11

The Far Ranging Socioeconomic Benefits of CO2-EOR and the Unique Role of Texas

Frank Clemente Ph.D.Senior Professor of Social Science & Energy PolicyPenn State Universityfac226@psu.edu

Note: Jude Clemente, Energy Analyst, Department of Homeland Security, San Diego State University, made significant contributions to this report.

The Context of CO2-EOR

“efficient capture and separation of by-product CO2 from the next generation of low emission power plants could provide massive, long-term sources of ‘EOR-Ready CO2”, U.S. DOE, 2006.

“Availability of CO2 limits the industry’s ability to expand CO2 -EOR” Charles Fox, Vice President, Kinder Morgan, 2008.

In 1985 the United States produced 9 Mb/d of oil and imported 5 Mb/d. In 2005, we produced 5 Mb/d and imported almost 14 Mb/d. –U.S. EIA, 2008

The United States has over 80 billion barrels of “stranded oil” recoverable through CO2-EOR.---U.S. DOE, 2006

The “Win-Win” Contributions of CO2-EOR

1. Supply-- Produce 2 million barrels of oil per day for 100 years.

2. National security -- reduce dependence on countries such as Venezuela, Iran and Russia

3. Economy -- Reduce trade deficit by over $ 70 billion per year.

4. Environment -- Productively use and safely sequester CO2

5. The future -- Enable the U.S. to realize the full potential of our greatest energy resource -- coal

The U.S Faces Intense Global Competition for Incremental Oil Supply – 2005-2030

Incremental Demand for Oil in Millions of Tons

From 1980 to 2005 the U.S accounted for 18% of the global increase in oil consumption. From 2005-2030 that figure will only be 5%

*Developing Asia Excludes China and India; U.S. EIA, International Energy Outlook, 2008

What Two Million Barrels a Day from CO2 – EOR Would Do

CO2 is the Pathway to Over 50 Billion Barrels of Oil in TX and OK.*

Oklahoma has more than 38 billion barrels of stranded oil and a large portion recoverable by CO2 – EOR.

“East and Central Texas have nearly 74 billion barrels of oil which will be left in the ground or “stranded”….( much of) This stranded oil is in mature reservoirs that appear to be technologically and economically available to enhanced oil recovery (EOR) using carbon dioxide (CO2) injection”

“Large volumes of CO2 supplies will be required in East and Central Texas (and Oklahoma) to achieve the CO2 – EOR potential”

* Calculated from Office of Oil and Natural Gas, U.S. Department of Energy, 2006

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The Location Of Stranded Oil Recoverable Through CO2 – EOR *

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With State of the Art technologies, Texas has over 35 billion barrels of recoverable oil

* Excludes Alaska and Offshore, Office of Oil and Gas, U.S. DOE, 2006

Adapted from Office of Oil and Gas data, U.S.DOE,2006

The Scale of CO2 – EOR’S Potential Contribution

CO2 – EOR could provide over 40 years of current U.S. production

And The Stranded Oil Is There

Over 350 billion barrels of oil are “stranded in the continental United States *

* Excludes Alaska and offshore; Adapted from Office of Oil and Gas data, U.S. DOE 2006

Billion Barrels

Texas alone has over 120 billion barrels of stranded oil – More than 30% of the U.S. total.

Why Texas is so Important to CO2 - EOR

1. Over 35 billion barrels of potentially recoverable oil are in Texas – 40% of U.S. total.

2. Texas has been using EOR since 1972 and current production is over 200,000 barrels per day – over 20% of Texas production. Regulatory experience with EOR is well established.

3. Texas already has an extensive pipeline infrastructure capable of transporting CO2.

4. Texas accounts for 20 % of U.S. oil production but conventional output has declined from 2.6 Mb/d in 1980 to about 1 Mb/d currently.

5. CO2 –EOR will enable Texas to reassert its role as the cornerstone of U.S. oil supply.

“the benefits of EOR production will result in $200 billion in additional reserves and 1.5 million jobs in Texas” Myra Crownover, Chair of Energy Resources Committee, Texas House of Representatives, 10/2008

Adapted from Office of Oil and Gas, U.S. DOE,2006

Areas in TX and OK Amenable to CO2 - EOR

Office of Oil and Gas, USDOE,2006

Twelve Strengths of the EOR Process

1. Injected CO2 pushes “stranded” oil to the well bore, increasing recoverability.

2. CO2 lowers the viscosity of oil and increases the flow rates.

3. CO2 is liquid-like at 800 meters and oil field reservoirs are effective traps for buoyant fluids – the reason oil accumulated there.

4. CO2 becomes less mobile over time, reducing leakage risks.

5. Cement plugs insure no leakage from well bore.

Twelve Strengths of the EOR Process (con’t)

6. Oil produced from CO2 – EOR is 70% “carbon free” – based on difference between carbon content in the incremental oil from EOR and the volume of CO2 stored in the reservoirs.

7. Intergovernmental Panel on Climate Change concluded “CO2 can remain trapped underground”.

8. Provides an extensive “value added” market for the sole of CO2 emissions from new coal fueled power plants and will defray some of the cost of CCS.

Twelve Strengths of the EOR Process (con’t)

9. Helps resolve two key issues constraining storage of CO2 – (1) establishing mineral rights and (2) assigning long term liability

10. U.S. trade balance improves by $ trillions over lifetime of the process. State and local government revenues increase by $ billions.

11. New, well paying jobs created and broad positive impacts on economic growth

12. National security significantly enhanced as imports of foreign oil reduced by 18%

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Texas produces 80% of U.S. CO2-EOR

Texas Public Utility Commission,2008,

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Why The United States needs CO2-EOR

The United States Must ExpandDomestic Sources of Oil

1. U.S. consumption of oil has increased from 17 Mb/d in 1990 to 21 Mb/d in 2007 – an increase of 22%.

2. Over the same period, U.S. production of oil has decreased from 7.4 Mb/d to 5.1Mb/d – a decline of 31%.

3. In order to meet demand, imports of foreign oil increased almost 70% -- from 8 Mb/d to 13.5 Mb/d.

4. As a result, the U.S. now imports 65% of its crude oil and this pattern is expected to continue through 2030.

The United States Must Expand Domestic Sources of Oil (con’t)

5. These imports are costly and in 2007 the U.S. paid $ 300 billion to buy oil from foreign suppliers.

6. These imports are risky and pose a threat to U.S. energy security. Over 10 % of our oil imports are from Venezuela. Russia and Iran account for 17% of the world output.

7. Even “secure” sources of energy supply are questionable – Mexico supplies 12% of our oil imports, but production is projected to decline over 35%.

8. The specter of “peak oil” looms over world markets – global production of conventional oil has been flat since 2005.

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Our Growing Dependence on Foreign Crude Oil

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U.S. EIA Annual Energy Outlook,2008

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The Cost of Dependence—Transferring wealth of the American People

Annual Cost of U.S. Petroleum Imports

$103B

$133B

$180B

$251B

$286B

$309B

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2002 2003 2004 2005 2006 2007

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Modernization – The Rise of the Automobile

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In 2002, there were 812 million vehicles globally. By 2030 there will be 2.1 billion.

Source (Dargay , Gately and Sommer, 2007)