Denbury to operate Riley Ridge EOR assets

By OGJ editors
HOUSTON, June 29
-- Denbury Resources Inc., Plano, Tex., will acquire carbon dioxide assets in western Wyoming that will give it more reserves than it needs to develop its existing tertiary enhanced oil recovery assets in the Rocky Mountains.

Denbury’s pending purchase of the majority interest it did not already own in the 9,700-plus acre Riley Ridge Federal Unit in Sublette County, Wyo., and 28,000 acres of adjoining leases will add the capacity to eventually produce 580-630 MMcfd of  CO2 from 6.1 tcf of proved and probable reserves. The development plan to achieve these rates could take as long as 10 years, Denbury said.

The $191 million acquisition from Cimarex Energy Co., Denver, of working interests of 57.5% in Riley Ridge and 33% in the adjacent acreage in LaBarge field will also bring Denbury operatorship of both and revenue from methane and helium sales that should pay for Riley Ridge development and the cost to extract and compress the CO2. Closing is set for late July.

Denbury estimates that the Riley Ridge Unit contains proved reserves of 250 bcf of natural gas, 8.9 bcf of helium, and 1.4 tcf of CO2 net to the interest to be acquired. It estimates the other acreage at a probable 250-300 bcf of gas, 9.5-11.5 bcf of helium, and 1-1.2 tcf of CO2 net to the interest being acquired. Denbury’s net interest totals 4.5 tcf of the gross 6.1 tcf of total proved and probable CO2 reserves.

ExxonMobil Corp. is selling gas, helium, and CO2 separated at its Shute Creek processing plant from the Mississippian Madison formation on other units in LaBarge field, the same reservoir from which Riley Ridge will produce.

Riley Ridge is expected to start flowing methane and helium in late 2011. Wells are being completed and separation plants built to extract methane and helium from the raw well stream, which is 65% CO2, 19% gas, 6% helium, 5% hydrogen sulfide, and the rest other gases. Denbury will reinject CO2 and H2S until a CO2 pipeline can be laid.

Denbury has begun engineering and design of a CO2 separation plant to serve Riley Ridge with initial capacity of 130 MMcfd. The company expects to begin preparing the development plan for the adjoining acreage, which is expected to add 450-500 MMcfd of CO2 when fully developed.

Beyond Riley Ridge, Denbury in the past 15 months has secured 50 MMcfd of CO2 each from ConocoPhillips at Lost Cabin, Wyo., and ExxonMobil at LaBarge, Wyo., and 200 MMcfd from a proposed DKRW Advanced Fuels LLC facility at Medicine Bow, Wyo.

Denbury is near the start of construction of its first  CO2 pipeline in the area, the Greencore line from Lost Cabin to Bell Creek, Mont. It should begin its first tertiary oil production in the region within a few years, most likely from the recently acquired joint venture at Grieve field in Natrona County, Wyo. Soon afterward it will begin CO2 injection in giant Bell Creek in Carter and Powder River counties, Mont.

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