5.3 Current Permian Basin EOR Projects and CO2 Supply
Table 5.3.1 – Listing of Actively Producing CO2 EOR Floods in the Permian Basin
The projects in these Permian Basin fields are estimated to have purchased a record volume of approximately 1.73 billion cubic feet per day (Bcfd) (49 million cubic meters per day (MMcmd)) of CO2 for EOR in 2010. Melzer Consulting calculates that, to date, more than 11 trillion cubic feet (Tcf) (311 billion cubic meters), or 630 million short tons (572 million metric tons), of CO2 have been injected into Permian Basin fields. To give one an idea of the size of that market, the current daily volume of CO2 purchases in the Permian Basin is equivalent to the output of six Trailblazer-sized plants/capture facilities.
From the years 1986 through 2008, CO2 supplies to the Permian Basin EOR industry were effectively flat (gradual inclining sales) and averaged about 1.3 Bcfd (3.68 MMcmd) per day. Figure 5.3.1 recaptures that history and one can note that the sales didn’t begin to increase sharply until 2009. A closer look at the supply and demand along with a discussion about the sources of newly added and potential future supplies – after 2009 – is provided later in this report.
Figure 5.3.1 – Permian Basin CO2 EOR Volumes Sold
Approximately 90% of the CO2 supplies have been provided by the “big four” suppliers: KinderMorgan, ExxonMobil, Oxy, and SandRidge. In recent years, Hess and Trinity CO2 have joined the list with the latter emerging as a “proxy” supplier by way of aggregating some supplies from small interest owners in McElmo Dome and a small natural gas plant recovery plant, La Veta, near the Sheep Mountain source field in south central Colorado.
The breakdown of this supply by CO2 source is shown in Figure 5.3.2 and Table 5.3.2. As shown, the vast majority of these supplies (1.15Bcfd or 33 MMcmd) come from McElmo Dome. Oxy’s Bravo Dome (combined in Figure 5.3.2 with Hess’ West Bravo Dome) is next and the remaining four make up the difference in roughly equal volumes.
Figure 5.3.2 – Breakdown of Permian Basin CO2 Supplies for CO2 EOR by Supply Source in 2009
Table 5.3.2 – Permian Basin CO2 Supply Sources and Estimated Delivery Capacity in 2009
|2010 Average Daily Volumes (MMcfd)||Estimated Capacities (MMcfd)|
|Sheep Mountain Pipeline|
|Sheep Mountain + La Veta||50|
|West Texas Overthrust (WTO)||100||120|
|Potential Excess Pipeline Capacity||520|
The CO2 source field infrastructure is critical, but the pipeline network provides another important component to the CO2 EOR sub-industry. With some relatively minor exceptions, the pipelines are owned by the same owners and in approximately the same percentages as the source fields. However, the pipelines in Lea County, New Mexico are a significant exception, with Trinity CO2 LLC exclusively owning a major block of 113 miles (182 kilometers). Their pipeline network in the western portion of the Basin currently delivers about 1/15th of the Permian Basin volumes to the EOR projects.
Table 5.3.2 illustrates the excess capacities of the large CO2 pipelines from the sources. As shown, there is little to no excess capacity available on the Cortez pipeline delivering supplies from McElmo Dome and Doe Canyon. Additional pump stations were added in early 2009 to get 300 million cubic feet per day (MMcfd)(8.5 MMcmd) more capacity, bringing total capacity to about 1.3 Bcfd (37 MMcmd). Kinder Morgan has said publicly that they might be able to further increase capacity to about 1.5 Bcfd (42.5 MMcmd), with more pump stations, providing some potential for additional capacity.
Noting that the Cortez line is at its current throughput capacity; additional drilling at McElmo Dome and Doe Canyon will be only to maintain volume throughput. On the other hand, Bravo and Sheep Mountain pipelines have excess capacity, and the limiting factors there are the deliverability of wells at the source fields. Oxy and SandRidge (the WTO) are currentlythe to increase processing capacity of the low Btu (CO2-contaminated methane) for both natural gas and CO2 sales.
Although there is plenty of excess capacity in the northern portion of the Sheep Mountain line, flow is constrained by the declining productivity of the wells in the Sheep Mountain field, which is not being offset by additional supplies from the nearby and smaller La Veta field. Capacity on lower portion of the Sheep Mountain line is about 500 MMcfd (14 MMcmd) and the Bravo Pipeline is about 330 MMcfd (9 MMcmd), giving a total capacity of about 830 MMcfd (23 MMcmd) for these two. However, initial potential flow rates on new wells from both West Bravo and Brova Dome suggest regionally depletedpressures. It is therefore unlikely that additional deliverability from the Bravo Dome area will be forthcoming.
The capacity of the Val Verde pipeline is approximately 120 MMcfd (3 MMcmd), so there is little to no excess capacity on this line. However, industry intelligence indicates that Oxy will build new capacity designed to move volumes to the Central Basin pipeline, perhaps along either the Val Verde or Comanche Creek pipeline rights-of-way with the capacity to move expanded Century plant volumes. The Century plant expansion was planned to be under construction in 2011 but is at least postponed to 2012 based upon economics of the natural gas industry. The new Century plant CO2 tailgate specifications will meet the Kinder Morgan Central Basin Pipeline (CBP) specifications and allow the CO2 to move north, unlike the current CO2 from the legacy plants which are precluded from entering the CBP. Removal of the H2S to levels below 20 ppm was a key cost issue on this important plant design consideration.
As illustrated in Fig. 5.3.1, the growth in the CO2 EOR market in the Permian Basin over the period 1985 to 2004 was slow; hampered by oil price crashes (in 1986 and 1998), uncertainties associated with future oil prices, and the lack of widespread operator knowledge of and comfort with CO2 EOR technologies.
However, the situation has since changed. After nearly two decades where available CO2 supplies to the Permian Basin outpaced demand in CO2 EOR projects, since 2005 there has been a shortfall of CO2 supply (see Fig. 5.3.3).
Figure 5.3.3 – CO2 Supply and Demand History and Near-Term Projections for the Permian Basin
Today, the single largest barrier to expanding CO2 flooding in the Basin is the lack of substantial volumes of reliable and affordable CO2. This is despite the fact that several supply market responses have been taken to attempt to address this limitation. To recap:
- Kinder Morgan added three pump stations along the Cortez line, completed its Doe Canyon drilling and CO2 processing plant and added several new McElmo Dome wells in southwestern Colorado, all in early 2008. The Doe Canyon volumes added 100-120 MMcfd (2.8-3.4 MMcmd) of CO2 supply availability to the Permian Basin and the McElmo Dome drilling added another 200 MMcfd (5.6 MMcmd) of CO2 production capacity. The pump stations allow a throughput upgrade to Cortez to get to 1,300 MMcfd (37 MMcmd).
- In the last two years, Hess has developed the West Bravo CO2 source field in an attempt to deliver about 110 MMcfd (3 MMcmd) of new CO2 for expanding injection into the deeper ROZ in the San Andres formation in the Seminole field.
As for the future, several potential projects have been in discussion which could also help to partially alleviate CO2 shortages in the mid to long-term.
- Enhanced Oil Resources Inc. announced a memorandum of understanding for developing a pipeline with SunCoast Energy Corp. to transport 350 MMcfd (10 MMCmd) of CO2 nearly 350 miles (563 kilometers) from its St. Johns, Arizona helium and CO2 field to the Permian Basin.8 The Chupadera Mesa project just east of Socorro in central New Mexico offers another helium play that could be developed. Both of these projects face some well completion challenges, reserve questions and questionable plant/pipeline economics.
- In June 2008, SandRidge Energy announced its agreement with Oxy to build a CO2 treatment plant and associated CO2 compression and pipeline facilities in Pecos and Terrell Counties in Texas, providing Oxy with a dedicated CO2 stream for CO2 EOR. The design of the Century plant calls for two stages of construction with an initial inlet plant capacity to start at about 300 MMcfd (8.5 MMcmd) (~1/2 CO2) , but could ramp up to 1,000 MMcfd (28.3 MMcmd).9 The development schedule and resultant CO2 volumes beyond the initial phase will be dictated by natural gas prices.
The implied backdrop for all the source expansion planning is the large potential demand for CO2 EOR enhancements of existing projects, along with the addition of new ones. As shown in more detail below, the anticipated potential for expansion in CO2 demand to CO2 EOR is high, based on the robust oil pricing forecasts and the backlogged list of planned, on-going and expanding projects in the Basin.