SHELL CITES REDUCED COSTS IN NEW U.S. CO2 PROJECTS

July 24, 1995
Improved technology and field applications are trimming costs of enhanced oil recovery with carbon dioxide flooding in the U.S. Southwest. Shell Western E&P Inc., one of CO2'S most vocal proponents, says full use by industry of CO2 techniques could boost oil recovery in the region by as much as 800 million bbl.

Improved technology and field applications are trimming costs of enhanced oil recovery with carbon dioxide flooding in the U.S. Southwest. Shell Western E&P Inc., one of CO2'S most vocal proponents, says full use by industry of CO2 techniques could boost oil recovery in the region by as much as 800 million bbl. For many years after its mid-1960s introduction in the Permian basin of West Texas, high start-up costs and technical complexity limited CO2 use to the domain of major integrated producers. But today, says Shell Western CO2 engineer Chuck Fox, CO2 recovery economics have improved to the point that many smaller companies should consider installing CO2 floods in fields where waterflooding no longer is profitable. Shell Western last June started up a CO2 flood on the Bennett Ranch Unit in Wasson field of Yoakum County, West Texas. The project is expected to show a profit with oil prices as low as $13/bbl (OGJ, July 17, p. 26). Fox said advances in reservoir characterization technology, hardware, and software techniques have significantly lowered the risk of a technical failure in a CO2 flood. In addition, experience gained in the past decade has enabled producers to trim CO2 flood installation costs by about 50%. Meantime, CO2 prices have dropped about 40%, in line with the decline in crude oil prices.

TECHNICAL, FINANCIAL HELP

Given current economics, Most CO2 floods installed in good candidate fields have an excellent chance of showing a profit. However, many smaller producers still might not be able to handle a typical CO2 flood's start-up costs and slow payout rate. Itself a CO2 supplier with interests in a growing number of Permian basin CO2 floods, Shell Western has begun contributing to CO2 activity in West Texas in other ways. The company is:
  • Cosponsoring a series of seminars to familiarize independent producers with CO2 project technology and financing.
  • Advising clients about design and installation of CO2 floods.
  • Providing financing for purchases of CO2 and capital equipment.
Besides developing CO2 payment plans that allow CO2 unit prices to vary according to the timing and extent of reservoir responses, Shell will bear some project risk. "We will trade CO2 for a working interest or overriding interest in a project," Fox said. The company also can provide oil price hedging services and help form tax partnerships and other business services. "We believe relations between suppliers and consumers of CO2 Will evolve from the present detached relationships toward partnerships and alliances where sellers and users share the risks and rewards of CO2 flooding," Fox said. "By forming alliances with users and crafting creative supply arrangements, Shell Western can change the shape of a working interest owner's cash flow curve and speed project payout." Table (11047 bytes)Copyright 1995 Oil & Gas Journal. All Rights Reserved.