are currently (at least) eight states that offer additional EOR tax incentives on incremental oil produced.

In year 2006 it was estimated in the United States that incremental oil from CO2-floods totalled 237,000 bpd representing 36.5% of all EOR production and 4.6% of the nations domestic production. The graph below shows development from 1984 through to 2006 between projects world-wide and in the Permian Basin.

In the state of Texas there is no EOR tax credit, per se, but instead since 1989 there has been in place an EOR Severance Tax Incentive scheme ensuring a tax rate of 2.3% on market value of oil for the first 10 years of CO2-EOR production. This is one-half of the standard rate.

Effective from September 1, 2007 the Legislature also adopted an Advanced Clean Energy and EOR Tax Reduction Bill which reduced the effective tax rate for use of anthropogenic CO2 to 1.15% for the first 7 years of CO2-EOR production.

The House Bill 3732 includes, i) recognition of CCS with EOR as a "qualifier" for Clean Energy, ii) provides severance tax reductions for anthropogenic CO2-EOR projects (see above), and iii) provides Ad Valorem Tax Abatement for CO2 capture. A related House Bill 1967 covers open access through CO2 pipeline infrastructure.

West Texas currently has approximately 3,900 km of associated CO2-pipeline infrastructure and in 2006 over 30 million ton CO2 was transported to the region from the natural CO2 reserves at McElmo Dome, Sheep Mountain and Bravo Dome in order to satisfy a growing demand.

There are several (obvious) criteria that explain the growth of CO2-EOR market in the Permian Basin:

* Comparatively cheap ‘anthropogenic’ CO2-sources (or CO2 as ‘associated gas’) were originally available from within the region. However to sustain the original growth this was quickly supplemented with large volumes of natural CO2 from neighbouring States.

* The fiscal regime was originally stimulated by the oil crisis of 1973, and attendant DOE price controls, which coincided with the first CO2 projects in the Basin. Subsequently fiscal measures and projects evolved simultaneously to promote incremental oil production.

* With growing demand and a natural supply the infrastructure evolved rapidly, thereby reducing CO2-transportation costs by approximately 40% in the first two decades.

* With time, improved reservoir screening methods considerably reduced risk associated with implementation of a CO2-flood: experience on one field was often extrapolated onto a neighbouring field. Technology and infrastructure clustering also made subsequent growth much easier.

* Improved understanding of CO2-flood design ensured more optimal use of the available CO2. There also evolved a better understanding for handling corrosion in an economical manner, as well as improved technology for handling, pumping and recycling CO2.

* There remains an enormous market potential for incremental oil and there are large quantities of both natural and anthropogenic CO2-sources available (see below).

Holtz et al. (1999) identified over 1700 significant oil reservoirs in Texas having a total potential of 31 billion bbl recoverable oil. The Texas Bureau of Economic Geology completed a study in April 2004 (see here) which assumed that 10% of this oil was amenable to CO2-EOR resulting in an economic value of $226 billion and was equivalent 1.48 million jobs. This compares with the current 260,000 persons who are directly working in the oil & gas industry having a $12 billion payroll, but which is declining at approximately 5% per annum.

In 2002 Texas emitted ~350 mtCO2/yr of which the US-EPA identifies 240 mtCO2/yr as coming from power generation and a large proportion of this being based on coal-fired lignite power plants. These are predominantly located in East Texas and together with purer sources of industrial CO2 are considered most amenable to CO2-capture using available 'near-term' technology.

Furthermore, the anthropogenic sources in East Texas are geographically well located between the existing CO2-floods in the Permian Basin and potential EOR activity that will also evolve in the Gulf of Mexico.

Finally in addition to Texas, the states of New Mexico, California, Kansas, Oklahoma, Louisiana, Wyoming, North Dakota, and Alaska, have some unique opportunities for developing large-scale commercial CO2-arenas, both in conjunction with enhanced oil recovery and for future GHG-mitigation.

(Last updated February 2007)