CO2 for EOR in the North Sea (CENS) - Update on Project Status

A detailed description of CENS - the proposed CO2 infrastructure for the North Sea - appeared in an earlier issue. Here David Coleman ( David_Coleman@kindermorgan.com ), the representative for Kinder Morgan CO2 Company in CENS presents an update on the project. David has spent the last twenty-five years in domestic U.S. and international marketing, business development and economics management with Occidental, Unocal and the last four years with Kinder Morgan CO2 Company.

Background/History

The concept of using carbon dioxide for use in enhanced oil recovery (EOR) projects in the North Sea area began during the early summer of 2001 when Elsam A/S and Kinder Morgan CO2 Company, L.P, (KMCO2) entered into a cooperation agreement to study whether or not it might be feasible and ultimately profitable to capture and transport anthropogenic CO2 from onshore coal fired plants to offshore oil fields for use in tertiary or enhanced recovery oil projects. As an ancillary benefit, the CO2 captured and transported for EOR use would be taken from the atmosphere, thereby benefiting the cultures from which the CO2 would be taken, allowing each country participating to better meet its climate change obligation.

Schematic of North Sea Pipeline Infrastructure Proposed under CENS Project

During the first year, high level studies were done in the UK, Denmark and Norway to ascertain potential offshore demand for CO2, supply location for any such demand, capital and operating costs to capture, transport and flood the fields, identification of fiscal regimes in place and other necessary feasibility variables. To accomplish the assigned task and measure interest, discussions were held with the regional major oil and gas operators, relationships formed with country energy departments, trade associations and NGOs and studies let with consultants competent in the relevant areas.

The CENS economic model or "CEM" was developed by mid year 2002 from the study results to organise the information, validate the concepts and allow for "what-if" analysis, both on a macro and micro basis for the three country areas. The CEM determined that CO2 could be supplied to the fields at a total delivered cost of approximately thirty five dollars ($35.00) per tonne. The CEM answered the pivotal question: "Could anthropogenic CO2 be captured, transported and used for EOR, while at the same time generating a profit for the participants?" The answer was: "It depends." If the answer were given in macro-economic terms, the answer was: "Yes". If the answer were based on each industry's participation under current fiscal regime restrictions, the answer was a resounding: "No". The bottom line was the government is the real customer and until such time as fiscal terms were modified to allow for CO2 for EOR projects, there was no incentive for the oil and gas industry to seek out large scale opportunities to apply this technology to the diminishing reserves in the North Sea.

Post CEM Study/Today (Early 2004)

The status of the CENS project is still developmental and perhaps even pre-developmental. From mid-2002 to today (early 2004), local representation continues in Denmark , Norway and the UK by Elsam and INCO2. Oil companies, governmental agencies and ministries have and continue to be a major focus for the message of fiscal and regulatory modifications to include EOR using CO2 as part of each country's energy and environmental consideration. The CENS partners' primary function changed from performing studies to finding customers. That focus shifted from the region to Norway , because of its oil industry regulatory and governmental structure, where it was believed the first major CO2 EOR project might well originate. CENS and Statoil's New Energy group (lead by Olav Kaarstad) entered into a cooperative effort to study supplying CO2 for EOR to the Gullfaks field within the Statoil Tampen 2020 project. CENS co-developed a second study to locate stable, secure sources of CO2 from coal fired plants and other sources in the Northwest European area for pipeline transport to Tampen. New Energy was charged with determining if it were feasible to bring CO2 via ship to the Gullfaks area. Statoil is currently determining whether or not to go forward with using CO2 at Gullfaks. A decision is expected during the first or second quarter of 2004. If Gullfaks does go forward, it will be the first large scale CO2 flood in the North Sea .

CENS partners have continued to increase CO2 for EOR knowledge by hosting several Norwegian, UK and Danish private company and governmental representatives at KMCO2 properties in the Permian basin. There continues to be open dialogue about the transferability of CO2 flooding technology. CENS has been a part of the recent UK white paper on energy security and helped validate the model used by its authors. The UK operators are reluctant to embrace CO2 for EOR because the fiscal mechanism to do so is not yet in place.

While there has not been a firm project to date, the entire prospect is one of education and technology transfer. To start a new production phase in the life of the offshore North Sea is not an easy proposition, and the stakeholders will need to work together to ensure all can do so profitably. CO2 for EOR has had success in significantly increasing the ultimate recovery percentage from US oil fields for over three decades. New products are being introduced and technology adapted continuously to lower the entry cost and ensure safety. Transportation of CO2 through high-pressure pipelines is commonplace in the Permian basin and these pipelines, made from carbon steel, are the most cost effective and safest pipelines per mile of any type in service.

2004 has started off to be a pivotal year for CO2 in the North Sea area. The Norwegian government, in an effort to stimulate EOR using CO2 have proposed, in a recent white paper, issuing a volume allowance for each barrel of oil produced using CO2. While adoption of such a proposal is not assured, such a fiscal change could have effects beyond the borders of Norway . CENS has proposed similar modifications to the ministries in the UK and Denmark . The UK Government has just announced its National Allocation Plan (NAP) for CO2 emissions. No one is sure yet as to how this will be finally implemented or its consequences. On the positive side for EOR use of CO2, the EU ETS has acknowledged that CO2 Capture and Storage (EOR or non EOR) is a remediation technology subject only to agreeing the conditions for measuring and monitoring.

The CENS partners stand ready to assist any company in completing a project.

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