Commodity CO2-EORGreenhouse Gas-Economic
Development-Sequestration
Michael E. Moore
Managing Partner
Falcon ES/GHG Partners/CO2 Norway
Houston
November 18, 2004
White House Agrees that Science
Supports Man-Made CO2 is Impacting
the Climate
New York Times Aug 26th, 2004
White House Shifts Its Focus on
Climate
•
By ANDREW C. REVKIN August 26, 2004 New York Times
• “In a striking shift in the way the Bush administration has
portrayed the science of climate change, a new report to
Congress focuses on federal research indicating that
emissions of carbon dioxide and other heat-trapping
gases are the only likely explanation for global warming
over the last three decades.
• In delivering the report to Congress yesterday, an
administration official, Dr. James R Mahoney, said it
reflected "the best possible scientific information" on
climate change. Previously, President Bush and other
officials had emphasized uncertainties in understanding
the causes and consequences of warming as a reason
for rejecting binding restrictions on heat-trapping gases.”
Primary Sequestration
• Geologic
• Terrestrial
• Ocean
Geologic Sequestration of CO2 Today’s Most Viable Option
Carbon/CO2 Sequestration Pathways
Geologic sequestration may
be most viable option in the
near- to mid-term
Technology basically proven
• Costs and economics of long-term
storage uncertain
• Monitoring, verification, and safety
need to be included
JAF01901.CDR
Additional value from incremental oil
and gas recovery
Incentives and tradable credits will
help offset sequestration costs
Carbon Sequestration Leadership
Forum Source: http://www.cslforum.org
Magnitude of Current Geologic
Sequestration Work
Source:www.cslforum.org
Kyoto, EU ETS and RGGI
• Signed by Putin, Kyoto kicks into action
within 90 days.
• The European Union’s “Emission Trading
Scheme” starts trading on January 1, 2005
• The “Regional Greenhouse Gas Initiative”
comprising of 10 New England states, is
slated to start mid 2005
• California Mandates
Gulf Coast Carbon Center:
Developing a Business Plan for Carbon Use and Sequestration in
the US Gulf Coast
Lead: Susan Hovorka, Ian Duncan, Mark H. Holtz, and Eugene Kim
Michael Moore-Advisor
Gulf Coast Carbon Center
Bureau of Economic Geology
The John A. and Katherine G. Jackson School of Geosciences
The University of Texas at Austin
GCCC Infrastructure
Regional Setting of Frio Brine Pilot Site
Significance
to US carbon program:
Potential to
upscale to impact Houston
US releases
Pilot site
Power plants
20 miles
Industrial
sources
FutureGen in Texas
Source: www.cleancoalfoundation.org
•
Texas Clean Coal Technology Council Announces Bid to Bring Billion
Dollar, Zero-Emission Power Plant Prototype to Texas
•
The Governor’s Clean Coal Technology Council announced on July 28, 2004
that it will lead the effort to bring FutureGen – a billion dollar, 10-year project to
create the world’s first coal-based, zero-emission power plant designed to
capture and permanently sequester carbon dioxide – to Texas. In addition to
improving air emissions globally, FutureGen could be used to spur enhanced oil
and gas recovery in Texas where 31 billion barrels of crude oil could be
recovered though CO2 flooding.
Texas Railroad Commissioner Michael L. Williams, who serves as chair of the
Governor’s Council, has already sent a preliminary letter to the Department of
Energy (DOE) notifying it of Texas intention to host FutureGen. Since the
project was initially announced by President George W. Bush early in 2003,
DOE has approved the first round of funding for the prototype and is scheduled
to name an industry consortium that will partner in the project later this year.
The industry consortium is required to put up $200 million for FutureGen
funding, and the project is also expected to attract international participation.
Texas, with an ample supply of coal, unmatched geology for sequestering
carbon dioxide and the need for enhanced oil recovery, ready markets for the
energy produced and a transmission grid capable of handling the increased
load, would be the ideal location for FutureGen according to the chairman of the
Governor’s Clean Coal Technology Council.
“Bringing FutureGen to Texas is a perfect fit,” Williams said. “For this prototype
to be successful, it is going to have to be profitable. That means that enhanced
oil recovery can help us produce affordable, clean energy.”
CO2 Driven EOR and GHG
Sequestration
How CO2 Works
• CO2 mixes with oil much like turpentine cleans paint from a brush
• Inter-phase mass transfer typically yields NGL rich gas production
• Chase water injection helps control mobility and gas recycle
Texas Permitted CO2 Wells and
30+ Years Regulatory Experience
• 9279 Wells permitted for CO2 injection in Texas
• 9176 of these in RRC Dist 8/8A (Permian Basin)
•
•
•
•
Public acceptance is high
Regulatory experience deep
HSE issues well defined
Knowledge base developed in Texas
US CO2 driven EOR Projects and
Infrastructure
Source: Denbury Resources, Inc., 2004
IEA US 2002 GHG Statistics
Storage Potential
Global Capacity
Storage
Option
Oil and Gas
Fields
Deep saline
formations
Unminable
coal
Gigatons CO2
920
400 – 10,000
>15
Data source : IEA Greenhouse Gas R&D Programme
U.S. Basins very Mature,
Production Peaked in 1970
Annual Domestic Crude Oil Production
9,500
MBbl/day
8,500
7,500
6,500
5,500
4,500
1950
1960
1970
1980
1990
2000
Source: API, DE, Bloomberg, Raymond James Research Report
Texas Oil Production Curve
Deeper Dependence on Foreign Crude Economically and
Strategically Dangerous for Nation and Texas
The green represents estimated production 2005-2015
Louisiana Oil Production Curve
Source: ARI/Reeves
Identified Recoverable Texas Crude
Oil—Only with CO2
Source: Texas BEG/GCCC
80 Billion Barrels Residual Oil in Significant TX Reservoirs
31 Billion Barrels
CO2 EOR Candidate
Target
10% of Target to Economic Model
10 Year Forward Price Curve WTI
Source: Barclays Bank, NYMEX Futures, IPE Brent Futures and Derivatives Market Nov 16, 2004
These values now have banks seriously looking into
financing long term CO2 driven EOR floods, required capture
technology financing and infrastructure project financing as
well as the future potential Emission Reduction Credits
markets
Tax
Incentives
Sec 29
Sec 43
Commodity
CO2
$25.00/tn
10 yrs
Research
Grants
$
Crude Oil
WTI
$35.00
10 yrs
Federal &
State
Economic
Dev Funds
Offsets
$1.00-2.00
ton
Potential Sequestration Volume
through
CO2-EOR in Texas
Source: Texas BEG/GCCC
P er cent
R eco ver y
C O 2 - EOR
R eso ur ce
( B b b l s)
C O 2 S eq uest er ed
( t o ns)
C O 2 S eq uest er ed
( met r i c t o ns,
t o nnes)
CO 2
S eq uest er ed
( G i g at o nne, G t )
10%
3 .7
522,474,000
473,883,918
0.47
20%
7. 4
1,044,948,000
947,767,836
0.95
30%
11. 2
1,567,422,000
1,421,651,754
1.42
40%
14 . 9
2,089,896,000
1,895,535,672
1.90
50%
18 . 6
2,612,370,000
2,369,419,590
2.37
60%
2 2 .3
3,134,844,000
2,843,303,508
2.84
70%
2 6 .0
3,657,318,000
3,317,187,426
3.32
80%
2 9 .8
4,179,792,000
3,791,071,344
3.79
90%
3 3 .5
4,702,266,000
4,264,955,262
4.26
100%
3 7. 2
5,224,740,000
4,738,839,180
4.74
Direct Economic Impacts of Crude
Production in Texas
Source: Texas BEG/GCCC
CO 2 Percent
EOR
Oil
W ellhead
R ecover R esourc Price V alue ( B
y
e (B
( $/ bbl)
$)
Severance
Taxes ( $B ,
4 .6 %)
A d V alorem
Taxes ( $B ,
3 .9 5%)
Jobs C reat ed ( 19 .1 Economic V alue
jobs per $1M M
( W ellhead
W ellhead V alue)
V aluex2 .9 1)
Franchise
Taxes ( $B ,
0 .18 %)
Sales
Taxes ( $B ,
2 %)
10%
3.1
25
$78
$4
$3
1,480,250
$226
$0.4
$5
20%
6.2
25
$155
$7
$6
2,960,500
$451
$0.8
$9
30%
9.3
25
$233
$11
$9
4,440,750
$677
$1.2
$14
40%
12.4
25
$310
$14
$12
5,921,000
$902
$1.6
$18
50%
15.5
25
$388
$18
$15
7,401,250
$1,128
$2.0
$23
60%
18.6
25
$465
$21
$18
8,881,500
$1,353
$2.4
$27
70%
21.7
25
$543
$25
$21
10,361,750
$1,579
$2.8
$32
80%
24.8
25
$620
$29
$24
11,842,000
$1,804
$3.2
$36
90%
27.9
25
$698
$32
$28
13,322,250
$2,030
$3.7
$41
100%
31.0
25
$775
$36
$31
14,802,500
$2,255
$4.1
$45
*Calculations based on the TX RRC's "General M odel of Oil and Gas Impact on the Texas Economy" derived from the Comptroller's Input-Output model of the Texas economy.
Severance and Ad Valorem Taxes from Wellhead Value; Indirect Taxes from Economic Value.
CO2 EOR is Important to Texas
Hence, so is the CO2 Source
Source: ARI/Kuuskraa
CO2 EOR AVE. YRLY
PRODUCTION IN BBLS/DAY
GROWTH OF CO2 EOR PRODUCTION IN TEXAS AS A
PERCENTAGE OF STATEWIDE PRODUCTION
20%
16%
12%
8%
4%
0%
1970
1975
1980
1985
1990
YEAR
1995
2000
2005
CO2 Demand Keeps Rising
Source: ARI/Kuuskraa-Reeves
Growing Demand for CO2
Source: Steve Melzer/Melzer consulting
Anadarko’s Salt Creek and Monell
135 mmcf/d CO2 used in EOR from Exxon-Mobil Labarge Gas Processing Plant
Sequestration Protocols developed by Battelle
Cody
Gillette
New 125 Mile CO2 Line
Salt Creek
Casper
Point of Sale for CO2 to Monell
Point of Sale for CO2 to Salt Creek
Existing CO2 Line
Rawlins
Rock Springs
Cheyenne
Monell
Potential Offsets for Market
• Timeline
– Field Operations: Underway
– Protocol: Completed
– Implementation: Underway
– Certification: Buyer Driven
• CO2 Offset/ERC Inventory
Project
Historical
2004
Annual to 2020
Lindsey
600,000 tons
300,000 tons
300,000 tons
Monell
50,000 tons
1.0 million tons
1.1 million tons
Salt Creek
None
1.8 million tons
2.6 million tons
Total
650,000 tons
3.1 million tons
4 million tons
Conclusion
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Gulf Coast Carbon Center delivers a win-win opportunity
GHG issues are accelerating, GCCC provides solutions
CO2 is as a valuable commodity to Texas, Louisiana, Kansas, Oklahoma,
Kansas, Illinois, Mississippi, California, New Mexico & Wyoming
Geologic Sequestration works for large scale abatement of CO2/GHG
development globally via CSLF
Supporting the Texas FutureGen initiative
Huge opportunity for regional emitters and sinks as well as technology,
equipment, and service providers
States benefit from positive economic impacts and extended asset life as
well as job growth
Michael E. Moore
Advisor Gulf Coast Carbon Center
Managing Partner GHG Partners dba Falcon Environmental Services
Director Commodity Markets for CO2 Norway
Emerging energy commodity market development for past 20 years.
1776 Yorktown, Suite 500
Houston, Texas 77056
Main: 713-961-3204
Fax: 713-961-2676
mmoore@falcongasstorage.com