© 2004 Society of Petroleum Engineers Inc. This paper was prepared for presentation at the 14th Europec Biennial Conference held in Madrid, Spain, 13-16 June 2005. This paper was selected for presentation by an SPE Program Committee following review of information contained in an abstract submitted by the author(s). Contents of the paper, as presented, have not been reviewed by the Society of Petroleum Engineers and are subject to correction by the author(s). The material, as presented, does not necessarily reflect any position of the SPE, their officers, or members. Electronic reproduction, distribution, or storage of any part of this paper for commercial purposes without the written consent of the Society of Petroleum Engineers or the International Association of Drilling Contractors is prohibited. Permission to reproduce in print is restricted to an abstract of not more than 300 words; illustrations may not be copied. The abstract must contain conspicuous acknowledgment of where and by whom the paper was presented. Write Librarian, SPE, P.O. Box 833836, Richardson, TX 75083-3836, U.S.A., fax 01-972-952-9435.

Abstract

The mitigation of environmental problems requires both national and international agreements, since they have possible global effects. In nationwide conventions (such as Rio, 92; Kyoto Protocol, 1997), a common conclusion has been the need to reduce greenhouse emissions, especially those due to CO2 from burning fossil fuels. For example, Kyoto protocol has established that industrialized nations should reduce their emissions over 2008-2012 by at least 5.2% compared with the 1990 levels. An alternative USA proposal is based on reducing greenhouse emissions by capturing and stockpiling CO2 in natural sites like oceans, caverns, depleted oil reservoir, etc. This paper presents a physical description and an economic analysis of a project to capture and inject CO2 in oil production and its storage in the depleted oil reservoir located in a mature field in Brazil. The Stella® Software has been used in order to analyze de dynamics of the whole process of CO2 sequestration in enhanced oil recovery, considering each step of the process with its respective energy requirements. The main findings of this have the following benefits: i) reduction in the emission of CO2; ii) extension of the operational life of the reservoir; and iii) improvement and development of technology to promote EOR in mature fields. Results indicate that project NPV is around US$ 3.2 million, what is significant for a small mature field. Additionally, it contributes by removing greenhouse gases (GHG) from the atmosphere by storing 0.73 million tons of CO2 over a period of 20 years. Project feasibility, as expected, was found to be very sensitive to oil price, oil production, and CAPEX.

1 – Introduction

Carbon dioxide (CO2) produced from combustion of fossil fuels has been increasing intensively, as can be seen in Figure 1. The concerns with the emission of CO2 and other pollutants discussed in several forums demonstrate the importance of a stabilization scheme of these gases, although there is much uncertainty regarding the impacts of these GHG emissions and global warming. The meetings of more impact were United Nations Framework Convention on Climate Change (Rio-92), carried out in Rio de Janeiro in 1992, and the Kyoto Protocol carried out in 1997, the first international treat designed to stabilize greenhouse gas emissions.

One way to stabilize these emissions is through CO2 sequestration. This policy is attractive because it has the advantage of maintaining the use of fossil fuels while reducing the CO2 concentration levels in the atmosphere. The technology of CO2 sequestration consists of capturing CO2 from an anthropogenic source of emissions, followed by compression, transportation, and storage in an environmentally acceptable place.

Regarding the effective reduction in CO2 emissions into the atmosphere, it should be evaluate if more CO2 is stored than the CO2 emitted from the process of CO2 sequestration in order to certify that in fact reduction in emissions of the GHG is occurring.

Taking this in consideration, possible sites and methods for CO2 storage include: depleted oil and gas reservoirs, aquifers, oceans, forests, enhanced oil recovery (EOR) and enhanced coalbed methane production (ECBM).

In spite of the several possibilities for storing CO2 mentioned above, some barriers should be overcome to stimulate the adoption of CO2 sequestration procedures. The first requirement is to reduce the high costs of the each step of this mitigation option. The urgent need for reducing current costs (mainly costs of capture) depends on further research and development into CO2 sequestration, as well as, the incentive of mechanisms such as the ones proposed by the Kyoto Protocol, which will create more opportunities for cost reduction. If the carbon credits are internalized, the costs of CO2 sequestration will be offset and sequestration may become attractive. It may also be necessary to implement a

SPE 94181

CO2 CAPTURE AND STORAGE IN MATURE OIL RESERVOIR: PHYSICAL DESCRIPTION, EOR AND ECONOMIC VALUATION OF A CASE OF A BRAZILIAN MATURE FIELD A.T. F. S. Gaspar, SPE, State University of Campinas, G. A. C. Lima, SPE, State University of Campinas, S.B. Suslick, SPE, State University of Campinas.

2 Gaspar, Lima and Suslick [SPE 94181]

CO2 tax regime in order to generate incentives for the reduction of CO2 emissions into the atmosphere. If no incentives are provided, capture and disposal methods may never be used1.

Under a stand-alone economic return basis, enhanced oil recovery method (EOR) tends to be an attractive geologic disposal option for CO2

2. EOR can combine in some situations economic and environmental objectives.

CO2 sequestration has already been practiced in some places around the world as the case of Calgary- developed by an independent oil and gas producer, which has implemented a large-scale EOR project in south-eastern Saskatchewan in order to study the mechanisms, reservoir storage capability and economics of CO2 sequestration in oil fields3. CO2 for this project has been supplied by a coal gasification plant transported through a 325-km pipeline.

This paper is focused on the utilization of CO2 for enhancing oil recovery in a mature oil reservoir. The main objective is to provide an overview of the process, costs of CO2 sequestration and to analyze the economic feasibility of sequestrating CO2 in reservoirs submitted to EOR operations in a typical Brazilian mature oilfield.

This paper is organized as follow: Section 2 presents the current carbon market conditions. In section 3, general aspects of the economics of CO2 sequestration are presented. Next section, the main concepts about EOR are described, followed by the methodology for the economic analysis in section 5. The next section provides a case study of a mature oilfield including the energy requirements of the EOR process. Results are analyzed in the final section.

2 – Carbon Market Kyoto Protocol established that developed countries individually or jointly would have to reduce at least an average of 5.2% bellow the emissions level in 1990, during the period 2008-2012. As developed countries were the pioneers in the industrialization, so the first to use fossil fuels, the convention notices that the larger part of global, historical and current greenhouse gases emissions is originated in developed countries. Moreover, the developing countries do not have obligations to reduce greenhouse gases4.

To fulfill the agreement proposed by the Kyoto Protocol,

some flexible mechanisms were introduced, such as: Clean Development Mechanism (CDM) Join Implementation (JI) Emission Trading (ET) Join Implementation and Emission Trading are

exclusively to developed countries. The joint implementation and the tradable certificate are the exchange of credits among developed countries that establish the limits of the “right to pollute". The clean development mechanism is nothing less than the right of a developed country to pollute the atmosphere in change of an investment in developing countries in clean

energy or projects that remove carbon from the atmosphere. With the development of systems for trading CO2 credits,

GHG emissions will likely be reduced. As the market of credits evolves, it will be there incentives for the application of CO2 sequestration policies, as well as an improvement in the economics of the process. No common standards have yet been developed, although trading systems for CO2 credits trading are emerging worldwide. According to the estimations from the World Bank, in 2002, worldwide trading in CO2 emissions reached 67 million tons. It is expected that the total market value reaches US$ 10 billion annually by 20083. According to Springer5, some models of CO2 trading among Kyoto Protocol partners with emission caps, assume that the price of credits ranges from US$ 0.80 to US$ 20.20/ton CO2. However, with prices at these levels, the value of CO2 credits may well not be sufficient to enable all the CO2 sequestration projects to enter the market place. In the literature, it can be seen that prices of CO2 credits vary widely. This can be attributed to the different assumptions. As cited by Kallbekken and Torvanger6, the prices of the credits are difficult to be estimated. Such prices will depend strongly on the policy assumptions that are made, such as, the size of the emission reductions to be undertaken and the availability of mitigation options.

The prices of CO2 credits will indicate if CO2 is an economic attractive option. If carbon price is greater than zero, capture and disposal methods will become attractive and should be used.

3 – General Economic Aspects of the CO2 Sequestration Process

One of the challenges to be overcome in the implementation of a sound CO2 sequestration policy is the high cost of the whole process. Investment costs (CAPEX) and operating costs (OPEX) of CO2 sequestration can be split into 4 components:

• Capture,

• Compression,

• Transportation, and

• Storage.

Each component is described here separately. Usually, costs (CAPEX and OPEX) of CO2 sequestration are estimated between US$ 40 and US$ 60 per ton of CO2 avoided7, depending on the methodology used in the capture process, the amount of required compression, the distance from the source to the storage site, and the site characteristics where CO2 is going to be injected.

These costs mentioned above present large variability. As indicated by Gough and Shackley8, in many cases, the variability reflects different assumptions about fuel prices, discount rates, specific technologies, and different elements of total costs besides being site-specific, becoming difficult a

[SPE 94181] CO2 CAPTURE AND STORAGE IN MATURE OIL RESERVOIR: A CASE OF A BRAZILIAN MATURE FIELD 3

direct comparison of the costs. By convention, some organizations like the IEA Greenhouse Gas R & D Programme incorporate the cost of compression into cost of capture9 impeding direct comparison with just capture or compression cost components. In this section, costs of each step of CO2 sequestration process are briefly described.

3.1 – CAPEX and OPEX of Capture and Compression

A great contribution to the total cost formation in the sequestration system comes from the capital and operation cost for the compression, associated cooling and dehydration equipment10.

For estimating compression costs, the amount of required compression and the unit costs of compression should be considered. However, these two elements can vary from project to project. Great part of the cost is associated with the use of electricity. In addition, compression costs are considerably higher for small flows11. Costs of compression vary from US$ 7.4 to 12.4/tonne11.

In addition to the compression costs, one issue which causes concern is the high cost of capture. The economics of CO2 sequestration is dominated by the cost of capture component (the dominant parameter for the current technology) and has been one of the key barriers to the introduction of CO2 sequestration technology9.

OPEX of capture depends on labor, maintenance, purchase of chemicals, etc. In case of solvent scrubbing plants, the cost of solvent for make-up purposes should be considered9. Capture costs depend on the amount of CO2 to be captured, CO2 concentration and pressure in the stream of emissions source, and the nature of the capture process (chemical or physical absorption, chemical or physical adsorption, membranes, cryogenic fractionation, etc.). CAPEX of capture is associated with the equipment required such as absorption columns, for instance.

As previously mentioned, the barrier concerning high costs can be attenuated since there are some sources suitable for capturing CO2 at lower costs as the recovery of CO2 from industrial processes which provides higher concentrations, consequently requiring less energy. As cited by Lysen12, if CO2 is nearly pure, at best, only dehydration and compression may be required before transportation. Farla et al13 mentioned that so far, little attention has been given to CO2 recovery from industrial processes, although large amounts of CO2 are emitted at high concentration by few industries. Table 1 presents CO2 capture and compression data for these cases and for those with higher costs. Data are from Farla et al13 and Hendriks14.

3.2 – CAPEX and OPEX of Transportation Cost

For large quantities and long distances, CO2 is most common

transported via pipeline. However, very long distances can become a barrier for the implementation of CO2 sequestration. Trucks can be used for reduced quantities and short distances. Ships can be an alternative to offshore pipeline transport, mainly when CO2 has to be transported over large distances15.

Some factors should be considered for estimating operating costs for transportation of CO2 by pipeline: CO2 flow rate and distance from the source to the storage site. The costs for transportation are likely to be reduced when large scale of operation is deployed. For capital costs, the following parameters should be considered: pipeline geometry (internal diameter), terrain characteristics, for example if it is a mountainous area, because it would lead to higher construction costs. Population density should also be considered, since higher safety is required for populated areas (i.e., more valves required) which may increase costs11 considerably.

Considering these issues, transportation cost can vary significantly for different projects. Table 2 presents some figures from the literature16,17 of CAPEX and OPEX of transportation via pipeline.

3.3 – CAPEX and OPEX of Storage

Cost components for CO2 injection into storage sites include mainly CAPEX for drilling wells, and costs related to the operation and maintenance of the system18. The composition of total storage cost includes: location, injection costs, reservoir depth, average temperature, reservoir radius, monitoring, flow rate and the value of saleable products (for instance, the revenues from enhanced hydrocarbon recovery).

Due to so many parameters mentioned above, cost of CO2 storage cannot be estimated with certainty since large variations can occur in these parameters. For example, Nguyen and Allison18 pointed out that in most CO2 storage cases in geological reservoir, costs range from below US$ 5 to above US$$ 20 per ton. Onshore storage is generally less expensive than offshore storage. Offshore drilling costs are higher. Surely, costs vary considerably from project to project11.

In some cases (as the case study of this paper), there are opportunities for storage at small cost or even net benefits, by means of improving oil or gas by injection of CO2 into the reservoir resulting in some offsetting income. Such cases include the application of CO2 in EOR and ECBM. EOR can be attractive from the economic point of view since this method can lower the costs of CO2 sequestration significantly. However, ECBM option is more expensive since it requires a large number of wells11. In addition, CO2 storage in coalbeds is still in the early stage of development.

Besides the advantages due to revenues of CO2 EOR it is worthwhile to know that the cost of construction and operation injection wells contributes with only a small portion of the total cost for the system10.

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4 – Enhanced Oil Recovery

As many oilfields approach an advance stage of maturity, enhanced oil recovery must be considered, in order to recovery more oil from the reservoirs, extending the field lifetime. Using CO2 in EOR methods may help to reduce emission of GHG into the atmosphere if CO2 is captured from anthropogenic sources. Technical expertise about CO2 injection in oil reservoir already exists. Storage of CO2 in reservoirs submitted to EOR operations is a direct consequence of CO2 utilization.

The gas is used in its supercritical form for extracting more oil out of mature reservoirs in the EOR process. CO2 displaces residual oil left in place after primary and secondary production and has been successfully injected for forty years. EOR has the potential to recover additionally 6-15% of the original oil in place, increasing 10-30% the total production from an oil reservoir19. Carbon Dioxide is an excellent solvent in EOR operations and it is more effective than other gases to recover some of 70% of the original oil in situ that secondary recovery can leave behind3. CO2 injection projects have focused on oil reservoirs with densities between 16 and 45 ºAPI and reservoir depths up to 10.800 ft, permeability lower than 2 mD, viscosity between 0.3 and 188 cP, among other characteristics20.

An advantage to use CO2 in EOR is that the pressure required for achieving dynamic miscibility with it is lower than the pressure required for dynamic miscibility with other gases such as natural gas, flue gas or nitrogen21. Once CO2 is selected, it is flooded into the reservoir at a pressure equal to or above the minimum miscibility pressure. Then, CO2 and oil mix and can easily flow to the production well. Typically, injected gas compositions have ranged from 97% to 99% purity (the rest can be constituted of NO2 and SO2 for example). Some of the CO2 injected will remain stored in the reservoir.

Successful EOR operations are routine business in USA and can serve as example. Currently, about 71 of the 84 projects of CO2 applications for EOR worldwide projects are in USA, although the great majority of these projects are not carried out specifically for reducing GHG. The amount of enhanced oil being produced from these CO2 – EOR projects averages 206,000 bbl/day22. Approximately 20,000 tons of CO2 are delivered daily into oil fields for EOR projects23. According to EPRI24 estimates, 3 million metric tons/year of CO2 are currently being sequestered (permanently stored) in depleted oil fields in the western United States; although, data concerning the specific volumes and flow rates of CO2 injected into depleted oil fields for EOR are generally not publicly available.

CO2 combined with EOR can be used to recover oil which otherwise would not be produced. Then, the revenues from oil selling could help to offset the costs of CO2 storage in many instances25 resulting in an economically attractive storage option. CO2 - EOR sequestration is the most viable route for technology cost reductions in the near term, due to

the high oil prices26. Higher oil prices enhance revenue and profitability, leading to increased investment in EOR facilities and eventually higher levels of production. The possibility of reducing costs in other CO2 sequestration options such as aquifers and depleted fields (without production of hydrocarbons) will probably be less than EOR11. Moreover, in agreement with Heddle16, CO2 - EOR is also considered a very attractive option, since most oil fields have already undergone primary and secondary recovery, enabling the re-use of facilities, since infrastructure is already present in the field (i.e. wells, pipelines), requiring just some adaptation for CO2 storage purposes.

5 – Methodology for economic analysis

This section presents the economic analysis used to evaluate the feasibility of the CO2 sequestration with EOR. Costs for each stage of the project including capture, compression, transportation and storage are divided into capital expenditures (CAPEX) and operating expenditures (OPEX). Typically in carbon sequestration, the OPEX of the process include labor, materials, maintenance, and possibly seismic monitoring costs18. Moreover, the economic data that must be considered to calculate the costs of CO2 sequestration are: market prices of equipment and services, operational life of the project, fiscal regime, CO2 purchase, operating expenses with CO2 recycle, operating cost of the well, investments in compressors, separation equipment, well conversions, drilling costs, fuel cost, etc.

The company net cash flow is estimated using the following simplified annually relationship:

NCF= (R+CCO2–Roy–PIS–OPEX–IW–D) * (1–T) +D–CAPEX (1)

The cash flow is found by deducting from the inflows (gross revenue and the possible CO2 credits to be gain due to the sequestration), the IW (investments costs)1*, OPEX, and taxation according to the Brazilian fiscal regime (royalties, PIS/PASEP, rental area, corporate tax and other levies). Due to its linear character, with some pertinent adaptations, Equation (1) could be applied to any R & D system, despite the differences between the incidence of taxes and levies of several fiscal systems.

The estimation of R (gross revenue) was carried out by multiplying the oil production times their oil prices, i.e., the inflows are generated by the oil production. The credits of CO2 to be implemented due to CO2 sequestration are also included in the cash flow. In this case, carbon credits were also discounted. Some specialists may argue that just costs can be discounted, not emissions or abatement27. While, other authors consider that GHG emissions, if discounted should be using a lower rate than that used for costs28.

1* Some costs such as drilling and completion expenditures, may be accounted as yearly cost in some fiscal regimes.

[SPE 94181] CO2 CAPTURE AND STORAGE IN MATURE OIL RESERVOIR: A CASE OF A BRAZILIAN MATURE FIELD 5

The choice of the correct discount rate is one of the key issues in the model of valuation and decision-making. The discount rate for this EOR – CO2 sequestration project must reflect the following considerations:

• The opportunity cost of investing in this project rather than, in other with the same risk and return characteristics;

• The time preference of the corporation for cash (liquidity);

• The social opportunity cost of not investing in this project and, consequently, keeping on delivering CO2 to the atmosphere.

Moreover, according to Sathaye and Meyers29, generally in developing countries the World Bank uses discount rates of 8 – 12% for economic analysis.

The components of costs (CAPEX and OPEX) of CO2 sequestration included in the discounted cash flow (Equation 1) are estimated as follow:

The estimative of total CAPEX taking into account the investment in each step of a CO2 sequestration project is represented in Equation (2).

CAPEXt=CAPEXcap+CAPEXcomp+CAPEXtransp+CAPEXstor (2)

The total OPEX is estimating similarly to the CAPEX approach according to Equation (3).

OPEXt=OPEXcap+OPEXcomp+OPEXtransp+OPEXstor (3)

Finally, the next step is to apply this methodology to a Brazilian mature oilfield.

6 – Case study

6.1 – Feasibility of CO2 injection in a depleted onshore reservoir

This study is based on a mature onshore standstone oilfield located within the Reconcavo Basin in the northeastern part of Brazil. This is a small basin where petroleum was discovered in the late thirties. Moreover, light oil is produced from the field. In addition, it is assumed that there is not production without the application of EOR methods. Therefore, all produced oil, which otherwise would not be recovered, is due to the injection of CO2. Data were obtained from an expert in CO2-EOR. The main technical and economical characteristics of the oilfield are shown in Table 3.

CO2 comes from a fertilizer industry. It will guarantee the gas supply over the lifetime of the project. CO2 is a by-

product from ammonia production that normally would be emitted to the atmosphere. The gas is captured through the conventional chemical absorption technique based on hot potassium carbonate. After captured, CO2 is compressed to a supercritical state, transported through a 78 km pipeline and utilized in the EOR project in the mature onshore oilfield. CO2 flood extends over an area of 12 km2. CO2 is injected into the reservoir at a depth of about 1800m. Reservoir permeability averages 300 mD. Moreover, leakage of CO2 in the project is negligible here.

In this project, current expenditures on CO2 transportation are: 20.000 US$ per km per in, in a paved road, i.e., the simulation includes an adequate infrastructure for transportation of goods and services. The investments in compression are approximately US$ 3 million for power generation ranging from 2200 to 2400 HP.

For simplicity, a simple production profile with a constant enhanced oil production over the total lifetime is assumed. The EOR response is 0.34, or in other words, 0.34 tons of additional oil is produced for each ton of CO2 injected. Also, it is considered here that well costs are not accounted in the economics of this project, since these are already presented in the field. Besides, cost of CO2 storage include costs of separation, compression and recycling of CO2 produced along with the oil besides the small contribution of the costs of monitoring of CO2 sequestration.

Moreover, it is also assumed that half of the amount of CO2 injected remains stored in the reservoir. It is estimated that 3.65 MMbbl of oil will have been recovered, contributing to store 0.73 million tons of CO2 over the 20 years of the lifetime of the project.

Fiscal and economical assumptions used in this study are shown in Table 4. The cash flow is estimated using the following assumptions: oil revenues based upon actual market conditions, CO2 credits, project costs like fixed operating costs, variable operating costs, capital costs such as CO2 capture, compression, transportation, storage, taxes like income tax, COFINS/PIS, Government Take such as (royalties, rental area, etc). A discount rate of 12% is assumed for the project. As discussed earlier in the previous section, the discount rate reflects the opportunity cost of investing in this project, which depends on worldwide market for CO2 credits, the macroeconomic setting, oil field stage (marginal fields, etc.), among others. Moreover, depreciation of facilities has started in the first year. In addition, abandonment costs are depreciated from the fourth year.

6.2 – Energy Requirements for EOR through CO2 flooding Normally, in the total process of CO2 sequestration, there is a little amount of CO2 directly or indirectly emitted into the atmosphere because of the intensive use of energy in the capture, compression, transportation and storage of CO2 combined with enhanced oil recovery stages. CO2 is

6 Gaspar, Lima and Suslick [SPE 94181]

additionally generated in these stages resulting in CO2 emissions. Direct emissions result from the use of on-site electricity generation while indirect emissions result from the use of off-site electricity generation.

In order to quantify these secondary emissions, it should be considered each step where energy was used. Firstly, in this study, stream source contains almost pure CO2 (approximately 98%). In view of this, no significant quantities of CO2 are emitted in the capture process (no substantial amounts of energy to purify the stream are required). However, some emissions occur when CO2 is compressed, transported, and utilized in enhanced oil recovery operations. Substantial amounts of energy are needed to compress the CO2 to a supercritical state for pipeline transportation to the storage site. In addition, EOR methods are highly energy intensive. Electricity, as well as natural gas is an important power source for EOR operations24.

In this particular case, the external power source for each operation is based on natural gas. Steam is also utilized for drying CO2 in the compression stage. The energy requirement for each stage of this CO2 EOR sequestration project, as well as the emission factors from energy generation, was based on published data. Emission factors depend on the composition of the fuel type consumed. For example, burning coal will release more CO2 than will burning natural gas (117.080lbs/106Btu). According to Farla et al13, the carbon dioxide from ammonia production in the fertilizer industry instead of be vented may be compressed in a four-isentropic compression process. The compression energy amounts to 393 kJ/kg-CO2. Most of the water will be removed in the first compression stages. Additional drying consumes 8 kJ/kg-CO2 of heat, and cooling takes 8 kJ/kg-CO2 of electricity.

When CO2 is injected in EOR operations, it consumes significantly more electric energy per barrel of oil produced than thermal EOR methods, for example. CO2-EOR methods require about 5 hp per barrel of oil per day. The electric power for gas EOR is required for pumping fluids from the wells, separating product from produced and break through gases, compression for gas injection and re-injection, and pumping product to market and produced water to treatment and re-injection24.

Some venting of CO2 is inevitable at various stages in the life of an EOR project24. For example, in the EOR operation, CO2 is emitted because of the utilization of equipments on-site, besides the utilization of energy outside the boundaries of the field. By the other hand, for EOR, it is utilized CO2 that otherwise would be vented to the atmosphere.

In this paper it is assumed a carbon dioxide emission factor of 51 kg-CO2/GJ, based on the fuel input in the electricity production in the region of the project. The carbon dioxide emission factor of 62 kg-CO2/GJ is assumed for steam. The Stella® Software has been used in order to analyze de dynamics of the whole process of CO2 sequestration in enhanced oil recovery, considering each step of the process with its respective energy requirements. Despite this is only a preliminary stage in the development of the model, significant outputs were obtained for the evaluation of EOR dynamics and CO2 sequestration.

Emission factors and energy requirements of each step of the project were used as inputs to analyze the net storage of CO2 in the active oil reservoir. Figure 2 shows a sample screen of the conceptual CO2 storage model located in the interface level of the model. This model can be applicable to any oil reservoir. Each component that should be used to estimate the net storage of CO2 is described in details in the mapping level of the conceptual diagram illustrated in Figure 3.

7 – Results and Discussion

It is important to keep in mind that the costs of CO2 incorporated in the cash flow are in a CO2 captured base, i.e., the gross amount of CO2 stored. To incorporate each component of sequestration cost in a CO2 avoided base, it is necessary to take into account the CO2 emissions generated associated with the energy use in each stage of CO2 sequestration.

The NPV before taxes is US$ 6.95 million (US$ 1.90/bbl), whereas the NPV including the CO2 credits is US$ 9.67 million (US$ 2.65/bbl). The effective NPV considering the government take (NPV after all taxes) was US$ 3.20 million (US$ 0.86/bbl). It is important to highlight that if CO2 credits had not been discounted it would be a gain of US$ 860,000 in the effective NPV, and then the effective NPV would be US$ 4.00 million (US$ 1.10/bbl). A comparative analysis of NPV magnitude is shown in Figures 4a and 4b.

The NPV is a result of future cash flows under a static scenario. Since the future is always uncertain, the NPV may be considered as a random variable so that the confidence level in its mean value is not absolute. Uncertainties in parameters such as oil price, carbon credits market, oil production, CAPEX, and OPEX were evaluated by means of sensitivity analysis. Graphs for each input variable were obtained in order to assess planning regarding CO2-EOR economics optimization.

For the sensitivity analysis of NPV, the selected variables were submitted to a range of 50% of their original input values, except the oil production value, which varied from minus 50% to 0 (because oil has been produced close to its limit). Table 5 lists the input variables with their ranges for the sensitivity analysis. This range was based on data from the literature. These uncertainties and variability reflect differences in assumptions and applications.

Figure 5a indicates the sensitivity of NPV in relation to oil price, oil production, CAPEX, and OPEX of capture, compression, transportation and storage, as well as CO2 credits. In this project, it can be noted that uncertainties in the oil price and oil production, followed by CAPEX play an important role in the total CO2 sequestration - EOR process economics. However, in this hypothetical case, due to the limited range of values considered (i.e., for the base case values assumed), the values of CO2 credits and OPEX of capture, compression, transportation, and storage are very small resulting in NPV relatively less sensitive to changes in

[SPE 94181] CO2 CAPTURE AND STORAGE IN MATURE OIL RESERVOIR: A CASE OF A BRAZILIAN MATURE FIELD 7

these variables. Taking this into account, CO2 credits as well as OPEX of capture, compression, transportation and storage were isolated and submitted to an additional sensitivity analysis. From figure 5b, it can be seen that CO2 credits are a significant parameter and an increase in the price results in an increase in the NPV.

The sensitivity of NPV to these variables can be exemplified as follow: a rise of US$ 1.00 in the oil price input can result in a NPV of about US$ 1.00 million higher from the base case. While a reduction of US$ 1.00 million in CAPEX would result in an increase of about US$ 860,000 in the NPV. An increase of US$ 1.00 in the value of CO2 credits parameter would result in an increase of about US$ 187,000.

A risk analysis was also performed to simulate the performance of the uncertain variables. The required input parameters for the risk analysis are: oil price, amount of injected CO2, discount rate, capture cost, compression cost, transportation cost, and storage cost besides storage ratio. The range of variation of the respective uncertain inputs variables is presented in Table 6 via probabilistic distribution. For example, oil price and discount rate uncertainty are modeled using lognormal distribution, whereas the storage ratio is modeled using normal distribution. Triangular distribution (min, median, max) were used for the OPEX of capture, compression, transportation and storage and amount of CO2 injected parameters.

As a result of this simulation, a frequency of distribution of the NPV was obtained as illustrated in Figure 6. From this figure it can be seen that there is a risk of about 50% that the NPV will be lower than its expected value. In addition, Figure 7 shows that excluding the oil price, oil production and CAPEX in the risk analysis, the most significant parameter is CO2 credits. Figure 7 shows that OPEX of each step of CO2 sequestration is almost an upright line, indicating a low sensitivity.

The maximum financial exposure was in the beginning of the project, mostly because of high capital investments. Nevertheless, the payback time occurred within six years, which is relatively early considering the lifetime of this oilfield.

The net storage of the CO2 in the reservoir per kg of oil recovered was also analyzed using Stella® software (the storage of CO2 considering the energy requirements and related CO2 emissions of the whole process).

It is assumed that 3.00 kg of CO2 are required for injection in order to produce 1 kg of oil. The injected amount depends on the characteristics of the reservoir. From this required amount, 1.50 kg is supposed to remain in the reservoir, while the rest of the CO2 is produced along with the oil. However, the net amount of CO2 stored per kg of oil produced is about 1.32 kg oil, since CO2 is emitted from the use of energy (an amount of approximately 0.18 kg of CO2 emitted per kg of oil produced). Despite that, it is still worthwhile sequestering CO2 in active oil reservoirs because in each kg of oil produced, 1.32 kg of CO2 remains stored in the ground, that is, in this project 0.18 ton of CO2 is stored per

barrel of oil produced. This result is in agreement with the available literature. According to Wilson et al30, a net amount of about 0.15 ton of CO2 is stored per barrel of oil, while Espie31 reports a value of 3.3 barrels of oil for each ton of CO2 stored in the Permian settings in the North Sea area, or 0.3 ton of CO2 per barrel of oil. According to Stalkup21, the net ratio in four field experiments varies between 0.17 and 0.78 tons per barrel of oil, gross ratios are roughly twice as high.

8 – Conclusions

The main barriers for the implementation of CO2 sequestration are the high costs. However, increasing level of knowledge and experience "learning by doing", and contributions of new technologies in the field of CO2 sequestration will probably reduce these costs. Another obstacle is the general lack of taxes or credit systems in most countries to support long term investments by companies in CO2 sequestration. These high costs can be minimized combining CO2 sequestration with enhanced oil recovery, due to the revenues from the extra oil recovered which can help to offset the costs of the process of CO2 sequestration.

Results from the project cash flow showed that the NPV is around US$ 3.2 million (US$0.86/bbl). Moreover the project will contribute to store 0.73 million tons of CO2 that normally would be emitted into the atmosphere.

In addition, oil price, oil production and CAPEX play important role in the project feasibility. The sensitivity analysis indicates that higher oil prices can incentive investments in CO2 sequestration combined with EOR projects. In this simulation, the value of CO2 credits can be considered small, not having a great effect on NPV. However, high values for CO2 credits would have a significant impact in EOR coupled with CO2 sequestration projects. Oilfield operators can gain good returns sequestering CO2 in the reservoirs if the values of credits increase substantially. CO2 sequestration can be economically viable if costs of CO2 can be reduced and carbon credits increased. New market mechanisms are necessary to create a climate for positive investments in new technologies.

Finally it must be considered that not all the CO2 injected remains stored in the reservoir. Some of this amount is produced along with the oil, recycled and the rest remains stored in the reservoir. From this amount we should consider the energy used to carry out all the process, from the capture in the emissions source to the storage site.

Acknowledgements

The authors gratefully acknowledge financial support for this research from CAPES, CNPq, CEPETRO, and ANP. Prof. Roelof Boumans from the Gund Institute for Ecological Economics, University of Vermont, gave important insights for the Stella Model.

8 Gaspar, Lima and Suslick [SPE 94181]

Nomenclature

bbl = Barrel of Oil

C = Carbon

CAPEX = Capital Expenditure (Sum of all investments, except IW, and is considered linearly depreciable in 10 years)

CAPEXt = Total CAPEX

CAPEXcap = CAPEX of Capture

CAPEXcomp = CAPEX of Compression

CAPEXtransp = CAPEX of Transportation

CAPEXstor = CAPEX of Storage

CO2 = Carbon Dioxide

D = Total Depreciation

ECBM = Enhanced Coal Bed Methane Recovery

EOR = Enhanced Oil Recovery

GHG = Greenhouse Gases

IW = Investment accounted as costs

MMbbl= Million of barrels

NCF = Net Cash Flow

OPEX = Operational Expenditure

OPEXt = Total OPEX

OPEXcap = OPEX of Capture

OPEXcomp = OPEX of Compression

OPEXtransp = OPEX of Transportation

OPEXstor = OPEX of Storage

PIS = Social tax, directly charged over gross revenue

R = Gross revenue, given by k * p * q (where p is the price of Brent Dated oil and q is the number of barrels produced in the considered year. The conversion factor k depends only on oil quality (ºAPI, sulfur content, etc)

Roy = Total amount paid in Royalties

T = Corporate tax rate

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[SPE 94181] CO2 CAPTURE AND STORAGE IN MATURE OIL RESERVOIR: A CASE OF A BRAZILIAN MATURE FIELD 9

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Management and Sequestration Technologies and Life Cycle analysis, 2000.

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29. Sathaye, J. and Meyers, S.: “Greenhouse Gas Mitigation Assessment: A Guidebook. Kluwer Academic Publishers, 1995; apud Freund, P. and Davison, J.: "General Overview of Costs", Proceedings of the IPCC workshop on carbon dioxide capture and storage, Regina, Canada, 2002.

30. Wilson, M., Moberg, R., Stewart, B., and Thambimuthu, K.: CO2 Sequestration in oil reservoirs - a monitoring and research opportunity, 2000; apud Ecofys & TNO – NITG.: "Global carbon dioxide storage potential and costs", report, nº EEP – 02001, 2004.

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Table 1: OPEX of capture and compression from several sources of CO2

Source of Emissions Costs of Capture and Recompression (US$/ ton CO2) Literature Source

Fertilizer Industry 8 13 Ethylene Oxide Production 9 13 Iron Steel Production 35 13 Power Plant 35-40 14 Petrochemical 46 13

Table 2: CAPEX and OPEX of CO2 Transportation by Pipeline

Pipeline Costs (US$) Comments Literature Source

CAPEX 21/ in / km (US$21 per inch of diameter per km of length) 16 OPEX 3.1/ km (not depend on pipeline diameter) 16 OPEX 0.82 – 3.27 / t CO2 per 100 km (depending on the size and capacity of the pipeline) 17

Table 3: Reservoir Technical Characteristics Proved Reserves (MMbbl) 3.97 API Gravity 35 Field Area (Km2) 12.00 CO2 Injected (ton/day) 200 Storage ratio (%) 50 Oil Production (bbl/year) 182,500 CO2 Injection versus Oil Production Ratio 0.398 Capex of capture (million US$) 6.00 Capex of compression (million US$) 3.00 Capex of transportation (million US$) 6.00 Capex of storage (million US$) 1.00 Costs of abandonment (million US$) 1.10 Opex of capture (US$/ton) 3.00 Opex of Compression (US$/ton) 7.50 Opex of Transport (US$/ton) 8.00 Opex of storage (US$/ton) 3.00 Total Opex (million US$/ year) 1.46 Table 4: Economic Model: Fiscal and Economic Assumptions Useful Life of the project (years) 20 Oil Price (US$/ bbl) 25 Discount Rate 12% Corporate Tax 25% Other Corporate Taxes under Net Revenue (PIS/ PASEP + COFINS) 3.65% Royalties (net production) 5% Rental Area (US$/Km2) 300

Table 5: Economic Model: Parameters for Sensitivity Analysis Parameter Assumed Value Range

Oil Price (US$/bbl) 25.00 12.50 – 37.50 Oil Production (bbl/year) 182,500.00 91,250.00 – 182,500.00 CAPEX (MMUS$/ton CO2) 16.00 8.00-24.00 Capture Cost (US$/ton CO2) 3.00 1.50 – 4.50 Compression Cost (US$/ton CO2) 7.50 3.75 – 11.25 Transportation Cost (US$/ ton CO2) 8.00 4.00 – 12.00 Storage Cost (US$/ton CO2) 3.00 1.50 – 4.50 Credits (US$/ ton CO2) 10 5.00 – 15.00

[SPE 94181] 11

Table 6: Input Parameters of Risk Analysis

Uncertain Variables Selected Distribution Input Parameter Values Oil Price (US$/bbl) lognormal mean = 25; standard deviation= 10 Amount of CO2 Injected triangular 150; 200; 250 Storage Ratio normal mean = 50%; standard deviation= 10% Discount Rate lognormal mean = 12%; standard deviation = 4% CO2 Credits lognormal mean=10; stand deviation= 5 Opex Transport triangular 6; 8; 10 Opex Compression triangular 6; 7,5; 9 Opex Storage triangular 1,5; 3; 4,5 Opex Capture triangular 1,5; 3; 4,5

The values of the parameters referring to the triangular distribution are the optimistic, most likely and pessimistic ones, respectively.

Figure 2: Interface level: Basic Conceptual Conditions of the CO2 Sequestration- EOR Process

Figure 1: Global CO2 concentration in the atmosphere (after UNEP/GRID-Arendal32)

12 [SPE 94181]

Figure 3: Mapping Level of CO2 Sequestration in EOR operation simulated by Stella Model

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Figure 4: a) Net Present Value of CO2 Sequestration-EOR project; b) Net Present Value per oil barrel

[SPE 94181] 13

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14 [SPE 94181]

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