By OGJ editors
HOUSTON, Mar. 14 -- The operator of the world's largest known, undeveloped accumulation of carbon dioxide and helium signed a major helium sales contract but said sales cannot begin until it finds a CO2 buyer and a pipeline is built.
Ridgeway Petroleum Corp., Calgary, signed a 15-year take-or-pay contract under which Air Liquide America LP, Houston, will buy liquid helium at the market price in St. Johns, Apache County, Ariz. Other contract details are confidential.
"Based on an estimated annual helium production of 1 bcf, Ridgeway would supply Air Liquide with as much as 15% of the world's annual helium requirements," a Ridgeway announcement said.
However, first a plant would be needed to separate helium from raw produced gas and liquefy it for sale. Construction of such a plant will cost around $125 million, Ridgeway disclosed.
Detailed plant design and engineering are under way, and Ridgeway estimates that purchases could start as early as 2006. The figure of 1 bcf/year is a project estimate based on the anticipated size of the plant, Ridgeway said.
Ridgeway discovered a large accumulation of mainly CO2 and helium in Apache County in 1994 which later drilling showed extends into Catron County, NM. A 1999 independent engineering report estimated 14.8 tcf of original gas in place, of which 13.9 tcf is CO2, 64 bcf is helium, and the balance is mainly nitrogen.
It remains uncertain what percentage of the gas in place can be recovered economically, Ridgeway noted.
Ridgeway has been unable thus far to overcome the biggest hurdle to placing the field on long-term production: finding oil operators to purchase CO2 for enhanced oil recovery projects and construction of a $400 million, 650-mile pipeline to oil fields in Kern County, Calif.
Sustained oil prices at present levels would contribute to positive economics for such EOR projects.
Ridgeway plans to drill more wells in St. Johns field this year. In February 2003 it sought to raise close to $5 million. Proceeds would go to "acquire more precise data and detailed estimates for the field development stage and provide input for more detailed project economics modeling and to pay annual lease rentals and other expenses."
Field work this year in both states "is to consist of drilling and completing a number of wells to establish more statistically persuasive data for gas composition, average well flow by zone, optimal drilling and completion procedures, and provide additional wells for delivery of crude CO2 to the Reliant Processing Ltd. (formerly FLO-CO2 Inc.) liquids plant" near Springerville, Ariz., Ridgeway said.
The Springerville plant started up in July 2002 and provided Ridgeway's first revenues from the project (OGJ Online, July 8, 2002).
The additional wells for the CO2 plant should enable Reliant to achieve its projected volume target of 500 tons/day of liquid CO2 during the next 18 months. At that time, Ridgeway said, revenues from the liquids plant should be sufficient to fund Ridgeway's ongoing annual lease rentals and general and administrative expenses.
Overall development of the field would take 30-50 years, the company said.
Ridgeway has spent nearly $40 million leasing 300,000 acres, drilling 18 wells, and building the CO2 plant.
