Oil and Gas in the Capitals

 Vol. 233 No. 11

Late last year, U.S. Secretary of Energy Steven Chu asked the National Coal Council, in cooperation with the National Petroleum Council, to study the potential for using CO₂ captured from electrical generating facilities and other sources—carbon capture, utilization, and storage (CCUS)—for greatly expanded enhanced oil recovery (EOR). Private companies have demonstrated EOR’s potential, and CO₂ EOR in the U.S. has increased from 30,000 bpd in 1986 to 350,000 bpd in 2012, an average annual growth rate of 9.4%.

The study involved 50 of the nation’s leading experts in fossil fuels, CCUS, energy economics, and environmental issues. It built on research conducted by the U.S. National Energy Technology Laboratory, which estimated that more than 60 billion bbl of oil in the U.S. are economically recoverable, using next-generation technology at an oil price of $85/bbl. In addition, U.S. Residual Oil Zone (ROZ) resources are enormous, and could yield another 33 billion bbl, for a total of at least 100 billion bbl of oil.

The basic requirement is the availability of adequate amounts of CO2, and new EOR projects are being delayed, due to a lack thereof. As much as 20 billion metric tons (mt) of CO₂ will be needed to produce this resource, and, if potential ROZ production is included, the requirement exceeds 33 billion mt. However, only about 2 billion mt of CO₂ will be available from natural sources and natural gas processing. CCUS technologies can help meet this 31-billion-mt shortfall, to enable additional production.

Expanding CCUS/EOR can significantly reduce CO₂ emissions by capturing CO₂ at power plants and other sources, and injecting the CO₂ into oil fields, releasing stranded oil. As noted, EOR expansion is constrained by CO₂ availability, and CCUS/EOR addresses this supply constraint. Large-scale development of EOR will require massive amounts of CO2, economically derived from large, concentrated stationary sources, such as coal power plants along the Ohio River, one of the regions hit hardest by declines in U.S. manufacturing. These large supplies are also available at coal conversion facilities, like coal-to-liquids (CTL) plants. CTL plants with CO2 capture technology could produce more than 2.5 million bpd of additional oil.

The report finds that 18-to-31 billion mt of CO₂ could be used in U.S. oil fields over the next 40 years, compared to the 2 billion mt available from natural sources and natural gas processing. Use of CCUS/EOR technologies could yield more than 3.5 million bpd of additional oil. The captured CO₂ can be transported to oil fields through a network of pipelines, and construction and operation of this network will stimulate economic growth, providing large numbers of new U.S. jobs in economically-challenged areas. By 2035, the combination of coal-based EOR and CTL could provide up to 30% of U.S. liquid fuel requirements.

The study found that implementing this scenario would have major economic benefits. It would create new industries; revitalize industry, manufacturing and technology; and create numerous professional, technical and skilled jobs. By 2030, the CCUS/EOR and related initiatives could annually generate nearly $200 billion in industry sales, more than 1 million jobs, and $60 billion in federal, state and local government tax revenues. If “CCUS/EOR” were a company, it would rank fifth on the Fortune 500 and be significantly larger than many iconic companies. The sales created would be larger than the GDP of many countries, such as Romania, Hungary, New Zealand, Ukraine and Vietnam. In addition, the U.S. could reduce petroleum imports by over 6 million bpd, thereby improving its Balance of Payments and enhancing energy security.

However, this is not a free lunch. The study identified potential challenges and actions required. To achieve these goals, an aggressive R&D program, plus related initiatives by government and industry, is required. Importantly, these must start soon. The most cost-effective, beneficial programs with the highest return-on-investment must be implemented.

Although a limited CO₂ pipeline network already exists to supply EOR, a much-expanded national network will be required. The existing infrastructure includes about 4,100 mi of pipelines moving 65 mt of CO₂ annually. A greater number of larger, 24-in. and 30-in. pipelines would likely be used, thus reducing the miles of required pipeline. However, this may be offset, at least partially, by the requirement to move CO₂ further to major markets. The study estimated that about 40,000 mi of pipelines may be required.

Regulatory certainty is necessary for development of a robust CCUS/EOR industry. Accordingly, the report recommended that the appropriate federal, state and local regulatory agencies, with cooperation from industry, work with Chu to develop a stable, consistent regulatory framework.

Further, there is a mismatch in the U.S. between available jobs and required skills. An important issue is whether there will be an adequate skilled workforce available to meet the demands created. Despite current high unemployment, many U.S. manufacturing, technical and related jobs cannot be filled. In the manufacturing sector, alone, 600,000 positions cannot be filled. Accordingly, the study found that education and training programs must be implemented to ensure an adequate supply of skilled workers.

In sum, CCUS/EOR presents the U.S. with an opportunity to be a world leader in technology development, energy, and environmental stewardship, while increasing economic growth. The goals are technically and economically achievable. This ambitious but feasible plan by leading U.S. energy experts should be listened to.