Commodity CO2-EOR-Greenhouse Gas-Economic Development-Sequestration
Michael E. MooreManaging Partner
Falcon ES/GHG Partners/CO2 NorwayHouston
November 18, 2004
White House Agrees that Science Supports Man-Made CO2 is
Impacting the ClimateNew York Times Aug 26th, 2004
White House Shifts Its Focus on Climate
• By ANDREW C. REVKIN August 26, 2004 New York Times
• “In a striking shift in the way the Bush administration has portrayed the science of climate change, a new report to Congress focuses on federal research indicating that emissions of carbon dioxide and other heat-trapping gases are the only likely explanation for global warming over the last three decades.
• In delivering the report to Congress yesterday, an administration official, Dr. James R Mahoney, said it reflected "the best possible scientific information" on climate change. Previously, President Bush and other officials had emphasized uncertainties in understanding the causes and consequences of warming as a reason for rejecting binding restrictions on heat-trapping gases.”
Primary Sequestration
• Geologic
• Terrestrial
• Ocean
Geologic Sequestration of CO2 - Today’s Most Viable Option
Geologic sequestration may be most viable option in the near- to mid-term
Technology basically proven• Costs and economics of long-term
storage uncertain
• Monitoring, verification, and safety need to be included
Additional value from incremental oil and gas recovery
Incentives and tradable credits will help offset sequestration costs
Carbon/CO Seques tration P athw ays2
JA F0 19 01.C D R
Carbon Sequestration Leadership Forum Source: http://www.cslforum.org
Magnitude of Current Geologic Sequestration Work
Source:www.cslforum.org
Kyoto, EU ETS and RGGI
• Signed by Putin, Kyoto kicks into action within 90 days.
• The European Union’s “Emission Trading Scheme” starts trading on January 1, 2005
• The “Regional Greenhouse Gas Initiative” comprising of 10 New England states, is slated to start mid 2005
• California Mandates
Gulf Coast Carbon Center:Developing a Business Plan for Carbon Use and Sequestration in
the US Gulf Coast
Lead: Susan Hovorka, Ian Duncan, Mark H. Holtz, and Eugene KimMichael Moore-Advisor
Gulf Coast Carbon CenterBureau of Economic Geology
The John A. and Katherine G. Jackson School of GeosciencesThe University of Texas at Austin
GCCC Infrastructure
Pilot site
Power plants
Industrial sources
High sand tre
nd
in the Frio
Houston
20 miles
Regional Setting of Frio Brine Pilot Site
Significance to US carbon program:
Potential toupscale to impact
US releases
FutureGen in TexasSource: www.cleancoalfoundation.org
• Texas Clean Coal Technology Council Announces Bid to Bring Billion Dollar, Zero-Emission Power Plant Prototype to Texas
• The Governor’s Clean Coal Technology Council announced on July 28, 2004 that it will lead the effort to bring FutureGen – a billion dollar, 10-year project to create the world’s first coal-based, zero-emission power plant designed to capture and permanently sequester carbon dioxide – to Texas. In addition to improving air emissions globally, FutureGen could be used to spur enhanced oil and gas recovery in Texas where 31 billion barrels of crude oil could be recovered though CO2 flooding.
Texas Railroad Commissioner Michael L. Williams, who serves as chair of the Governor’s Council, has already sent a preliminary letter to the Department of Energy (DOE) notifying it of Texas intention to host FutureGen. Since the project was initially announced by President George W. Bush early in 2003, DOE has approved the first round of funding for the prototype and is scheduled to name an industry consortium that will partner in the project later this year. The industry consortium is required to put up $200 million for FutureGen funding, and the project is also expected to attract international participation.
Texas, with an ample supply of coal, unmatched geology for sequestering carbon dioxide and the need for enhanced oil recovery, ready markets for the energy produced and a transmission grid capable of handling the increased load, would be the ideal location for FutureGen according to the chairman of the Governor’s Clean Coal Technology Council.
“Bringing FutureGen to Texas is a perfect fit,” Williams said. “For this prototype to be successful, it is going to have to be profitable. That means that enhanced oil recovery can help us produce affordable, clean energy.”
CO2 Driven EOR and GHG Sequestration
How CO2 Works
• CO2 mixes with oil much like turpentine cleans paint from a brush• Inter-phase mass transfer typically yields NGL rich gas production• Chase water injection helps control mobility and gas recycle
Texas Permitted CO2 Wells and30+ Years Regulatory Experience
• 9279 Wells permitted for CO2 injection in Texas
• 9176 of these in RRC Dist 8/8A (Permian Basin)
• Public acceptance is high• Regulatory experience deep• HSE issues well defined• Knowledge base developed in Texas
US CO2 driven EOR Projects and Infrastructure
Source: Denbury Resources, Inc., 2004
IEA US 2002 GHG Statistics
Storage Potential
Global Capacity
Storage
OptionGigatons CO2
Oil and Gas
Fields920
Deep saline formations
400 – 10,000
Unminable coal
>15
Data source : IEA Greenhouse Gas R&D Programme
U.S. Basins very Mature, Production Peaked in 1970
4,500
5,500
6,500
7,500
8,500
9,500
1950 1960 1970 1980 1990 2000
MB
bl/d
ay
Annual Domestic Crude Oil Production
Source: API, DE, Bloomberg, Raymond James Research Report
Texas Oil Production CurveDeeper Dependence on Foreign Crude Economically and
Strategically Dangerous for Nation and Texas The green represents estimated production 2005-2015
Louisiana Oil Production CurveSource: ARI/Reeves
Identified Recoverable Texas Crude Oil—Only with CO2
Source: Texas BEG/GCCC
80 Billion Barrels Residual Oil in Significant TX Reservoirs
31 Billion BarrelsCO2 EOR Candidate Target
10% of Target to Economic Model
10 Year Forward Price Curve WTI Source: Barclays Bank, NYMEX Futures, IPE Brent Futures and Derivatives Market Nov 16, 2004
These values now have banks seriously looking into financing long term CO2 driven EOR floods, required capture technology financing and infrastructure project financing as
well as the future potential Emission Reduction Credits markets
ResearchGrants
Federal &State
EconomicDev Funds
Offsets$1.00-2.00
ton
Crude OilWTI
$35.0010 yrs
CommodityCO2
$25.00/tn10 yrs
Tax Incentives
Sec 29Sec 43
$
Potential Sequestration Volume through
CO2-EOR in TexasSource: Texas BEG/GCCC
Percent Recovery
CO 2 -EOR Resource (B bbls)
CO 2 Sequestered (tons)
CO 2 Sequestered (metric tons, tonnes)
CO 2
Sequestered (Gigatonne, Gt)
10% 3.7 522,474,000 473,883,918 0.47
20% 7.4 1,044,948,000 947,767,836 0.95
30% 11.2 1,567,422,000 1,421,651,754 1.42
40% 14.9 2,089,896,000 1,895,535,672 1.90
50% 18.6 2,612,370,000 2,369,419,590 2.37
60% 22.3 3,134,844,000 2,843,303,508 2.84
70% 26.0 3,657,318,000 3,317,187,426 3.32
80% 29.8 4,179,792,000 3,791,071,344 3.79
90% 33.5 4,702,266,000 4,264,955,262 4.26
100% 37.2 5,224,740,000 4,738,839,180 4.74
Direct Economic Impacts of Crude Production in Texas
Source: Texas BEG/GCCC
Percent Recover
y
CO 2 -EOR
Resource (B
Oil Price
($/bbl)
Wellhead Value (B
$)
Severance Taxes ($B,
4.6%)
Ad Valorem Taxes ($B,
3.95%)
J obs Created (19.1 jobs per $1MM
Wellhead Value)
Economic Value (Wellhead
Valuex2.91)
Franchise Taxes ($B,
0.18%)
Sales Taxes ($B,
2%)
10% 3.1 25 $78 $4 $3 1,480,250 $226 $0.4 $5
20% 6.2 25 $155 $7 $6 2,960,500 $451 $0.8 $9
30% 9.3 25 $233 $11 $9 4,440,750 $677 $1.2 $14
40% 12.4 25 $310 $14 $12 5,921,000 $902 $1.6 $18
50% 15.5 25 $388 $18 $15 7,401,250 $1,128 $2.0 $23
60% 18.6 25 $465 $21 $18 8,881,500 $1,353 $2.4 $27
70% 21.7 25 $543 $25 $21 10,361,750 $1,579 $2.8 $32
80% 24.8 25 $620 $29 $24 11,842,000 $1,804 $3.2 $36
90% 27.9 25 $698 $32 $28 13,322,250 $2,030 $3.7 $41
100% 31.0 25 $775 $36 $31 14,802,500 $2,255 $4.1 $45
*Calculations based on the TX RRC's "General Model of Oil and Gas Impact on the Texas Economy" derived from the Comptroller's Input-Output model of the Texas economy. Severance and Ad Valorem Taxes from Wellhead Value; Indirect Taxes from Economic Value.
CO2 EOR is Important to TexasHence, so is the CO2 Source
Source: ARI/Kuuskraa
GROWTH OF CO2 EOR PRODUCTION IN TEXAS AS A PERCENTAGE OF STATEWIDE PRODUCTION
0%
4%
8%
12%
16%
20%
1970 1975 1980 1985 1990 1995 2000 2005
YEAR
CO
2 E
OR
AV
E. Y
RLY
P
RO
DU
CT
ION
IN
BB
LS
/DA
Y
CO2 Demand Keeps RisingSource: ARI/Kuuskraa-Reeves
Growing Demand for CO2Source: Steve Melzer/Melzer consulting
New 125 Mile CO2 LineNew 125 Mile CO2 Line
MonellMonell
Salt CreekSalt Creek
Rawlins
Rock Springs
Cody
Gillette
Casper
Cheyenne
Anadarko’s Salt Creek and Monell135 mmcf/d CO2 used in EOR from Exxon-Mobil Labarge Gas Processing Plant
Sequestration Protocols developed by Battelle
Existing CO2 Line
Point of Sale for CO2 to Monell
Point of Sale for CO2 to Salt Creek
Potential Offsets for Market
• Timeline
– Field Operations: Underway
– Protocol: Completed
– Implementation: Underway
– Certification: Buyer Driven
• CO2 Offset/ERC Inventory
Project Historical 2004 Annual to 2020
Lindsey 600,000 tons 300,000 tons 300,000 tons
Monell 50,000 tons 1.0 million tons 1.1 million tons
Salt Creek None 1.8 million tons 2.6 million tons
Total 650,000 tons 3.1 million tons 4 million tons
Conclusion• Gulf Coast Carbon Center delivers a win-win opportunity• GHG issues are accelerating, GCCC provides solutions• CO2 is as a valuable commodity to Texas, Louisiana, Kansas, Oklahoma,
Kansas, Illinois, Mississippi, California, New Mexico & Wyoming• Geologic Sequestration works for large scale abatement of CO2/GHG
development globally via CSLF• Supporting the Texas FutureGen initiative• Huge opportunity for regional emitters and sinks as well as technology,
equipment, and service providers• States benefit from positive economic impacts and extended asset life as
well as job growth
• Michael E. Moore • Advisor Gulf Coast Carbon Center• Managing Partner GHG Partners dba Falcon Environmental Services • Director Commodity Markets for CO2 Norway • Emerging energy commodity market development for past 20 years. • 1776 Yorktown, Suite 500
Houston, Texas 77056Main: 713-961-3204Fax: 713-961-2676
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