Market and price for CO2

A key driver for the interest from CCS projects in EOR is the revenue stream that can be delivered. Five of the eight operating LSIPs sell CO2 to CO2 EOR operators. These are fully commercial endeavours at prevailing CO2 prices with the revenue covering the capture and transport costs from low-cost sources, such as the natural gas processing, synfuels, or fertiliser sectors, and has developed along with the broader US EOR market over the past 40 years.

CO2 EOR production is linked to the price of oil, and rising oil prices have increased the demand for CO2. In response, the number of active CO2 EOR projects rose from 78 in 2002 to more than 130 in 2012. The price of CO2, strongly influenced by regional constraints in supplying CO2, also increased with rising demand during this period.

The EIA (2012) and IEA (2011a) each project that oil prices will continue to increase over the next decade, increasing the demand for CO2 and leading to increased CO2 supplies. In the US the supply of CO2 is expected to increase by 50 per cent by 2015 relative to 2010 production levels, and could potentially double by 2020 (Figure 68) (EIA 2012). More than half this growth will come from A-CO2 which will become increasingly important during the following decade (DiPietro et al. 2012).

Growth in oil output may lag behind growth in use of CO2 because high oil prices encourage operators in existing fields to inject CO2, even when rates of production are lower than previously targeted rates of production. The average rate of use of CO2 in the US is estimated to be 0.5 tonnes of CO2/barrel of oil in 2011 (Bloomberg 2012). This is an increase from 0.3–0.4 t CO2/ barrel of oil for some projects as described by earlier studies (Gozalpour et al. 2005, Godec 2011).

With increasing pipeline investments to relieve supply constraints, together with additional A-CO2 supply sources being developed, it is expected that over the medium term CO2 prices will be set by these low-cost anthropogenic sources. Until 2020, and in the absence of coherent GHG policies in the US, there is little financial impetus to develop higher cost anthropogenic sources of CO2 for EOR other than in demonstration projects with government support unless effective GHG mitigation policies are introduced.

FIGURE 68 Projected US supply of CO2 for EOR by source

Source: DiPietro et al. (2012) and projects in the Define stage of the Global CCS Institute’s Asset Lifecycle Model (Appendix C).