Recap of the Houston Workshop

Recap of the Houston Workshop Michael E. Moore Houston Workshop Program Director Vice President Blue Strategies LLC Executive Director NACCSA Presente...
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Recap of the Houston Workshop Michael E. Moore Houston Workshop Program Director Vice President Blue Strategies LLC Executive Director NACCSA Presented at the 17th Annual CO2 Flooding Conference December 8-9, 2011 Midland, Texas

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Supporting Sponsors

Pre-Events Dinner & After Events Field Trip • Dinner for speakers and guests hosted by and at the home of Dr. Jostein Mykletun Consul General of Norway

• Field trip hosted by the CO2 Workshop Group and visited Denbury’s Hastings CO2-EOR Project and Siemens facilities developing and deploying their oxyfueled power and CO2 platform for EOR

Norwegian-UK-Canadian Consulates CCS Workshop “Trans-Atlantic Research to Business: CCS in EOR” • Opening remarks by the three Consul Generals • Two panel sessions with Q&A



• • •

• • • •

• • • •

May Akrawi, Consul, Head of Science & Innovation, British Consulate-General

Opening Remarks Andrew Millar - HM Consul General - British Consulate-General Houston Dr. Jostein Mykletun - Consul General - Royal Norwegian Consulate-General Houston Paula Caldwell St-Onge - Consul General, Canadian Consulate General Dallas/Houston Panel 1 CO2 Storage Assessment Introduction by Moderator Stuart Haszeldine - Univ. of Edinburgh "CO2 storage assessment work in the UK, the road to business-driven CCS" Olav R. Hansen - Statoil "Commercial CCS developments Offshore Norway - an update" Scott Rennie - Schlumberger Carbon Services "Saskatchewan commercial CCS landscape: the Aquistore monitoring program" Darrick Eugene Esg - TXCCSA – “State CCS policy” Panel 2 Monitoring and EOR: The Regulatory Landscape Tip Meckel -TBEG "GCCC view on state of R2B EOR, and monitoring and the road to offshore" James Verson - NERC Research Fellow, Univ. of Bristol "Geophysical monitoring efforts at the “Weyburn CCS/EOR Project" Mike Fernandez - Director, CCS Development Policy Alberta Energy "The Alberta review: good practices for balancing regulatory caution with reason“ Maria Barrio - Project Manager, SINTEF “CO2 monitoring project at Hurum“

TXCCSA-GCCS-STORE-TBEG MRV for CO2-EOR Workshop • • • •

Melita Elmore TXCCSA Darrick Eugene TXCCSA Vanessa Nunez TBEG-STORE-GCCC Mahesh Gundappa Blue Strategies

Day One • • • • • • • • • •

Tracy Evans Co-CEO Blue Strategies LLC Cheryl Wilson Bloomberg’s New Energy Finance Steve Melzer Melzer Consulting Doug Carter U.S. Carbon Sequestration Council / LTI Mike Godec Advanced Resources Inc. Eric Redman Summit Power Julio Friedman Lawrence Livermore National Lab Olav Hansen Statoil ASA Stuart Haszeldine University of Edinburgh Darrick Eugene TXCCSA

Are We any Closer to CCS? Opening Keynote Speaker Tracy Evans CO-CEO Blue Strategies 9th Annual EOR Carbon Management Workshop December 5, 2011

Outline • Historical Perspective • Realizations • Accomplishments • Outlook

CCUS Market outlook: CO2, use it or lose it CO2 Conference Week, carbon management workshop

Cheryl Wilson Bloomberg New Energy Finance

CCUS -- Is it Something Old, and/or Something New? Prepared for: The 9th Annual EOR Carbon Management Workshop Presented by: Michael L. Godec, Vice President Advanced Resources International [email protected] December 5, 2011 Houston, Texas 12

Oil Recovery and CO2 Storage From "Next Generation" CO2-EOR Technology* Oil Recovery*** (Billion Barrels)

Reservoir Setting

CO2 Demand/Storage*** (Billion Metric Tons)

Technical

Economic**

Technical

Economic**

L-48 Onshore

104

60

32

17

L-48 Offshore/Alaska

15

7

6

3

Near-Miscible CO2-EOR

1

*

1

*

ROZ (below fields)****

16

13

7

5

Sub-Total

136

80

46

25

Additional From ROZ “Fairways”

40

20

16

8

*The values for economically recoverable oil and economic CO2 demand (storage) represent an update to the numbers in the NETL/ARI report “Improving Domestic Energy Security and Lowering CO2 Emissions with “Next Generation” CO2-Enhanced Oil Recovery (CO2-EOR) (June 1, 2011). **At $85 per barrel oil price and $40 per metric ton CO2 market price with ROR of 20% (before tax). ***Includes 2.6 billion barrels already being produced or being developed with miscible CO2-EOR and 2,300 million metric tons of CO2 from natural sources and gas processing plants. **** ROZ resources below existing oilfields in three basins; economics of ROZ resources are preliminary. 13

Distribution of Benefits from “Next Generation” CO2-EOR Revenue Recipient 1. Federal/State Treasuries

Revenues

Value Chain Function

Per Barrel ($)

Royalties/Severance/Income Taxes

2. Power/Industrial Companies Sale of Captured CO2 Emissions

TOTAL ($ billion)

$20.50

$1,640

$12.60

$1,010

$7.70

$620

3. Other

Private Royalties

4. Oil Industry

Return of/on Capital

$18.20

$1,450

5. U.S. Economy

Services, Materials and Sales

$26.00

$2,080

$85.00

$6,800

Total

JAF2011_065.XLS

14

But, There is Not Enough CO2 to Rapidly Expand Oil Production from CO2-EOR

15

Permian Basin EOR Oil Produced Below the OWC

December 2011

17

Easily Greater Than 10,000 bopd

18

The Value of Enhanced Oil Recovery Presented to The CO2 Carbon Management Workshop Houston, TX December 5, 2011 Doug Carter

19

Direct benefits reverberate in the economy •

For every dollar of direct investment in a basic industrial activity like oil production, indirect economic activity expands to supply materials and services, and induced economic activity results from the wages paid to those direct and indirect employees. • The Department of Commerce Bureau of Economic Analysis supports an “input-output” model of the US economy called RIMS-II. • RIMS-II suggests that the total direct, indirect, and induced activity from oil production is about twice the direct activity. • A white paper by the TX Bureau of Economic Geology suggests a factor of 2.9, and 19 jobs for every $million of produced oil. • So $2.7 T of oil becomes $5 - 8 T of increased GDP (over 30 years), and 50 million job-years (1.7 million jobs for 30 years). [More with “next gen”.] • And all of this economic activity generates royalties and tax income.

A possible solution to the cost problem is to recycle EOR income taxes to subsidize capture NOTE: New Revenue ≠ New Tax ! • •

Any new subsidy must have offsetting revenues: “revenue neutrality” How much subsidy is needed & how much tax is available? – Assume $100/Bbl oil, with $33/Bbl margin before taxes, 30% federal income tax rate => $10/Bbl tax. For CO2 intensity of 0.3 T CO2/Bbl oil, that’s $33/T CO2 if we recycle all of the federal income tax. – If capture & delivery cost is $80/T and EOR Value is $40/T, then $33/T is “in the neighborhood”.





Additional option is to tap “indirect” and/or “induced” income tax flowing from the project. That would require “dynamic scoring,” which is generally rejected by Joint Tax Committee. Challenges: Maintain simplicity but reflect unique nature of each EOR project; avoid windfalls but determine reasonable IRRs given unusual risks involved.

20

Texas Clean Energy Project nd Annual Progress Report – Plus CO /EOR Observations 2nd 22

Eric Redman, President of Summit Power Group, Inc. th Annual EOR Carbon Management Workshop 9th

Houston, Texas ● December 5, 2011

The View From the Bridge: China as partner, the EOR future, and technology in transition Dr. S. Julio Friedmann Lawrence Livermore National Laboratory [email protected]

CO2 Conference Houston, TX Dec. 5th, 2011

LLNL-PRES-514860 This work was performed under the auspices of the U.S. Department of Energy by Lawrence Livermore National Laboratory under contract DEDE-AC52AC5207NA27344. Lawrence Livermore National Security, LLC

How wide, how long, how strong is EOR bridge? Wider than expected Longer than expected Some surprises

• The costs are coming down • The opportunities are many and growing • Technology can and will help • Can’t buy our own hype: this will continue to be tricky This work performed under the auspices of the U.S. Department of Energy by Lawrence Livermore National Laboratory under Contract DE-AC52-07NA27344

CO2 storage around the UK, aquifer or EOR driven CCS Stuart HASZELDINE University of Edinburgh

[email protected] www.geos.ed.ac.uk/sccs/

CCS workshop Dec 2011

UK & EU drivers Storage assessment Investment and EOR risk UK and EU projects

26

CO2 storage

27

UK 60-70 Gt aquifer storage Oilfields 10Gt UK North Sea: 100yr CO2 Develop aquifers need : 10 yr Gasfields and EOR first Sleipner

UK has 35% of EU27 storage [email protected]

Solution 2 : CO2 value, EOR

CO2-EOR pays for pipes. €2.5 Bn from EU Increased CO2 piped to UK North Sea [email protected]

28

29

Summary and Future 1) 2) 3) 4) 5)

Storage is not (yet) the expensive part – but is the biggest technical risk – more work underway Storage survey completed : GIS national maps Produced water as pressure management Upfront costs, risk, liability – Government CO2-EOR : Needs CO2 AND subsidy or tax break Carbon budget, well spacing & sweep

www.sccs.org.uk [email protected]

CCS workshop Dec 2011

30

Federal Overview of CCUS Laws and Regulations By Darrick Eugene TxCCSA General Counsel CO2 Management Workshop December 5, 2011

31

Federal Regulations • GHG Permitting Guidance – March 11, 2011 • EPA’s UIC Class VI Rule – November 22, 2010 • Mandatory GHG Reporting Rule – Subpart PP – December 17, 2010 – Subpart RR – November 22, 2010 – Subpart UU – November 22, 2010

• Proposed Resource Conservation Recovery Act (RCRA) Rule – August 8, 2011 • 45Q CO2 Sequestration Tax Credit • S. 699 Bingaman • Practical Energy Plan, Lugar

Day Two • • • • • • • • • • • • • • • • • • • •

John Duda NETL/DOE Mike Slanders DOE Mike Smith Interstate Oil and Gas Compact Commission Ken Nemeth Southern States Energy Board John Harju Energy & Environmental Research Center Eric Kutscha Siemens Energy Howard Herzog Massachusetts Institute of Technology Lisa Bacanskas US Environmental Protection Agency Office of Air and Radiation Victor K. Der North America Global CCS Institute Robert Cornelius Denbury Resources Inc. Brad Crabtree Great Plains Institute Max Williamson Alston-Bird Russell Martin Tabula Rasa Mark Holtz Praxair Scott Wehner Chaparral Energy Mike Blincow Denbury Resources Inc. Greg Schnacke Denbury Resources Darrick Eugene Tx Carbon Capture & Storage Association Patrick Kelly US EPA Region 6 Mike Moore Blue Strategies LLC

Day 2 Opening Morning Keynote

Mike Smith Executive Director IOGCC THE PIPELINE PROJECT: Analysis of potential pipeline infrastructure, transportation & storage of CO2

IOGCC/SSEB PTTF REPORT

Southeast Regional Carbon Sequestration Partnership Presented to: 2011 CO2 Conference Houston, Texas December 6, 2011 Presented by: Kenneth J. Nemeth Executive Director Southern States Energy Board

Update on Results of SECARB “ Early” Test of Monitoring Large Volume Injection at Cranfield Mississippi River Natchez Mississippi

3,000 m depth Gas cap, oil ring, downdip water leg Shut in since 1965 Strong water drive Returned to near initial pressure Illustration by Tip Meckel

38

Early Test: Monitoring 3 million tonnes of CO2 injected at SECARB Cranfield Project Start DAS injection

1 million ton/year rate

Repeat 3-D VSP Cross well

Take home messages: - 3Mt of CO2 stored at Cranfield to date

Logging

3 Baseline 3-D

2 1

Start Phase 2 injection

Baseline VSP Cross well Start Phase 3 injection

ula Cum

tiv

n ctio e j e in

C

ula um

tive

cled y c Re red o t es m u vol

- Implemented multiple monitoring technologies - Bright future for CO2 storage and monitoring technologies/strategies that reduce risk

Geochemical monitoring

Real-time monitoring – BHP, BHT, AZMI, DST

2012

2011

2010

2009

0 2008

Million tonnes CO2

4

- Great collaborators show power of partnerships

Project Exceeded Objectives 2012: Fine-Tune MVA Approach & Mine Date Set for CCUS Insight 39

John Harju-NPC--Conventional Onshore Oil/EOR • Scope is conventional production only: - Excludes “tight” oil such as Bakken and Eagleford - Exclude Canadian oil sands and related HO - Include all EOR, California heavy & CO2 - About 45% of total North American oil production • The oil targets tend to include…….. - Remaining oil in place after current recovery plans - Known accumulations requiring technology application / price - Accumulations outside of historical technical norms

Background – Price Matters

Last 6 years defies old decline paradigm

Some due to unconventional such as Bakken, the NPC report used about 0.4 mmbopd for 2010

~ 3.1 mmbopd; EOR about 20% of total;

US Future Production Perspective EIA

Siemens Energy Oil & Gas Technology for Enhanced Oil Recovery

OxyFuel EOR plant

HP

LP

Pilot Project 16 September 2010 – Present 

Sep 2010 – Project Started



Dec 2010 – Core engine for oxy-fuel prototype located and purchased



Jan 2011 – Cooperation and IP agreement CES/Siemens updated and signed



Feb 2011 – In house reporting methodology finalized to meet DOE requirements



Mar 2011 – Siemens begins OFT-900 design and manufacturing contract



Apr 2011 – Core engine arrived to TurboCare Houston for overhaul operations



May 2011 – TurboCare begins core overhaul and retrofit



Jun 2011 – Core engine top half casing cover removed



Jul 2011 – Engineering commenced for test site controls, materials research



Aug 2011 – Groundbreaking ceremony takes place at test site



Sep 2011 – OFT-900 final design report is available



May 2012 – OFT-900 ships to test site



Jun 2012 – Start of OFT install and operations



Dec 2012 – First set of materials and engine performance available

Potential Roles for EOR in CCS Development Can Do Help project economics (positive value on CO2) Build out infrastructure Develop capacity along the supply chain Help shape regulatory environment (including liability issue) Cannot Do Avoid need for subsidies for capturing CO2 from power plants (and many other industrial sources) Replace climate change as the primary driver for CCS technology

Take-Away Points EOR is an extremely important step to CCS commercialization – even more important now given the “new” fiscal and political realities However, cost of capturing CO2 from most anthropogenic sources is greater than price EOR operators can afford to pay for the CO2 Ultimately, only climate policy can make large-scale CCS truly commercial

THE STATUS OF CCS- 2011 Report Presentation at Projects Events in North America November 2011 Victor S. Der North America WWW.GLOBALCCSINSTITUTE.COM

49

Regional bias towards storage selection

50

Released October 4th The Global Status of CCS: 2011 report.

Day Two Luncheon Keynote Speaker x x

Robert Cornelius – Sr. VP CO2 Conference - Houston December 6, 2011

NYSE: DNR

x x

CO2 EOR Potential Operating Area

First Production

Estimated Peak Production Rate (Net MBOE/d) 20

(as of 9/30/11)

Expected Peak Year

Produced Proved 3P to date(1) Remaining Remaining(2) (MMBOE) (MMBOE) (MMBOE)

Phase 1 (6 fields)

1999

2010

35

40

11

Phase 2 ( 3 fields excl Heidelberg)

2006

2009

10

15

8

Oyster Bayou

2012

2012-13

---

---

25

Tinsley

2008

2013-14

5

32

9

Heidelberg

2009

2014-16

2

33

9

Delhi

2010

2015-17

1

28

9

2013/14

2018-20

---

---

30

Cranfield

2009

2016-19

2020

---

---

26

Conroe

2015

2023-27

---

---

130

Cedar Creek Anticline

2017

2024-28

---

---

197

Totals:

54

156

552

Bell Creek

Expected year of first tertiary production. (1) Tertiary oil production only through 9/30/11 (2) Based on internal estimates of reserve recovery

52

CO2 Pipelines: Transportation is Essential



The 320 mile Green Pipeline is strategic to our long-term growth plans and success in the Gulf Coast region. – Total Investment $850 to $875 million – Capacity 800 MMCFD



The 232 mile Greencore Pipeline in Wyoming began construction on August 29th, 2011 – Total Investment $275 to $325 million – Capacity 725 MMCFD



The pipelines can provide the required continuous run-time (24/7 operations) CO2 producers such as, power plants, coal gasification facilities, chemical plants, etc. 53

Capturing the Benefits of CO2-EOR: Developing Financial Incentives and Coalition Support to Accelerate Commercial Deployment of CO2-EOR

Brad Crabtree Great Plains Institute 9th Annual EOR Carbon Management Workshop December 5-6, 2011 Houston, TX HTTP://WWW.C2ES.ORG/INITIATIVES/EOR

Overview of the Initiative

• Status Fed programs and State Programs • EPA drivers and actions • Existing and status US carbon markets like CA-AB 32 and discussed CCS in CA • Potential value of CCS carbon credits

Blue Strategies

CO2 Conference – Houston, Texas Russell Martin December 6, 2011

Upstream Oil and Gas Overview Reserve Growth for Higher Recovery Efficiency December, 2011 Mark H. Holtz

Outline • Praxair Overview • Praxair Upstream Oil and Gas Services – Pilots and injection testing – CO2 supply

• Praxair Recent CO2 Projects – Wyoming CO2 Injection Test – Bakken CO2 EOR Pilot – MASDAR/ADCO UAE EOR and CCS pilot

CO2 Carbon Management Workshop Panel Discussion ”US CO2 & CO2 EOR Developments” Scott Wehner Sr VP Chaparral Energy [email protected] 06.December.2011

CO2 Infrastructure: Project Inventory & Pipelines

Existing Chaparral CO2 PL Planned Chaparral CO2 PL Possible Chaparral CO2 PL Third Party Pipelines Active Chaparral CO2 Projects Potential Chaparral CO2 Projects

64 646

CO2 Price, % Oil Price

Oil Price*, $/Bbl

10 -

6-

Steel, $/Metric Ton

8-

1000 800 -

4400 -

2200 -

00-

CO2 Price, $/Mscf

600 -

CO2 Pricing Pressure……Competing Forces  Law of Supply & Demand… …Market CO2 Pricing 1.4*– 3.3% of Crude Price (2008 – 2011)  Will ROZ Possibilities Pressure Pricing?  Will Crude Sales >$100/Bbl Pressure Pricing?  Few New Projects…  Smaller OOIP Targets  Poorer “acre.ft”  Deeper Targets  Remote to CO2 Pipeline/Source  Higher Royalties  Aged Wellbores  New Regulations/Potential Regulations  Oilfield OpExp Escalation

Reduced Margins than Early Projects Implemented with More Expensive CO2

 Plethora of UnConventional O&G Capital Focus * An un-natural source/single data point; others all >2.0%.

x x

CO2 Conference Week December 6, 2011 Mike Blincow

NYSE: DNR

x x

x x

CO2 Conference Week December 6, 2011 Greg Schnacke

NYSE: DNR

x x

Texas’ Unitization Law is not Workable 

Texas is the only top-ten oil and gas producing state that does not have formal statutory process that provides for the efficient establishment of units by formally authorizing the interests of a super-majority of mineral interest owners to form a unit



US experience and case law date back over 60 years for this method of combining these property interests utilizing a procedure that protects correlative rights



Arguments against this form of unitization have traditionally been expressed as a private property taking however, this argument is false as mineral ownership interests remain intact and all owners share in production and revenue

71

Texas will Profit from Unitization Reform  Texas voluntary form of unitization, particularly for tertiary recovery projects, is antiquated and wastes valuable oil resources. Millions, and potentially billions of barrels of oil will remain stranded in existing oilfields unless Texas’ unitization law is reformed  Texas stands to lose billions of dollars of new production and development potential, including billions of dollars in new tax revenue by not enacting unitization enabling legislation that allows the super majority of mineral interest owners to unitize tracts and develop depleting mineral property

72

CO2 Estimated Oil Recovery – 572 MMbbls (+/-3% of Texas’ Potential) CO2 EOR Project Investment - $3.8B Estimated Severance Tax Revenue - $1.2B Estimated Sales Tax Revenue - $269MM Estimated Ad Valorem Tax Revenue - $340MM Total Estimated Tax Revenue - $1.8B

Estimated Tax Revenues (Sev, Sales & Ad Val)

Expected CO2 EOR Production 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

140 120 100 80 60 40

Oil (Mbbls)

Jan-25

Jan-24

Jan-23

Jan-22

Jan-21

Jan-20

Jan-19

Jan-18

Jan-17

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

0

Jan-11

Jan-25

Jan-24

Jan-23

Jan-22

Jan-21

Jan-20

Jan-19

Jan-18

Jan-17

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

20

Jan-11

● ● ● ● ● ●

Selected SE Texas Fields CO2 Potential

Taxes ($MM)

73 73

Climate Change: What is going on in Texas and Beyond? Patrick Kelly US EPA December 6, 2011 9th Carbon Management Workshop Houston, Texas

Introduction to Greenhouse Gases and Programs

Permitting of GHG’s

GHG Credits (Green, Yellow and Brown) PSD/Title V Energy Efficient Commercial and Industrial Facilities ENERGY STAR Commercial Products Renewable Energy Energy Efficient WERR Residential Buildings

Image: P. Kelly EPA

ENERGY STAR Residential Products LMOP GasSTAR CMOP AgSTA R

Carbon Capture and Storage

HFC’s, HFE’s, etc PFC’s Heat Island SF6 N2O

MRR Reporting of GHG’s

Questions & Thank You! Michael E. Moore • • •

VP External Affairs and Business Development CCS Blue Strategies LLC WWW.BLUESOURCE.COM

• • •

Executive Director and Founding Board of Directors Member North American Carbon Capture Storage Association WWW.NACCSA.Org

• • •

VP and Founding Board of Directors Member Texas Carbon Capture Storage Association WWW.TXCCSA.Org



[email protected]



Tel: 281-668-8475