CO2 for oil swap brings carbon capture viability closer

Oil and gas producer Denbury makes its case for its 300-mile plus “Green Pipeline” that transports CO2 for use in extracting more oil from old fields. University of Texas, Austin’s Carey King and colleagues have looked at the economics of using a larger network to store CO2 in underground saline aquifers.

For 314 miles from Donaldsonville, Louisiana, to Alvin, Texas a 24-inch diameter pipeline slithers under the landscape, dwarfing even the giant invasive snake species menacing the US. And while the Hastings Oil and Gas Field sits at the Texan end of the pipe, fossil fuels don’t flow along it: CO2 does. Rather than emit the greenhouse gas to the atmosphere, in Louisiana, Mosaic Phosphates Company’s Faustina Plant sends it to Texas. There the pipeline’s owner, Denbury, uses the CO2 to swill more oil out of the ageing Hastings field, leaving most of the CO2 trapped underground instead.

Denbury estimates that from 2014 it could get 10,000 tonnes of CO2 a day from industrial sources. Though that sounds a lot, it pales against the roughly 15 million tonnes the whole US emits each day. But what if Texas’ coal-fired power plants were hooked up to pipelines to both produce more oil from old fields and keep CO2 locked out of the atmosphere?

A team of University of Texas at Austin scientists have been looking at the financial details of how such a network might work. Though it could trap much more CO2 than burning the oil it gets out will emit, they find that such a scheme likely could not yet support itself. “If you capture CO2 from multiple coal-fired generators to produce oil and you want to have a net storage of CO2, the costs are still greater than the revenues,” UT Austin’s Carey King told me. “But the oil revenues do pay for the majority of the costs.”

Putting CO2 in its place

In a paper published in Environmental Research Letters on Monday, Carey’s team look at four possible 20-year scenarios for how this network might work. Two of them take the oil out slowly, using CO2 from three Texan coal-fired power stations, that make full use of the investment in carbon capture equipment. The other two scenarios feature 21 power stations, rapidly getting as much oil as possible from the old Gulf of Mexico reserves, but continuing to store CO2 produced afterwards. That ‘fast’ network would probably be the most expensive one possible to set up, they note. In one of each of the fast and slow pairs the researchers impose a $60 tax on each tonne of CO2 emitted to the atmosphere. For the other scenario in each pair they leave what oil companies pay for CO2 as the only financial motivation.

The four scenarios Carey King’s team set up to study capturing CO2 while removing more oil from old reserves

Making a theoretical model system in which the researchers could tally up the economics of each scenario was a major task. But backed by several oil companies and non-profit campaigner the Environmental Defense Fund through UT Austin’s Gulf Coast Carbon Center, Carey’s team carefully worked through the different assumptions needed. For example, though some industrial sites capture carbon, it has never yet been done at a full scale coal-fired generator. So for the costs of this aspect of the network, the team worked from figures for existing industrial plant-scale technology.

Other key considerations include how much oil is left in the Texan reservoirs and how much CO2 would be needed to produce oil from them. Carey’s team also considered the depth of saline reservoir geological formations above or below the oil reservoirs where CO2 is stored after oil has been removed, he said. “The power capacity, CO2 emissions, and fuel needs and costs of the existing power plants in the grid influence how much each power plant operates, and thus how much revenue goes to the coal-fired power plants we model to have CO2 capture,” Carey added. “Then we must model a pipeline to connect the actual locations of the coal-fired power plants, mature oil fields and saline reservoirs.”

High interest

UT Austins's Carey King talks about his study on the economics of capturing CO2 while extracting more oil from old oil fields. Credit: IOP Publishing, via Creative Commons license, see citation below.

For investors in long-term projects like this network would be, it’s not enough to say if a scheme makes or loses money over its lifetime. They look at whether or not it makes more money than other investments, such as a bank account with a fixed interest rate, would in that period. Taking away the value of an alternative investment from the projected value of the investment you’re interested in gives a figure called net present value, or NPV. In short, investors typically want a large positive NPV.

Using a 10% interest rate for their comparison overall NPVs range from -$23 billion in the fast scenario with a CO2 tax, scenario 4, to -$1.0 billion for the slow scenario without a carbon tax, scenario 1. Balancing the CO2 stored against the emissions from the oil produced, the fast scenario 4 and slow scenario 1 stop 1.17 and 0.066 billion tonnes of CO2, respectively, entering the atmosphere over 20 years. But if companies can do better than they assume, the researchers write, these figures suggest that there could be an economic case for carbon capture even without a carbon tax.

“I think scenario 1 can be realised as this is close to what is occurring presently in Texas,” Carey told me. “The driver to produce more oil is sufficient to move along this path of development, and the CO2 could come from other industrial facilities that can capture CO2 more economically than a coal-fired power plant.” And while climate change makes a strong case for more radical steps, this offers a valuable chance to advance carbon capture technology in the world we live in today.

The pipeline network for the slow oil production scenarios consists of approximately 540 miles of pipe of various diameters from 8 to 20 inches. The pipeline network for the fast oil production scenarios consists of approximately 1400 miles of pipe of similar diameters. Image copyright IOP Publishing, used via Creative Commons license, see journal reference below

Journal reference:
Carey W King, Gürcan Gülen, Stuart M Cohen and Vanessa Nuñez-Lopez (2013). The system-wide economics of a carbon dioxide capture, utilization, and storage network: Texas Gulf Coast with pure CO2-EOR flood Environmental Research Letters DOI: 10.1088/1748-9326/8/3/034030