The global political landscape has shifted significantly in recent years. With America's foreign policy taking them on a number of conquests to confront the world's enemies, Russia's fading power and China's emergence as one of the world's fastest growing economies, geopolitics have changed forever.
But in the light of changing political relationships between the world's most powerful and important nations, how will these changes affect the future of global oil and gas exploration?
Despite a huge amount of weight placed behind alternative sources of fuel over the last decade, the two fossil fuels still remain the world's most expensive commodities, and oil and gas exploration continues to be of great importance to the world.
Now, with commodity prices finally beginning to stabilise after a tough recession for the industry, the next challenge for the industry is the new era of geopolitical relations.
South America and the Gulf of Mexico
Oil and gas exploration in the Gulf of Mexico is a much contested topic with firms pulling out of the region - such as Devon Energy - US drilling policies looking ever more confused and much of it still open to auction from the world's biggest bidders, like Russia.
In South America, countries like Brazil and Venezuela have made moves that suggest a shift away from the United States as they look to increase self-sufficiency in the region. Once again, Russia has been involved as Moscow and Caracas have penned deals that look to further alienate the US.
There are many more areas which have changed the face of global oil and gas exploration, such as developments around the lucrative north west coast of Australia, and for the moment policies remain largely unchanged - drill when and where we can.
Although US foreign policy has made them unpopular with many nations, their oil and gas exploration exploits remain strong (even if that does not involve domestic exploration). Perhaps the biggest threat to exploration is not geopolitical relations but environmental red tape. But until renewable energy is at a stage where it can stand alone in meeting demands, oil and gas exploration will be vital to quenching the world's thirst.
Iraq and the West
Since the fall of Saddam Hussein as a result of the US-led invasion, Iraq has been crying out for foreign investment in its plentiful oilfields.
Now, finally, their efforts to lure some of the world's largest oil firms looks to be paying off. Iraq announced earlier this month that it had signed a huge oil deal, worth between 14 and US$20 billion, with UK oil giant BP and China's CNPC, in addition to another penned agreement with a consortium led by the Italian firm, ENI.
The Iraq Oil Ministry also announced recently that it is to award a consortium led by Exxon Mobil Corp. and Royal Dutch Shell PLC the right to develop the West Qurna-1 field in southern Iraq.
The geopolitical shift in this region has opened up fields for oil and gas exploration that have previously been closed to the developed world. But the future of exploration is far from secure as the region still remains unstable both economically and politically.
Tuesday, March 9, 2010
Feasibility Of CO2 EOR In Mature Fields
Denbury’s Business Model Demonstrates Feasibility Of CO2 EOR In Mature Fields
PLANO, TX.–Carbon dioxide enhanced oil recovery has been utilized safely and securely since 1974, but is experiencing a renaissance in the national policy debate over industrial carbon capture, sequestration and storage. From the Obama administration, to national environmental groups such as the Natural Resources Defense Council and leading government and academic scientific organizations such as the Bureau of Economic Geology at the University of Texas, the Massachusetts Institute of Technology, the Southern States Energy Board and the U.S. Department of Energy’s National Energy Technology Laboratory, a common theme is emerging that CO2 EOR will be a significant driver in future U.S. energy and environmental policy.
Denbury Resources Inc. is one company that has taken significant steps over the past decade, and has emerged as a leader in CO2 EOR. The company has strategically positioned itself through a focused acquisition, divestiture and organic growth strategy to emerge as perhaps the largest independent CO2 EOR-focused company in the United States today.
Denbury’s divestiture of its Barnett Shale assets, purchase of a 95 percent interest in the historic Conroe Field in Southeast Texas, and its agreement to acquire Encore Acquisition Company for $4.5 billion–nearly doubling the size of the company–has turned heads throughout the industry, and gotten the attention of environmental and governmental policymakers who see depleted and depleting oil fields as a source of significant domestic recoverable oil reserves and a proven “CO2 solution” for industrial carbon capture sequestration and storage.
Nationally, the Department of Energy estimates that of 400 billion “stranded” barrels in place, more than 84 billion barrels of oil in existing U.S. oil fields could be recovered using CO2 EOR. At an oil price ranging between $50 and $100 a barrel, it is economically feasible to recover 39 billion-48 billion barrels. In the Gulf Coast region and in the northern Rockies–Denbury’s two main operational target areas–recovery estimates range from 3.4 billion-7.5 billion barrels and 1.3 billion–3.2 billion barrels, respectively.
In most U.S. oil fields, about one-third of the original oil in-place is recoverable through primary and secondary recovery methods, increasing to 50-60 percent with CO2 EOR. Denbury is producing approximately 30,000 gross barrels of oil a day from its Gulf Coast assets.
Expanding CO2 Supply
CO2 EOR requires large quantities of carbon dioxide at reasonable prices for pressurized injection in order to rejuvenate depleted and depleting U.S. oil fields. Today, Denbury relies on natural CO2 from assets it produces from the massive Jackson Dome structures 16,000 feet beneath the Jackson, Ms., area. Similar to natural CO2 supplies found in Colorado and New Mexico, Jackson Dome represents an estimated 5 Tcf-9 Tcf of recoverable CO2 supply. Denbury is producing 800 million cubic feet a day and injecting some 700 MMcf/d while providing 100 MMcf/d to industrial users. As Denbury’s inventory of candidate oil fields grows, the need to develop additional sources of natural CO2 at Jackson Dome and to collect anthropogenic sources of CO2 will continue to expand.
The size and scale of candidate oil fields are important in the new world of deploying large volumes of continuous industrial CO2. Denbury’s acquisitions of the Conroe and Hastings fields in Southeast Texas are a good case in point. Hastings, a field that once produced 75,000 barrels of oil a day, now produces less than 3,000 bbl/d, but has the potential to produce 10 times that amount with an ultimate estimated recovery of 50 million-90 million barrels under a successful CO2 injection program. This field serves as the termination point of Denbury’s Green Pipeline, and is the financial workhorse behind the pipeline project and the hundreds of millions of dollars to implement the CO2 EOR project, which includes constructing the CO2 separation and recycling facility.
Conroe, a legacy asset north of Houston, has a preliminary estimated net potential recovery of 125 million barrels of oil from successful CO2 tertiary recovery. An 80-mile pipeline from the Green Pipeline will be needed, as well as $750 million-$1 billion in development expenditures to rejuvenate the field.
Pipeline System
To this end, Denbury is making significant investments in its CO2 pipeline transportation system to deliver compressed natural and man-made CO2 to oil fields throughout the Gulf Coast. In the coming weeks, Denbury will complete a major section of its Green Pipeline across Louisiana into Southeast Texas and begin phased CO2 injection operations in 2010. Final construction of the remaining leg across Galveston Bay to the large Hastings Field south of Houston will be completed thereafter.
The Green Pipeline is designed to transport both natural and anthropogenic CO2, and has several potential industrial CO2 sources within immediate proximity of pipeline operations. When completed, the 24-inch, 320-mile pipeline will transport up to 800 MMcf of CO2 a day. Denbury expects to add to the growing number of contracts it has signed to attract industrial CO2 supplies for oil field CO2 injection.
On the horizon is an even more ambitious potential transportation project, the proposed 600-700 mile Midwest Pipeline that would extend Denbury’s reach into the coal gasification regions of the Illinois Basin of southern Illinois, Indiana and Kentucky. The estimated $1 billion project, while only in the feasibility study stage, has excited a wide range of interest groups, ranging from industrial CO2 emitters, to environmental policy activists, to state and federal regulators who see the potential of a large industrial CO2 “take-away” line.
PLANO, TX.–Carbon dioxide enhanced oil recovery has been utilized safely and securely since 1974, but is experiencing a renaissance in the national policy debate over industrial carbon capture, sequestration and storage. From the Obama administration, to national environmental groups such as the Natural Resources Defense Council and leading government and academic scientific organizations such as the Bureau of Economic Geology at the University of Texas, the Massachusetts Institute of Technology, the Southern States Energy Board and the U.S. Department of Energy’s National Energy Technology Laboratory, a common theme is emerging that CO2 EOR will be a significant driver in future U.S. energy and environmental policy.
Denbury Resources Inc. is one company that has taken significant steps over the past decade, and has emerged as a leader in CO2 EOR. The company has strategically positioned itself through a focused acquisition, divestiture and organic growth strategy to emerge as perhaps the largest independent CO2 EOR-focused company in the United States today.
Denbury’s divestiture of its Barnett Shale assets, purchase of a 95 percent interest in the historic Conroe Field in Southeast Texas, and its agreement to acquire Encore Acquisition Company for $4.5 billion–nearly doubling the size of the company–has turned heads throughout the industry, and gotten the attention of environmental and governmental policymakers who see depleted and depleting oil fields as a source of significant domestic recoverable oil reserves and a proven “CO2 solution” for industrial carbon capture sequestration and storage.
Nationally, the Department of Energy estimates that of 400 billion “stranded” barrels in place, more than 84 billion barrels of oil in existing U.S. oil fields could be recovered using CO2 EOR. At an oil price ranging between $50 and $100 a barrel, it is economically feasible to recover 39 billion-48 billion barrels. In the Gulf Coast region and in the northern Rockies–Denbury’s two main operational target areas–recovery estimates range from 3.4 billion-7.5 billion barrels and 1.3 billion–3.2 billion barrels, respectively.
In most U.S. oil fields, about one-third of the original oil in-place is recoverable through primary and secondary recovery methods, increasing to 50-60 percent with CO2 EOR. Denbury is producing approximately 30,000 gross barrels of oil a day from its Gulf Coast assets.
Expanding CO2 Supply
CO2 EOR requires large quantities of carbon dioxide at reasonable prices for pressurized injection in order to rejuvenate depleted and depleting U.S. oil fields. Today, Denbury relies on natural CO2 from assets it produces from the massive Jackson Dome structures 16,000 feet beneath the Jackson, Ms., area. Similar to natural CO2 supplies found in Colorado and New Mexico, Jackson Dome represents an estimated 5 Tcf-9 Tcf of recoverable CO2 supply. Denbury is producing 800 million cubic feet a day and injecting some 700 MMcf/d while providing 100 MMcf/d to industrial users. As Denbury’s inventory of candidate oil fields grows, the need to develop additional sources of natural CO2 at Jackson Dome and to collect anthropogenic sources of CO2 will continue to expand.
The size and scale of candidate oil fields are important in the new world of deploying large volumes of continuous industrial CO2. Denbury’s acquisitions of the Conroe and Hastings fields in Southeast Texas are a good case in point. Hastings, a field that once produced 75,000 barrels of oil a day, now produces less than 3,000 bbl/d, but has the potential to produce 10 times that amount with an ultimate estimated recovery of 50 million-90 million barrels under a successful CO2 injection program. This field serves as the termination point of Denbury’s Green Pipeline, and is the financial workhorse behind the pipeline project and the hundreds of millions of dollars to implement the CO2 EOR project, which includes constructing the CO2 separation and recycling facility.
Conroe, a legacy asset north of Houston, has a preliminary estimated net potential recovery of 125 million barrels of oil from successful CO2 tertiary recovery. An 80-mile pipeline from the Green Pipeline will be needed, as well as $750 million-$1 billion in development expenditures to rejuvenate the field.
Pipeline System
To this end, Denbury is making significant investments in its CO2 pipeline transportation system to deliver compressed natural and man-made CO2 to oil fields throughout the Gulf Coast. In the coming weeks, Denbury will complete a major section of its Green Pipeline across Louisiana into Southeast Texas and begin phased CO2 injection operations in 2010. Final construction of the remaining leg across Galveston Bay to the large Hastings Field south of Houston will be completed thereafter.
The Green Pipeline is designed to transport both natural and anthropogenic CO2, and has several potential industrial CO2 sources within immediate proximity of pipeline operations. When completed, the 24-inch, 320-mile pipeline will transport up to 800 MMcf of CO2 a day. Denbury expects to add to the growing number of contracts it has signed to attract industrial CO2 supplies for oil field CO2 injection.
On the horizon is an even more ambitious potential transportation project, the proposed 600-700 mile Midwest Pipeline that would extend Denbury’s reach into the coal gasification regions of the Illinois Basin of southern Illinois, Indiana and Kentucky. The estimated $1 billion project, while only in the feasibility study stage, has excited a wide range of interest groups, ranging from industrial CO2 emitters, to environmental policy activists, to state and federal regulators who see the potential of a large industrial CO2 “take-away” line.
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