Focus on EOR Activities For Sustainable Production Growth

Wednesday 8 February 2012, Amsterdam

Focus on EOR Activities For Sustainable Production Growth

Denbury uses Enhanced Oil Recovery (EOR) methods to extract oil from its legacy assets. The company uses CO2 under EOR for tertiary oil production. Using EOR methods of extracting oil, almost 30–60% of the original oil in place can be extracted, whereas with the use of secondary recovery techniques only 20-40% of the original oil in place can be recovered.

Denbury applies EOR techniques to its matured fields and it also acquires old oil fields from other companies to apply EOR techniques. Through this the company can supplement its production profile. The company started the use of CO2 under its EOR technique for the tertiary oil production in August 1999. The company’s entry into the CO2 EOR operations was marked by the acquisition of the Little Creek field in August 1999. The company further acquired the Jackson Dome, a CO2 field on the east of Mississippi River, in 2001. Jackson Dome is the only significant natural source of CO2 existing in the area between East Texas and Florida. The proved reserves for the Jackson Dome field were estimated to be around 7.1 tcf (gross) at the year end 2010.

Tertiary oil reserves contributed almost 41% to the company’s total proved reserves and tertiary oil production accounted for almost 49% of the company’s total continuing production in 2010. Production from tertiary oil fields increased to 29,062bbl/d in 2010, a growth of almost 19% from 24,343bbl/d in 2009. The company’s net daily oil production from tertiary operations has registered a compound annual growth rate (CAGR) of 33% for the period of 1999 – 2010.

Denbury is an EOR-focused company, primarily because it owns a huge inventory of CO2 in the Gulf Coast region and Rocky Mountain region of the US. Since 2001, the company was able to increase its CO2 production capacity by more than 10 times to 1.1bcf/d in 2010. The CO2 production from Jackson Dome increased to 852 MMcf/d, out of which 87% is used for tertiary oil recovery activities and remaining being sold or delivered to third party under volumetric production payments.

Along with Jackson Dome in the Gulf Coast region, the company also owns the Riley Ridge Federal Unit located in Rocky Mountain region, where it is operator for gas separation plant and 28,000 acres of CO2 reserve adjacent to Riley Ridge unit. The company has proved reserve of 2.4tcf of CO2  in Riley Ridge along with a probable CO2 reserve of 2.0 – 2.2tcf. 

Though the company is currently relying on natural sources of CO2 for its tertiary operations, it is also looking forward to man-made sources of CO2. Man-made sources of CO2 include industrial activities such as power plants, as refineries release significant amount of CO2 as a byproduct. The company has entered into long-term contracts to purchase man-made CO2 from eight proposed gasification plants. These plants are located in the Gulf Coast and Rocky Mountain regions of the US. However, these plants are currently under construction and are only expected to start production in 2014. The company is an attractive partner for industrial units with high CO2 emission levels, as the byproduct of these industrial units can be utilized by Denbury for its CO2 operations.

For successful CO2 EOR operations, it is necessary to ensure that there are dedicated pipelines to transport CO2 from the point of production to the point of injection. Denbury owns and controls some major CO2 pipelines. The company first acquired the 183-mile NEJD CO2 pipeline in 2001, after which the company constructed 600 mile of CO2 pipelines across Gulf Coast region to connect oil sources to various fields. Additionally, the company has begun the construction of a 232-mile Greencore CO2 pipeline in Rocky mountain during August 2011 to connect various fields in the Rockies with CO2 sources.

With such a strong inventory base of CO2 and pipeline infrastructure to support its tertiary oil activities, the company is poised to develop a proved, probable and possible inventory base of 723 MMbbl in the Gulf Coast and Rocky Mountain regions. The company plans to recover around 10 billion barrels of oil from these two regions, through continuously focusing on its EOR activities. Denbury, being the largest CO2 assets owner in the Gulf Coast region, with 835 miles of CO2 pipeline that it owns or controls, has a strong platform for its tertiary oil recovery activities. The company anticipates that its production from EOR activities will grow at CAGR of 13-15% in 2010 – 2020, and production is expected to grow from 29,062bbl/d in 2010 to 120,000bbl/d in 2020. This shows that the company’s long-life EOR assets are the key for its sustainable long-term production growth.