## Improving Domestic Energy Security and Lowering CO 2 

## Emissions with

“ Next Generation ” CO 2 

## - Enhanced Oil Recovery (CO 2 

## - EOR)

June 20 , 2011

DOE/NETL

- 2011/1504 Activity 04001.420.02.03Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)



## Disclaimer

This report was prepared as an account of work sponsor ed by an agency o f the United States

Government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completenes s, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not in fringe privately owned rights. Reference therein to any specific commercial product, process, or service by trade name,
trademark, manufac turer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency there of. The views and opinions of authors expressed therein do not necessarily state or reflect those o f the United States Government or any agency thereof.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)



## “Improving Domestic Energy Security and Lowering CO 2 

## Emissions with “ Next Generation ” CO 2 

## - Enhanced Oil Recovery (CO 2 

## - EOR)”

Activity 04001.420.02.03



### Prepared by: Energy Sector Planning and Analysis (ESPA)

Vello A. Kuuskraa

Advanced Resources International, Inc.



### Tyler Van Leeuwen

Advanced Resources International, Inc.



### Matt Wallace

Advanced Resources International, Inc.



### NETL Contact:

Phil DiPietro
j oseph.dipietro@netl.doe.gov

Contract N o. DE

- FE0004001Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

This page intentionally left blank.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

i TABLE OF CONTENTS

I. EXECUTIVE SUMMARY

................................ ................................ ................................ ...................... 1

1. CO 2 - EOR Promot es Enhanced Energy Security and Lower CO 2 Emissions

................................ ... 1

2. CO 2 - EOR Can Provide Large New Revenues to Federal/State Treasuries and Other Participants

in the Value Chain.

................................ ................................ ................................ ........................... 2

3. The Volumes of Oil Recovery and CO 2 Storage Offered by “Next Generation” CO 2 - EOR are Large and Impressive.

................................ ................................ ................................ ................................ 3

4. Next Generation CO 2 - EOR Provides Benefits Far Beyond Those Available from State of Art CO 2 - EOR.

................................ ................................ ................................ ................................ ................. 4

5. “Next Generation” CO 2 - EOR Technologies Are Realistic and Achievable with Focused

Investments in R&D.

................................ ................................ ................................ ........................ 5

II. THE CURRENT AND FUTURE PROMISE OF CO 2 - ENHANCED OIL RECOVERY

........................... 7

A. The Current Status of CO 2 - EOR

................................ ................................ ................................ ....... 7

B. The F uture Promise of CO 2 - EOR

................................ ................................ ................................ .... 10

1. Oil Recovery and CO 2 Storage: Traditional (“Main”) Pay Zone of Oil Fields.

................................ .............................. 10

2. Oil Recovery and CO 2 Storage: Residual Oil Zone (“ROZ”)

................................ ................................ ....................... 11

C. CO 2 Market Demand and CO 2 Storage from “Next Generation” CO 2 - EOR Technology: Base Case

Oil Price and CO 2 Costs

................................ ................................ ................................ ................. 12

D. Impacts of Alternative Oil Prices and CO 2 Market Prices on CO 2 - EOR Volumes and CO 2 Demand/Storage

................................ ................................ ................................ ............................ 13

III. THE PERMIAN BASIN CO 2 - EOR CASE STUDY

................................ ................................ ............... 15

A. Outlook for CO 2 Enhanced Oil Recovery in the Permian Basin

................................ ..................... 15

B. A Successful CO 2 - EOR Project in the Permian Basin

................................ ................................ .... 17

C. Applying Industry Benchmarks

................................ ................................ ................................ ........ 19

1. OxyPermian’s Expectations for Oil Recovery Efficiency

................................ ................................ ............................. 19

2. CO 2 “Slug Si ze” and the Net CO 2 /Oil Ratio

................................ ................................ ................................ ................. 20

3. Costs and Economic Viability

................................ ................................ ................................ ................................ ...... 21

IV. “NEXT GENERATION” CO 2 - EOR TECHNOLOGIES

................................ ................................ ......... 23

A. Improvements in Currently Practiced CO 2 - EOR Technology.

................................ ........................ 23

1. Applying State of Art (SOA) CO 2

- EOR

................................ ................................ ................................ ........................ 24

2. Assessing Impacts of “Next Generation” CO 2

- EOR Technology

................................ ................................ ................ 25

B. Advanced Near Miscible CO 2 Enhanced Oil Recovery Technology

................................ ............... 31

1. Background

................................ ................................ ................................ ................................ ................................ . 31

2. Resource Target

................................ ................................ ................................ ................................ ......................... 32

3. Mechanisms of Near Miscible CO 2

- EOR

................................ ................................ ................................ ..................... 32

4. Oil Recovery with Near Miscible CO 2

- EOR

................................ ................................ ................................ ................. 34

5. Application of Near Miscible CO 2

- EOR Technology by This Study

................................ ................................ ............. 35

C. Application of CO2

- EOR to Residual Oil Zones (ROZs).

................................ ................................ 35

V. USING CO 2 ENHANCED OIL RECOVERY (CO 2 - EOR) TO INCREASE DOMESTIC OIL

PRODUCTION AND TO ACCELERATE DEPLOYMENT OF CCS

................................ ................... 38

A. Overview of Benefits

................................ ................................ ................................ ....................... 38

1. Improving Energy Security by Using CO 2

- EOR to Increase Domestic Oil Production.

................................ ............... 39

2. Providing Revenue Streams from Sale of CO 2 and Production of Oil.

................................ ................................ ........ 41

3. Accelerating the Application of CO 2 Storage.

................................ ................................ ................................ .............. 43

B. Proposed Use of Oil Fields for Storing CO 2

................................ ................................ .................... 43

VI. A REGIONAL (“BASIN

- ORIENTED STRATEGY”) LOOK AT THE CO 2 - EOR/STORAGE

POTENTIAL

................................ ................................ ................................ ................................ ........ 46

1. Appalachia

................................ ................................ ................................ ................................ ....... 47

2. Onshore California

................................ ................................ ................................ .......................... 51

3. East and Central Texas

................................ ................................ ................................ ................... 55

4. Michigan/Illinois Basin

................................ ................................ ................................ ..................... 59

5. Mid

- Continent

................................ ................................ ................................ ................................ .. 63Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

ii 6. Permian Basin

................................ ................................ ................................ ................................ . 67

7. Rockies

................................ ................................ ................................ ................................ ............ 72

8. Southeast Gulf Coast

................................ ................................ ................................ ...................... 76

9. Williston Basin

................................ ................................ ................................ ................................ . 80

10. Alaska

................................ ................................ ................................ ................................ .............. 83

11. Offshore Gulf of Mexico

................................ ................................ ................................ .................. 86

VII. OVERVIEW OF METHODOLOGY

................................ ................................ ................................ ..... 88

APPENDIX A Discussion of Study Methodology

APPENDIX B A Summary of the Meetings with Industry PractitionersImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

iii LIST OF FIGURES

Figure II

- 1. Growth CO 2 - EOR Production in the U.S.

................................ ................................ ............ 8

Figure II

- 2. Current U.S. CO 2 - EOR Activity

................................ ................................ ........................... 8

Figure II

- 3. Existing CO 2 Pipelines (Permian Basin)

................................ ................................ ............. 9

Figure II

- 4. Domestic Oil Supplies and CO 2 Demand (Storage) Volumes from “Nex t Generation” CO 2 - EOR Technology**

................................ ................................ ................................ ............ 11

Figure II

- 5. Volumes of Anthropogenic CO 2 Storage Capacity Available from “Next Generation” CO 2 - EOR Technology

................................ ................................ ................................ ............... 12

Figure III

- 1. CO 2 - EOR Results at the Denver Unit of the Wasson Oil Field

................................ ......... 17

Figure III

- 2. Oil Recovery Performance From Permian Basin San Andres Formation

......................... 18

Figure III

- 3. Occidental Petroleum’s Permian Basin EOR Opportunities

................................ ............. 19

Figure III

- 4. Evolution of “Industry Standard” for Volume of CO 2 Injection (“ Slug Size”)

..................... 20

Figure III

- 5. Typical Permian Basin CO 2 - EOR Project Cost Structure (Occidental Petroleum)

........... 22

Figure III

- 6. Updated Typ ical Permian Basin CO 2 - EOR Project Cost Structure (Occidental Petroleum)

................................ ................................ ................................ ......................... 22

Figure IV

- 1. Areal Sweep Efficiency in Miscible CO 2 Flooding as a Function of HCPV CO 2

............... 26

Figure IV

- 2. Using Modified Pattern and Well Placement Design to Capture Mobil Oil

....................... 27

Figure IV

- 3. Example of Viscous Fingering of CO 2 Due to Unfavorable Mobi lity Ratio*

...................... 29

Figure IV

- 4. Areal Sweep Efficiency in Miscible CO 2 Flooding as a Function of Mobility Ratio

........... 29

Figure IV

- 5. Effect of CO 2 Dissolution in Crude Oil on Viscosity.

................................ ......................... 33

Figure IV

- 6. Saturation Pressure/Swelling Factor for Near Miscible CO 2 - EOR

................................ .... 33

Figu re IV

- 7. Mechanisms of Near Miscible CO 2 - EOR

................................ ................................ .......... 34

Figure IV

- 8. Relative Miscible Pressure, Pres/MMP

................................ ................................ ............. 35

Figure IV

- 9. Oil Saturation Profile in the TZ/ROZ: Adapted from a Wasson Denver Unit Well.

........... 36

Figure IV

- 10. Map of ROZ Fairways.

................................ ................................ ................................ ...... 37

Figure V

- 1 "Poster Child" f or Integrating CO 2 - EOR and CO 2 Storage

................................ ............... 39

Figure V

- 2. The Domestic Oil Resource Base

................................ ................................ ..................... 40

Figure V

- 3. Comparison of NRDC/ARI and EIA’s Outlook for CO 2 - EOR

................................ ............ 41

LIST OF TABLES

Table EX

- 1. Distribution of Revenues from “Next Generation” CO 2 - EOR

................................ .............. 2

Table EX

- 2. Oil Recovery and CO 2 Storage From "Next Generation" CO 2 - EOR Technology

............... 3

Table EX

- 3. Comparison of Technically and Economically Recoverable Domestic Oil and CO 2 Storage C apacity from State of Art (SOA) and “Next Generation” CO 2 - EOR Technology* 4

Table II

- 1. Significant Volumes of Anthropogenic CO 2 Are Already Being Injected for EOR

.............. 9

Table II

- 2. Oil and CO 2 Prices Used in Sensitivity Analysis

................................ ............................... 13

Table II

- 3. Sensitivity Analysis of Oil Recovery (Billion Barrels): National Totals*

............................. 13

Table II

- 4. Sensitivity Analysis of CO 2 Demand (Billion Metric Tons): National Totals*

.................... 13Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

iv Table III

- 1. Oil Production from Major Permian Basi n Fields Under CO 2 - EOR (2010)

....................... 15

Table III

- 2. Oil Recovery Efficiency at the Denver Unit of the Wasson Oil Field

................................ 18

Table III

- 3. P ermian Reserves and CO 2 Requirements

– “The Next Billion Barrels”

.......................... 20

Table III

- 4. Relationship of Oil Recovery to CO 2 Injection Volumes

................................ ................... 21

Table IV

- 1. Example Permian Basin San Andres Formation Oil Reservoir

................................ ........ 23

Table IV

- 2. Oil Recovery and Economic Impact of Increasing the Volume of CO 2 Injected

............... 27

Table IV

- 3. Oil Recovery and Economic Impact of Modified Pattern and Well Placement

................. 28

Table IV

- 4. Oil Recovery and Economic Impact of Improving the Mobility Ratio

................................ 30

Table IV

- 5. Impact of Integrated Application of “Next Generation” CO 2 - EOR Technology

................. 31

Table V

- 1. Distribution of Economic Value of Incremental Oil Production from CO 2 - EOR

................ 42

Table VI

- 1.1. Crude Oil Production from the Appalachian Basin (MM Bbls/Yr)

................................ ..... 47

Ta ble VI

- 1.2. Appalachian Basin Oil Recovery and CO 2 Demand from Miscible “Next Generation” CO 2 - EOR

................................ ................................ ................................ ................................ .. 48

Table VI

- 1.3. Appalachian Basin Oil Recovery and CO 2 Demand from Near Miscible “Next Generati on”
CO 2 - EOR

................................ ................................ ................................ ........................... 49

Table VI

- 1.4. Appalachian Basin Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

.. 49

Table VI

- 1.5. Summary Table of Comparison of State of Art and “Next Generation” CO 2 - EOR Technology: Appalachian Basin (Regional Totals)

................................ ........................... 50

Table VI

- 2.1. Oil Production from Onshore California (MM Bbls/Yr)

................................ ...................... 51

Table VI

- 2.2. Onshore California Oil Recovery and CO 2 Demand from Miscible “Next Generation” CO 2 - EOR

................................ ................................ ................................ ................................ .. 52

Table VI

- 2.3. Onshore California Oi l Recovery and CO 2 Demand from Near Miscible “Next Generation”

CO 2 - EOR

................................ ................................ ................................ ........................... 53

Table VI

- 2.4. Onshore California Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

.. 53

Table VI

- 2.5. Summary Table of Comparison of State of Art and “Next Generation” CO 2 - EOR Technology: Onshore California (Regional Totals)

................................ ........................... 54

Table VI

- 3.1. O il Production from East and Central Texas (MM Bbls/Yr)

................................ .............. 55

Table VI

- 3.2. East and Central Texas Oil Recovery and CO 2 Demand from Miscible “Next Generation”

CO 2 - EOR

................................ ................................ ................................ ........................... 56

Table VI

- 3.3. East and Central Texas Oil Recovery and CO 2 Demand from Near Miscible “Next

Generation” CO 2 - EOR

................................ ................................ ................................ ...... 57

Table VI

- 3.4. East and Central Texas Oil Reco very and CO 2 Storage from “Next Generation” CO 2 - EOR

................................ ................................ ................................ ................................ .......... 57

Table VI

- 3.5. Summary Table of Comparison of State of Art and “Next Generation” CO 2 - EOR Technology: East and Central Texas

................................ ................................ ............... 58

Table VI

- 4.1. Oil Production from Michigan and Illinois Basins (MM Bbls/Yr)

................................ ........ 59

Table VI

- 4.2. Michigan/Illinois Basin Oil Recovery and CO 2 Deman d from Miscible “Next Generation”

CO 2 - EOR

................................ ................................ ................................ ........................... 60

Table VI

- 4.3. Michigan/Illinois Basin Oil Recovery and CO 2 Demand from Near Miscible “Next

Generation” CO 2 - EOR

................................ ................................ ................................ ...... 61Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

v Table VI

- 4.4. Michigan/Illinois Basin Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

................................ ................................ ................................ ................................ .......... 61

Table VI

- 4.5. Summary Table of Comparison of State of Art an d “Next Generation” CO 2 - EOR Technology: Michigan/Illinois Basin

................................ ................................ .................. 62

Table VI

- 5.1. Oil Production from the Mid

- Continent (MM Bbls/Yr)

................................ ........................ 63

Table VI

- 5.2. Mid

- Continent Oil Recovery and CO 2 Demand from Miscible “Next Generation” CO 2 - EOR

................................ ................................ ................................ ................................ .. 64

Table VI

- 5.3. Mid

- Content Oil Recovery and CO 2 Demand from Near Miscible “Next Generat ion” CO 2 - EOR

................................ ................................ ................................ ................................ .. 65

Table VI

- 5.4. Mid

- Continent Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

.......... 65

Table VI

- 5.5. Summary Tab le of Comparison of State of Art and “Next Generation” CO 2 - EOR Technology: Mid

- Continent (Regional Totals)*

................................ ................................ 66

Table VI

- 6.1. Oil Production from the Permian Basin (MM Bbls/Yr)

................................ ....................... 67

Table VI

- 6.2. Permian Basin Oil Recovery and CO 2 Demand from Miscible “Next Generation” CO 2 - EOR

................................ ................................ ................................ ................................ .. 68

Table VI

- 6.3. Permian Basin Oil Recovery a nd CO 2 Demand from Near Miscible “Next Generation”

CO 2 - EOR

................................ ................................ ................................ ........................... 69

Table VI

- 6.4. Permian Basin Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

......... 70

Table VI

- 6.5. Summary Table of Comparison of State of Art and “Next Generation” CO 2 - EOR Technology: Permian Basin Regional Totals**

................................ ................................ . 70

Table VI

- 7.1. Oil Production from the Rockies (MM Bbls/Yr)

................................ ................................ . 72

Table VI

- 7.2. Rockies Oil Recovery and CO 2 Demand from Miscible “Next Generation” CO 2 - EOR

..... 73

Table VI

- 7.3. Rockies Oil Recovery and CO 2 Demand from Near Miscible “Next Generation” CO 2 - EOR

................................ ................................ ................................ ................................ .......... 74

Table VI

- 7.4. Rockies Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

................... 74

Table VI

- 7.5. Summary Table of Comparison of State of Art and “Next Generation” CO 2 - EOR Technology: Rockies (Regional Totals)

................................ ................................ ............ 75

Table VI

- 8.1. Oil Product ion from the Southeast Gulf Coast (MM Bbls/Yr)

................................ ............ 76

Table VI

- 8.2. Southeast Gulf Coast Oil Recovery and CO 2 Demand from Miscible “Next Generation”

CO 2 - EOR

................................ ................................ ................................ ........................... 77

Table VI

- 8.3. Southeast Gulf Coast Oil Recovery and CO 2 Demand from Near Miscible “Next

Generation” CO 2 - EOR

................................ ................................ ................................ ...... 78

Table VI

- 8.4. Southeast Gulf Coast Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

................................ ................................ ................................ ................................ .......... 78

Table VI

- 8.5. Summary Table of Comparison of State of Art and Next Generation CO 2 - EOR Technology: Southeast Gulf Coast (Regional Totals)

................................ ...................... 79

Table VI

- 9.1. Oil Production from the Williston Basin (MM Bbls/Yr)

................................ ....................... 80

Table VI

- 9.2. Williston Basin Oil Recovery and CO 2 Demand from “Next Ge neration” CO 2 - EOR

......... 81

Table VI

- 9.3. Summary Table of Comparison of State of Art and “Next Generation” CO 2 - EOR Technology: Williston Basin (Regional Totals)

................................ ............................... 82

Table VI

- 10.1. Oil Production from Alaska (MM Bbls/Yr)

................................ ................................ ......... 83

Table VI

- 10.2. Alaska Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

..................... 84Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

vi Table VI

- 10.3. Summary Table of Comparison of State of Art and “Next Generation” CO 2 - EOR Technology: Alaska (Regional Totals)

................................ ................................ ............ 85

Table VI

- 11.1. Oil Prod uction from the Offshore Gulf of Mexico (MM Bbls/Yr)

................................ ........ 86

Table VI

- 11.2. Offshore Gulf of Mexico Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

................................ ................................ ................................ ................................ .. 87Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

1 June 2011 

### I

. EXECUTIVE SUMMARY

This analysis

, sponsored by U.S. DOE/NETL and prepared by Advanced Resources

International (ARI)

, builds a national CO 2 EOR resource assessment from re servoir

- to

- reservoir

simulations of CO 2 floods. ARI us ed a proprietary database that contains oil properties and geologic characteristics of 1,800 onshore reservoirs and over 4,000 off shore sands. The simulations were conducted using the PROPHET model. PROPHET, originally developed by

Texaco for DOE in the 1980s, models stream tubes of fluid flow between injection wells and producing wells. PROPHET is a screening tool and estimates the magnitude and timing of oil production based on a user

- defined CO 2 injection protocol and the porosity of the host rock, the thickness of the oil, the d egree of fracturing and discontinuity within the target formation and

other inputs

. NETL published a similar resource assessment in February 2010; this report supersedes the earlier assessment. For this analysis, t he simulation methodology was peer

revie wed by industry practitioners and important refinements were made based on their input. Aggregated results indicate that C O 2 - EOR can p r ovide high value benefits to the domestic

economy and the environment , as discussed below.

**1. CO**  **2 -**  **EOR Promotes Enhanced**  **Energy Security and L**  **ower CO**  **2 Emissions** 

Increasing U.S. oil production and lowering domestic CO 2 emissions are two of the nation’s highest priority goals. CO 2 enhanced oil recovery (CO 2 - EOR), both as practiced today (“ S tate of

A rt” (SOA)) and what is pos sible (“ N ext G eneration”), directly addresses these two goals.

**•** “ Next G eneration ” CO 2 - EOR can provide 137 billion barrels of additional technically recoverable domestic oil, with about half ( 67 billion barrels) economically recoverable at an oil price of $8 5 per barrel. 1

**•** This volume of economically recoverable oil is sufficient to support nearly 4 million barrels per day of domestic oil production (1 .3 5 billion barrels per year for 5 0 years)

, reduc ing oil imports by one

- third . Production of oil from the ROZ (residual oil zone)

would add to these totals

. Technical CO 2 storage capacity offered by CO 2 - EOR would equal 45 billion metric tons.

**•** Nearly 20 billion metric tons of CO 2 will need to be purchased by CO 2 - EOR operators to
recover the 67 billion barrels of economically recoverable oil. Of this, about 2 billion metric tons would be from natural sources and currently operating natural gas processing plants. The remainder of the CO 2 demand (1 8 billion metric tons) would

need to be provided by anthropogenic CO 2 captured from coal

- fired power plants and

other industrial sources

.

**•** The market for captured CO 2 emissions from power plants created by economically

feasible CO 2 - EOR projects (projects that provide at least 20% ROR at an oil price of $85 per barrel and a CO 2 cost of $40 per metric ton) would be sufficient to permanently store
the CO 2 emissions from 93 large one G W size coal

- fired power plant s operated for 30

years

.

1 In addition to an oil price of $85 per barrel (WTI), the economic analysis assumes a CO 2 market price of $40 per metric ton and
a 20% return on investment, before tax.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

2 June 2011 **2. CO**  **2 -**  **EOR Can**  **Provide Large New**  **Revenues to**  **Federal/State Treasuries and**

**Other Participa**  **nts in the Value Chain.**

The value created by applying “Next Generation” CO 2 - EOR technology would be shared by

numerous stakeholders. Assuming an oil price of $85 per barrel (WTI) and a CO 2 market price of $40 per metric ton , the following new revenue stre ams would result from recovering 67.2
billion barrels of domestic oil with “Next Generation” CO 2 - EOR technology :

 Federal/ s tate treasuries would be a large beneficiary, receiving $ 21.20 of the $85 per barrel oil price in the form of royalties on Federal /st ate lands plus severance, ad valor e m and corporate income taxes. Total revenues to Federal/ s tate
treasuries would equal $1, 4 2 0 billion

.

 Electric p ower and other industrial companies would receive $ 10. 8 0 of the $85 per barrel oil price from the sale of CO 2

. Total revenues from sale of CO 2 at $40 per metric ton would equal $ 7 30 billion.

 The U.S. oil industry would receive $ 19.50 of the $85 per barrel oil price for return of and return on capital investment

. Private mineral owners would receive $ 7.70 per b arrel.

 The general U.S. economy would be the largest beneficiary, receiv ing $ 25.80 of the $85 per barrel of oil price, in the form of wages and material purchases

. T otal revenues would equal $1, 730 billion

.

With potential oil recovery of 67.2 billion bar rels, $ 5

. 7 trillion of new domestic revenues and economic activity would accrue to the participants in the CO 2 - EOR value chain

.

Per Barrel TOTAL ($) ($ billion)

1. Federal/State Treasuries Severance/Income Taxes $21.20 $1,420

2. Power/Industrial Companies Sale of Captured CO 2 Emissions $10.80 $730

3. Oil Industry Return of/on Capital $19.50 $1,300

4. Other Private Mineral Rights $7.70 $520

5. U.S. Economy Services, Materials and Sale of CO 2 $25.80 $1,730

Total $85.00 $5,700

JAF2011_030.XLS Revenue Recipient Value Chain Function Revenues Table E X

- 1

. Distribution of Revenues from “ Next Generation ” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

3 June 2011 **3**

**. The Volumes of Oil Recovery and CO**  **2 Storage Offered**  **by “Next**
**Generation” CO 2**  **- EOR are Large and Impressive.** 

W ith active use of “ N ext G eneration” CO 2 - EOR technology , large volumes of domestic oil could be produced while similarly large volumes of CO 2 c ould be reliabl y stored in

domestic oil fields , Table EX

- 2 :

 The volumes of domestic oil technically recoverable with “ N ext G eneration” CO 2 - EOR technology are large : 120 .3 b illion barrels from the main pay zone of oil

fields plus another 1 6 .3 b illion barrels from the Residual Oil Zone ( ROZ )

.

 With an oil price of $ 8 5 per barrel and a CO 2 cost of $40 per metric ton

, over 67

billion barrels will be recoverable ( with ROR of 20% )

. A n economic evaluation of oil recovery from ROZ s would add to this total. As a point of reference, proved

domestic oil reserves at the end of 2009 were 21 b illion barrels.

 The volumes of CO 2 that could be technically stored with EOR are equally large

--

over 4 5 billion metric tons. These volumes would significantly increase as the storage potential offered by the ROZ “fairway s ” become s better defined. As a point of reference, annual CO 2 emissions from domestic coal and natural gas

fired electricity production in 2009 were 2.2 billion metric tons.

 Assu ming about 2 billion metric tons of CO 2 are provided to the CO 2 - EOR industry from natural sources and gas processing plants

, almost 18 billion metric tons of anthropogenic CO 2 could be sold to the CO 2 - EOR market

. Reservoir Setting

Technical Economic* Technical Economic*

1. Miscible CO 2

-EOR

Lower-48 Onshore 104.4 60.3 32,250 17,230

Alaska 8.8 5.7 4,110 2,330

Offshore 6.0 0.9 1,770 260

Sub-Total 119.1 67.0 38,130 19,820

2. Near Miscible CO 2

-EOR 1.2 0.2 800 110

3. Residual Oil Zone*** 16.3 n/a 6,500 n/a

TOTAL 136.6 67.2 45,430 19,930

*At $85 per barrel oil price and $40 per metric ton of CO 2 market price w ith ROR of 20% (before tax ). JAF2011_030.XLS

***ROZ resources below ex isting oil fields in three basins; economics of ROZ resources w ere bey ond study scope. Oil Recovery** CO 2 Demand/Storage**
(Billion Barrels) (Million Metric Tons)

**Includes 2.6 billion barrels already produced or being dev eloped w ith miscible CO 2 -EOR and 2,300 million metric tons of

CO 2 from natural sources and gas processing plants. T able EX

- 2

. Oil Recovery and CO 2 Storage From "Next Generation" CO 2 - EOR TechnologyImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

4 June 2011 **4. “Next Generation”**  **CO 2**  **- EOR Provides Benef**  **its Fa**  **r Beyond Those Available**
**from State of Art CO 2**  **- EOR.** 

The introduction of “Next Generation” CO 2 - EOR technology would provide significant oil recovery and CO 2 storage benefits beyond those available from today’s state of art (SOA) CO 2 - EOR technology, Ta ble EX

- 3:

 The volume s of technically recoverable domestic oil would more than do uble

, from 6 2 billion barrels with SOA technology to 137 billion barrels with “N ext
G eneration ” CO 2 - EOR technology.

 Economically recoverable domestic oil would increase even more substantially

, to 67 billion barrels with “N ext G eneration ” technology compar ed to 2 7 billion barrels with SOA technology.

 The volumes of economically driven CO 2 demand by the CO 2 - EOR industry

would climb to nearly 20 billion metric tons from “Next Generation” technology.

With about 2 billion metric tons of CO 2 provided by natural sources and gas processing plants, the net economic demand for CO 2 captured from power and industrial plan t s would be 18 billion metric tons ( equal to 30 years of captured
CO 2 emissions from 93 GWs of coal

- fired power )

. SOA technology would create "Next

Generation"

1. Miscible CO2-EOR

Lower-48 Onshore 55.7 104.4 24.3 60.3 8,940 17,230

Alaska 5.8 8.8 2.6 5.7 1,490 2,330

Offshore GOM

- 6.0

- 0.9

- 260

Sub-Total 61.5 119.1 26.9 67.0 10,430 19,820

2. New Miscible CO2-EOR n/a 1.2 n/a 0.2

- 110

3. Residual Oil Zones n/a 16.3 n/a ***

- ***

Total 61.5 136.6 26.9 67.2 10,430 19,930

JAF2011_030.XLS

***The economics of recovering oil from the residual oil zone were beyond study scope. **At an oil price of $85 per barrel and a CO 2 cost of $40 per metric ton with ROR at 20% before tax. Economic

CO 2 Demand/Storage** (Million Metric Tons )

SOA “Next

Generation” SOA** “Next**

Generation” Basin/Area

*Includes 2.6 billion barrels already produced or placed into reserves with miscible CO 2 -EOR and 2,300 million metric tons of CO 2 from natural

sources and gas processing plants. SOA** Technically

Recoverable Oil (Billion Barrels) Economically

Recoverable Oil**

(Billion Barrels) Table EX

- 3. Comparison of Technically and Economically Recoverable Domestic Oil and CO 2 Storage Capacity from State of Art (SOA) and “Next Generation” CO 2 - EOR Technology *Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

5 June 2011 a marke t demand for captured CO 2 of only about 8 billion metric tons ( equal to 30 years of captured CO 2 emissions from 43 GWs of coal

- fired power). 2

**5**

**. “Next Generation” CO**  **2 -**  **EOR Technologies Are Realistic and Achievable**

**with Focused Investments in R&D.**

Before pro ceeding, it is useful to address the question

- - just what constitutes “ N ext
G eneration” CO 2 enhanced oil recovery and how would it benefit the U.S. economy and energy security ? Briefly state d , “ N ext G eneration” CO 2 - EOR incorporates four significant and, with investments in R&D plus field pilots, realistically achievable advances in technolog y :

 Improve ments in currently practiced miscible CO 2 - EOR technolog y

,

 A dvanced near m iscible CO 2 - EOR technology

,

 Application of CO 2 - EOR to residual oil zones (ROZs)

, 3

, 4

, 5

 Deployment of CO 2 - EOR in offshore oil fields. and

Chapter I V of the report provides a more in

- depth look at these four “ N ext G eneration”
CO 2 - EOR technologies

. Chapter V of the report provides a more detailed explanation

of the benefit s of “Next Generat ion” CO 2 - EOR technology.

The remainder of the report provides context, relevant information and details to help
the reader better understand CO 2 - EOR and its contribution toward improv ed domestic

energy security and lower emissions of CO 2

.

 Chapter II of t he report discusses today’s CO 2 - EOR activities as well as its future promise under “Next Generation” technology.

 Chapter III of the report provides a case study of the evolution in CO 2 - EOR practices and performance in the Permian Basin.

 Chapter VI provide s a “basin

- oriented” look at the applicability of CO 2 - EOR in

eleven U.S. basins and regions.

 Chapter VII provides an overview of the study methodology, which is more fully discussed in Appendix A.

2 Assuming 85% capacity factor and 34% efficiency, a1GW pow er plant would generate 223 billion kWh of electricity in thirty years (1GW x 85% x 8.76 (conversion between GW and billion kWh/year) * 30 years). With a CO 2 intensity of 0.94 million metric

tons CO 2 /kWh (thermodynamic equivalency based on efficiency of po wer plant and emissions profile of average coal) and 90% capture, this power plant would supply 18 9 million metric tons of CO 2 in 30 years, at 6.3 million metric tons per year.

3 “Technical Oil Recovery Potential from Residual Oil Zones: Permian Basin”, pre pared by Advanced Resources International, Inc. for the U.S. Department of Energy, Office of Fossil Energy, Office of Oil and Natural Gas, October 2005.

4 “Technical Oil Recovery Potential from Residual Oil Zones: Big Horn Basin”, prepared by Advanced Res ources International, Inc. for the U.S. Department of Energy, Office of Fossil Energy, Office of Oil and Natural Gas, February 2006.

5 “Technical Oil Recovery Potential from Residual Oil Zones: Williston Basin”, prepared by Advanced Resources International

, Inc. for the U.S. Department of Energy, Office of Fossil Energy, Office of Oil and Natural Gas, February 2006.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

6 June 2011 * * * * *

This report represents a significant up date of the “Next Generation” CO 2 - EOR technology first introduced in DOE/NETL Report

- 2009/135 “Storing CO 2 and Producing
Domestic Crude Oil with “Next Generation” CO 2 - EOR”. The following major changes have been made since the previous version:

 The economi c and reservoir models employed in the analysis have been thoroughly vetted by industry experts and practitioners. Based on input from these stakeholders, Advanced Resources made adjustments to how CO 2 - floods

are evaluated by the PROPHET 2 model and how fie ld and pattern economics

are calculated in our cashflow models.

 The current version of the report employs a significantly updated reservoir data

base , incorporating current data on many important reservoir datapoints, such as cumulative production, reser ves and well counts , among others.

 The economic model in the current study incorporates an economic truncation
function that limits the volumes of CO 2 injection (and project life) using a marginal

annual economic calculation.

 T o better capture current econ omic conditions, we have employed new oil and
CO 2 prices. The “base case” economic scenario now uses a n $85/Bbl oil price

and a $40/ m etric ton CO 2 market price. Additionally, CO 2 market prices are now calculated as a percentage of oil price. To reflect his torical practices, we model
CO 2 market prices at 2% to 3% of oil price (in terms of $/Mcf of CO 2 ) in our sensitivity analysis section of the report

.

 Finally, to recognize the higher risks of introducing an emerging technology, such
as “Next Generation” CO 2 - EOR and its need to compete for capital with other domestic energy investments, the economics have been evaluated using a 20% return on investment, compared to a 15% return on investment in the previous study.

Advanced Resources is truly grateful for ind ustry’s participation and input and has summarized the major recommendations we received and incorporated into this updated study in Appendix B.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

7 June 2011 

### II. THE CURRENT AND FUTURE PROMISE OF CO 2 

### - ENHANCED OIL
RECOVERY

**A. The Current Status of CO**  **2 -**  **EOR**

CO 2 - based enhanced oil recovery, using State of Art (SOA) technology, is already being implemented, particularly in the oil fields of the Permian Basin of West Texas, the Gulf Coast

and the Rockies.

 CO 2 - EOR currently provides about 28 1 ,000 barrels of oil per day in the U.S., 6

 Today, the great bulk of the CO 2 used for EOR comes from natural sources

, such as McElmo Dome in New Mexico and Jackson Dome in Mississippi . These

natural sources are supplemented by modest, but growing sources of anthropogenic CO 2 (Table II

- 1). equal to 6% of U.S. crude oil production (Figure II

- 1). CO 2 - EOR has been underway for several decades, starting initially in the Permian Basin and expanding today to 114 CO 2 - EOR projects currently installed in numerous regions of the country (Figure II

- 2).

 A robust network of pipelines transport CO 2 from natural CO 2 deposits and gas processing plants to the Denver City Hub ( Figure II

- 3 ) . Still, the number one barrier to reaching higher levels of CO 2 - EOR production is lack of access to adequate sup plies of affordable CO 2

.

 As shown in Table II

- 1, the largest single source of anthropogenic CO 2 used for EOR is the capture of 340 MMcfd ( 6.6 MMmt/yr) of CO 2 from the gas processing plant at La Barge in Western Wyoming. This is followed by the “poster chi ld” for integrating large

- scale CO 2 - EOR with CCS

- - the capture of 150 MMcfd (~3MMmt/yr) of CO 2 from the Northern Great Plains Gasification plant in Beulah, North Dakota and its transport, via a 200 mile cross

- border CO 2 pipeline, to the two EOR projects at the Weyburn oil field in Saskatchewan, Canada.

New CO 2 pipelines and refurbished gas treating plants have recently been placed on

line ( Figure II

- 2 )

. 7 These include Denbury’s 320 mile Green Pipeline along the Gulf Coast, and Occidental Petroleum’s new $850 million Century natural gas/CO 2 processing plant and pipeline facilities in West Texas . The proposed Denbury (Encore) pipeline (linked to the Lost Cabin gas plant in Wyoming) is proposed to come on line as

of late 2012. These new facilities will si gnificantly expand the availability and use of
CO 2 in domestic oil fields, leading to increased oil production from CO 2 - EOR . For example, Occidental Petroleum expects the installation of the Century CO 2 plant to expand its Permian Basin oil production by 50,000 barrels per day within 5 years. 8

6 Oil and Gas Journal EOR Survey, April 2010.

7 Various industry presentations and publications.

8 Occidental Petroleum I nvestor P resentation

, October, 2010

.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

8 June 2011 Figure I I

- 1. Growth CO 2 - EOR Production in the U.S.

Figure I I

- 2. Current U.S. CO 2 - EOR Activity Source: Advanced Resources Int ’ l., based on Oil and Gas Journal, 2010.

JAF028215.PPTIncremental Oil Recovery (barrels/day)

LaBarge

Gas Plant

Val Verde

Gas Plants Enid Fertilizer Plant

Jackson

Dome McElmo Dome Sheep Mountain

Bravo Dome 11

8

16 68 6 Dakota Coal

Gasification

Plant

Antrim Gas

Plant

2 1

1  Currently, 114 CO 2 - EOR projects provide 281,000 B/D.

 New CO 2 pipelines

- - the 320 mile Green Pipeline, the 226 mile Encore Pipeline and the Century CO 2 Plant

- - are expanding the use of CO 2 - EOR. 1

Source: Advanced Resources International, Inc., based on Oil and Gas Journal, 2010 and other sources. Number of CO 2 - EOR
Projects

Natural CO 2 Source

Industrial CO 2 Source

Existing CO 2 Pipeline

CO 2 Pipeline Under
Development 114

Encore Pipeline

Denbury/Green Pipeline

JAF028247.PPT Lost Cabin Gas Plant

Century CO 2 PlantImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

9 June 2011 Figure II

- 3. Existing CO 2 Pipelines (Permian Basin)

* Additional CO 2 supplies are anticipated in 2012 from the Lost Cabin gas processing plant in Wyoming (50 to 60 MMcfd) and from Train II of the Century gas processing plant in West Texas (180 MMcfd)

. **MMcfd of CO 2 can b e converted to million metric tons per year by first multiplying by 365 (days per year) and then dividing by 18.9 Mcf per metric ton. Source: Advanced Resources Int’l (2011). JAF028283.PPT

JAF028238.PPT

Location of

EOR / CO 2 Storage Natural Anthropogenic

Texas-Utah-New MexicoOklahoma Natural CO 2 (Colorado-New Mexico)

New Mexico-Oklahoma Gas Processing Plants (W. Texas)

Colorado-Wyoming Gas Processing Plants (Wyoming)

- 340

Mississippi/Louisiana Natural CO 2 (Mississippi) 1,100

- Michigan Ammonia Plant (Michigan)

- 15

Oklahoma Fertilizer Plant (Oklahoma)

- 30

Saskatchewan Coal Gasification Plant (North Dakota)

- 150

TOTAL (MMcfd) 2,830 870

TOTAL (million mt/yr)** 55 17

JAF2011_030.XLS CO 2 Sources by Type and Location CO 2 Supply (MMcfd)*

1,730 335 Table I I

- 1. Significant Volumes of Anthropogenic CO 2 Are Already Being Injected for EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

10 June 2011 **B. The Future Promise of CO**  **2 -**  **EOR**

1

. Oil Recovery and CO 2 Storage : Traditional ( “Main”) Pay Zone of Oil Fields.

The assessment s of oil recovery and CO 2 storage capacity set forth in this report have been

based on a database of over 6,300 domestic oil reservoirs, accounting for three

- quarters of U.S. oil resources. The study identifi e d 1,858 large oil reservoirs with 366 billion barrels of original oil

in

- place ( 487 billion barrels of original oil in

- place when extrapolated to national totals) as
favorable for CO 2 - EOR.

These large oil reservoirs were modeled for CO 2 – based enhanced oi l recovery using ARI’s adaptation of the streamline reservoir simulator PROPHET2 . The amount of CO 2 storage capacity offered by oil fields favorable for CO 2 - EOR was then evaluated using “Next Generation”

CO 2 - EOR technology and economics.

The study establ ished two oil recovery and CO 2 storage categories

- - “Technical Potential” (without consideration of prices and costs) and “Economic Potential” (the volume of oil the industry could produce and the volume of CO 2 industry could buy (and store) at a specifie d oil price and CO 2 market price ).

As shown in Figure I I

- 4 , the volume of technically recoverable oil using “Next Generation” CO 2 - EOR is 136.6 billion barrels. The CO 2 volume associated with this technically recoverable oil is

45.4 billion metric tons.

The volume of economically recoverable oil (at an oil price of $ 8 5/B, CO 2 costs of $40/Mt and a 20% before tax financial return) is 67.2 billion barrels.

The CO 2 demand associated with this economically recoverable oil is 1 9

. 9 billion metric tons. Appro ximately 2 .3 billion metric tons of CO 2 demand for CO 2 - EOR is expected to be provided

from natural gas processing plant s and natural sources of CO 2 , providing a demand of 17. 6
billion metric tons from CO 2 emissions captured by electric power and other indu strial plants.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

11 June 2011 Figure I I

- 4 . Domestic Oil Supplies and CO 2 Demand (Storage) Volumes from “Next Generation”
CO 2 - EOR Technology**

2. Oil Recovery and CO 2 Storage : Residual Oil Zone (“ROZ”)

No discussion of “Next Generation” CO 2 - EOR technology would be com plete without at least a preliminary treatment of the major volumes of additional oil that exist in the residual oil zone (ROZ).

Our estimated oil recovery potential from using CO 2 - EOR in the ROZ, below 56 large, existing Permian Basin oil fields, is 11.9 billion barrels of technically recoverable oil. This provides CO 2 storage capacity of 4.8 billion metric tons. 3 Additional technically recoverable ROZ oil

resources

, equal to 4.4 billion barrels and providing 1.7 billion metric tons of CO 2 storage capacity

, exist underneath 13 oil fields in the Big Horn 4 and underneath 20 oil fields in the

Williston 5 b asin s

.

The scope of work for this study did not include providing an economically recoverable

assessment of conducting CO 2 - EOR in residual oil zones (ROZs).Billion Barrels of Recoverable Oil

0 50 75 100 125

CO 2 Demand** Oil Recovery 25 150 137

45

CO 2 Demand** Oil Recovery 67

20 Technically Recoverable Economically Recoverable*

JAF028247.PPT Source: Advanced Resources Int’l (2011). *At an oil price of $85/B, a CO 2 market price of $40/mt and a 20% ROR, before tax.
**Includes 2,300 million metric tons of CO 2 provided from natural sources and 2.6 billion barrels already produced or being developed with miscible CO 2 - EOR.Billion Tons of CO2Storage

0 20 30 40 50

10 60Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

12 June 2011 **C. CO**  **2 Market Demand and CO**  **2 Storage from “Next Generation” CO**  **2 -**  **EOR Technology** **: Base Case Oil Price and CO 2**  **Costs**

The technical CO 2 demand associated with “Next Generation” CO 2 - EOR is 45.4 billion metric tons. The economic demand (and subsequent storage) for CO 2 with “Next Generation” CO 2 - EOR is 1 9. 9 billion metric tons, with about 2. 3 billion metric tons of CO 2 pro vided by natural

sources and existing natural gas processing plants

.
However, large numbers such as billions of tons of CO 2 demand and storage capacity are

different to gr as p and thus often of limited value.

An alternative way to illustrate the CO 2 dema nd and storage capacity offered by “Next
Generation” CO 2 - EOR is to use the metric of the number of one

- GW size power plants that could rely on CO 2 - EOR for purchasing and storing their captured CO 2 , Figure II

- 5:

 After subtracting out the 2.3 billion metri c tons of CO 2 supply currently available,
CO 2 - EOR still offers sufficient technical storage capacity for all of the anthropogenic CO 2 captured from 228 one

- GW size coal

- fired power plants for 30 years of operation.

 Similarly, t he volume of economic dema nd (and storage capacity) for anthropogenic CO 2 offered by CO 2 - EOR, is substantial, equal to 93 one

- GW size

coal

- fired power plants, after subtracting out the CO 2 supplies available from

natural sources and natural gas processing plants

.

Figure I I

- 5 . Volum es of Anthropogenic CO 2 Storage Capacity Available from “Next Generation”
CO 2 - EOR TechnologyNumber of 1 GW Size Coal-Fired Power Plants*

0 200 300

100 240

105 Technical Demand/Storage Capacity Economic Demand/Storage Capacity**

*Assuming 7 MMmt/yr of CO 2 emissions, 90% capture and 30 years of operations per 1 GW of generating capacity. **At an oil price of $85/B, a CO 2 market price of $40/mt and a 20% ROR, before.

JAF028247.PPT Source: Advanced Resources Int’l (2011). Total CO 2 Anthropogenic CO 2 Total CO 2 Anthropogenic CO 2

228

93Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

13 June 2011 **D. Impacts of Alternative Oil Prices and CO**  **2 Market Prices**  **on CO 2**  **- EOR** 

**Volumes and CO**  **2 Demand/**  **Storage**

The study undertook a series of sensitivity studies to gain insights on how alternative (higher and lower) oil prices and alternative (higher and lower) CO 2 market prices would impact results. Using historical + 30% bounds for future oil prices and historical ratios that relate CO 2 market prices to oil prices, the following nine cell price sensitivity matrix was constructed , Table II

- 2:

Oil Price CO 2 Market Price ( % of oil price

, in $/ Mcf )

($/B) Low: 2% Base: 2.5% High: 3%

($/Mcf) ($/Mt) ($/Mcf) ($/Mt ) ($/Mcf) ($/Mt)

Low: $ 6

0 1.20 23 1.50 28 1.80 34

Base: $ 8

5 1.70 32 2.12 40 2.55 48

High: $1 1 0 2.20 42 2.75 52 3.30 62

The sensitivity study shows that the volumes of economic oil production and CO 2 demand ( and storage ) from “Next Generation” CO 2 - EOR a re highly sensitive to oil and CO 2 market prices , as shown on Tables I I

- 3 and I I

- 4 below:

Oil Price CO 2 Market Price ( % oil price, $/ Mcf )

($/B) Low: 2% Base: 2.5% High: 3%

Low: $ 6

0 60.4 59.1 56.6

Base: $ 85 69.1 67.2 65.8

High: $1 1 0 73.5 72.1 70.7

*Includes 2. 6 billion barrels of oil already produced or placed in reserves with miscible CO 2

- EOR.

Oil Price CO 2 Market Price ( % oil price, $/ Mcf )

($/B) Low: 2% Base: 2.5% High: 3%

Low: $ 6

0 17.7 17.1 16.0

Base: $ 85 20.7 19.9 19.3

High: $1 1 0 22.3 21.7 21.0

*Includes 2, 3 00 million metric tons of CO 2 from natural sources and natural g as processing plants

. Table II

- 2. Oil and CO 2 Prices Used in Sensitivity Analysis

Table I I

- 3 . Sensitivity Analysis of Oil Recovery (Billion Barrels): National Totals *

Table I I

- 4 . Sensitivity Analysis of CO 2 Demand (Billion Metric Tons): Na tional Totals*Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

14 June 2011  The high oil price ($1 1 0/B) and low CO 2 market price ( 2% ) case adds about 6.3 billion barrels of oil recovery and 2 .4 billion metric tons of CO 2 demand ( and storage ) compared to the Base Case ( n ational totals )

.

High Oil/Low CO 2 Base Case

Oil Recovery (B bbls) 73.5 67.2

CO 2 Demand/Storage (B mt)* 22.3 19.9

*Includes 2, 3 00 million metric tons of CO 2 from natural sources and natural gas processing plants and 2.6 billion barrels of oil already produced or being developed with miscible CO 2

- EOR

.

 At a low oil price ($ 6 0/B) and high a CO 2 market price ( 3% ), the “Next
Generation” CO 2 – EOR oil recovery is 10.5 billion barrels less and the CO 2 storage potential is 3.9 billion metric tons lower compared to the Base Case ( n ational totals ) :

Low Oil/High CO 2 Base Case

Oil Recovery (B bbls) 56.6 67.2

CO 2 Demand/Storage (B mt)* 16.0 19.9

*Includes 2, 3 00 million metric tons of CO 2 from natural sources and natural gas processing plants and 2.6 billion barrels of oil already produced or being devel oped with miscible CO 2

- EOR

.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

15 June 2011 

### III

. THE PERMIAN BASIN CO 2 

### - EOR CASE STUDY

The purpose of the Permian Basin CO 2 - EOR Case Study is to provide the reader basic information, historical context and benchmarks by which to independently assess the realism of

the p rojections for current “ State of Art ” and tomorrow’s “ N ext G eneration ” CO 2 enhanced oil

recovery as set forth in this study and report . As such, th is Chapter addresse s the following three questions:

1. What is the o utlook for CO 2 - EOR in the Permian Basin?

2. What does a successful CO 2 - EOR project look like ?

3. How closely do the results of th is “Next Generation” CO 2 - EOR study, match the key industry

- used “benchmarks” for CO 2 - EOR performance of : (a) oil recovery efficiency; (b) the net CO 2 /oil ratio; and (c ) costs and economic viability?

**A. Outlook for**  **C O**  **2 Enhanced Oil Recovery**  **in the Permian Basin**

CO 2 enhanced oil recovery is underway in 56 Permian Basin oil fields, ranging from the field

wide CO 2 flood in the giant Wasson (San Andres) oil field to the smal l, 160 acre pilot CO 2 flood

at Dollarhide ( Clearfork )

. T hese 56 EOR project s produced about 200, 000 barrels per day of incremental oil production during 2010 , with five large CO 2 - EOR projects accounting for the bulk of this production ( Table I II

- 1 ) :

Incremental Primary Total Field CO 2

- EOR Operator Production Production **
(B/D) (B/D)

Wasson* Occidental 51,100 44,600
Kelly Snider KinderMorgan 29,600 26,50 0

Seminole Hess 16,500 16,500
Slaughter** Occidental 18,800 11,200

Means ExxonMobil 10,000 8,700

Total 126,000 107,500

Source: Oil and Gas Journal, April 2010. JAF2011_030.XLS *Combined production from six Wasson units. **Combined production fr om nine Slaughter units.

It is n otable that for these f ive giant oil fields, CO 2 - EOR accounts for 85% of the total oil currently produced from the portions of the field under a CO 2 - EOR flood

. For example, w ithout
CO 2 - EOR, the giant Wasson oil field, cu rrently providing 5 1,100 barrels of oil per day, would only produc e 6,500 barrels of oil per day. Table III

- 1. Oil Production from Major Permian Basin Fields Under CO 2 - EOR (2010)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

16 June 2011 Permian Basin oil production from CO 2 - EOR has grown steadily for the past ten years. Recently, t he rate of growth has been constrained by lack of CO 2 suppli es . However, steps are underway that could, at least in part, help overcome th e CO 2 supply constraint. For example:

 Kinder Mor g an has recently expanded the CO 2 transportation capacity of its Cortez pipeline by 200 MMcfd and increased the production capac ity of its SW

Colorado natural CO 2 fields (Doe Canyon and McElmo Dome) by 300 MMcfd. It has plans to further increase its CO 2 production and Cortez pipeline capacity by

an additional 200 MMcfd in 2011.

 OxyPermian is investing $850 million in the Century n atural gas/CO 2 processing plant and associated pipeline facilities. Train I, with CO 2 capacity of 260 MMcfd,

is due on line at the end of 2010. Train II , with CO 2 capacity of 180 MMcfd, is

come on line in early 2012. The CO 2 will be used by Oxy to accel erate and enhance the development of its Permian Basin CO 2 - EOR projects. This investment will capture 3.5 Tcf (180 million metric tons) of CO 2 for EOR and will enable Oxy to expand its Permian oil production by at least 50,000 barrels per day by 2015 9

 Nu merous planned advanced coal

- based power plants equipped with CO 2 capture, such as Summit’s Texas Clean Energy IGCC Project, are being located in West Texas, looking to sell their captured CO 2 to the CO2

- EOR industry. .

While still constrained by lack of suf ficient volumes of CO 2 , a number of new CO 2 - EOR projects are being started or expanded:

 Kinder Morgan is planning a CO 2 - EOR flood for the Katz (Strawn) oil field, looking to recover 24 million incremental barrels from the 150 million barrels of
OOIP in

- pla ce in this field. By extending their SACROC CO 2 pipeline, Kinder Morgan is expecting to access an additional 100 million barrels of oil recovery

from initiating CO 2 floods in the numerous other oil fields along the pipeline route

to the Katz field area.

 O xyPermian has announced plans to initiate new CO 2 - EOR floods at North Dollarhide (Clearfork) and SW Levelland Unit (San Andres) in 2010 and 2011.

 The most exciting news in the Permian Basin is the steady expansion of CO 2 floods in the residual oil zone (RO Z) below and beyond existing oil fields. Of particular interest are the commercial

- scale ( 2,380 acre, 29 pattern Stage 1 ) ROZ flood underway by Hess at Seminole and the joint DOE/NETL and Legado ROZ

field research pilot at Goldsmith

.

9 Investor presentation, October, 2010Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

17 June 2011 **B. A Successful CO**  **2 -**  **EOR Project in the Permian Basin**

CO 2 injection into the Denver Unit of the giant Wasson (San Andres) oil field began in 1985, helping arrest the steep d rop in oil production. Before the start of CO 2 - EOR, oil production had declined from about 90,000 B/D t o 40,000 B/D in 10 years. After the initiation of the CO 2 flood, oil production increased to about 50,000 B/D . T oday, twenty four years after the start of the flood, the Denver Unit still produces at 30,000 B/D ( Figure II I

- 1 )

.

At the completion of the CO 2 flood, Oxy expects the Denver Unit to recover nearly 67 % of the approximately 2 billion barrels of original oil in

- place, with CO 2 - EOR providing 19.4% on top of an already high 47.3% recovery efficiency achieved in the Denver Unit from primary recovery

and the waterflood ( Table I II

- 2 )

.
To a significant degree, it appears that OxyPermian has been applying many of the initial

features of “ N ext G eneration” CO 2 - EOR technology at the Denver Unit, including increasing the
volumes of CO 2 injected, working to i mprove reservoir sweep efficiency, and conducting rigorous reservoir surveillance.

Figure I II

- 1. CO 2 - EOR Results at the Denver Unit of the Wasson Oil FieldImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

18 June 2011 Recovery M ethod Oil Recovery Efficiency (%OOIP)

**•** Primary 17.2%

**•** Waterflood 30.1%

**•** CO2 Flood 19. 5 %

Total Oil Recovery 66. 8 %

Figure I II

- 2 compares the oil recovery performance of typical Permian San Andres Formation

CO 2 flood s with the CO 2 flood performance at the D enver Unit of the Wasson oil field, based on information from OxyPermian. As shown in Figure IV

- 2, the Wasson Denver Unit CO 2 flood has an expected oil recovery efficiency of 19.5% from the CO 2 flood, compared to an expected 15% recovery efficiency from a typical Permian Basin CO 2 flood. The extra 4.5% of recovery efficiency at the Wasson Denver Unit is equal to 90 million barrels of oil and an additional $ 7.6 billion dollars of revenue (at an oil price of $ 8 5 per barrel) , demonstrating the value of pursu ing
advances in CO 2 - EOR technology

.

Figure I II

- 2. Oil Recovery Performance From Permian Basin San Andres Formation Table I II

- 2. Oil Recovery Efficiency at the Denver Unit of the Wasson Oil FieldImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

19 June 2011 **C. Applying Industry Benchmarks** 

1. OxyPermian’s Expectations for Oil Recovery Efficiency

A most useful outlook on expected CO 2 - EOR reco very efficiency is provided in the recent analyst presentations by Occidental Petroleum for its Permian Basin EOR opportunities. 10

 Oxy’s Permian oil properties ha ve 11.9 billion barrels (net) of original oil in

- place. Of this, 4.1 billion barrels (net) have been produced, with an estimated 0. 6 billion barrels of this from past application of C O 2 - EOR at Oxy’s large oil fields such as Wasson (Denver Unit) ( Figure III

- 3 )

. For perspective, Occidental is the largest onshore/Lower 48 oil producer and also the largest operato r of CO 2 - EOR projects in the Permian Basin

.

Figure I II

- 3. Occidental Petroleum’s Permian Basin EOR Opportunities

 Of the 7.8 billion barrels (net) remaining, Oxy expects to recover 2.4 billion barrels from applying CO 2 enhanced oil recovery, with 1.4 billion barrels as likely and 1.0

billion barrels as potential ( Figure I II

- 3 )

.

 Overall, Oxy has expectations for recovering 3 billion of the 11.9 billion barrels of original oil in

- place (net) from applying CO 2 - EOR in the Permian Basin. This is e qual

to a n ultimate recovery efficiency for CO 2 - EOR of over 25 % of OOIP. Oxy’s expectations for CO 2 - EOR performance in the Permian Basin are consistent with the oil recovery efficienc ies from “Next Generation” CO 2 - EOR technology determined by this study

.

10 Investor presentation, October, 2010.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

20 June 2011 2. CO 2 “Slug Size” and t he Net CO 2 /Oil Ratio

In the past, operators used small

- volume injections of CO 2 (0.4 to 0.5 hydrocarbon pore volume ( HCPV) ) to maximize profitability. With higher oil prices, CO 2 - EOR economics

favo r using considerably higher volumes of CO 2 . The evolution toward using higher
volumes of CO 2 is illustrated by Oxy’s experience at the Eastern Denver Unit of the

Wasson oil field ( Figure I II

- 4 )

.

Figure I II

- 4. Evolution of “Industry Standard” for Volume of CO 2 Injection (“Slug Size”)

Thes e increased CO 2 volumes need to be managed and controlled to assure that the injected CO 2 contact s additional residual oil rather than merely re

- circulate s through already contacted portions of the reservoir. One of the purposes of “Next Generation”

reser voir feedback

, diagnostics and control (“surveillance”) is to better manage the producti ve use of injected CO 2

.

Based on using larger volumes of CO 2 injection and reservoir surveillance, Oxy Permian anticipates a net CO 2 requirement of 5 Tcf for producing i ts next billion barrels of oil with
CO 2 - EOR from the Permian Basin ( Table I II

- 3 )

.

Net 3P Reserves (MMBOE) Net CO 2 Required (Tcf)

**•** Developed 570 2.8

**•** Undeveloped 430 2.2

T otal 1,000 5.0

Source: OxyPermian Source: OXY Permian 2006 

### 2001 EDU 80% to 100% HCPV CO 2 

### slug size increase approved 1996 EDU 60% to 80% HCPV CO 2 

### slug size increase approved 1994 EDU 40% to 60% HCPV CO 2 

### slug size increase approved 1992 Non performing FIA patterns stopped (~20% HCPV CO 2 

### slug size) 1989 EDU WAG & start off CO 2 

### injection in WAC, FIA, B8 FIA 1984 Start of CO 2 

### injection in EDU with 40% HCPV CO 2 

### slug size Started Eastern Denver Unit (Wasson Oil Field) CO 2 

### - EOR Project

Source: OXY Permian 2006 

### 2001 EDU 80% to 100% HCPV CO 2 

### slug size increase approved 1996 EDU 60% to 80% HCPV CO 2 

### slug size increase approved 1994 EDU 40% to 60% HCPV CO 2 

### slug size increase approved 1992 Non performing FIA patterns stopped (~20% HCPV CO 2 

### slug size) 1989 EDU WAG & start off CO 2 

### injection in WAC, FIA, B8 FIA 1984 Start of CO 2 

### injection in EDU with 40% HCPV CO 2 

### slug size Started Eastern Denver Unit (Wasson Oil Field) CO 2 

### - EOR Project

JAF028238.PPT

Table I II

- 3

. Permian Reserves and CO 2 Requirements

– “The Next Billion Barrels”Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

21 June 2011 OxyPermian’s expectations of a net 5 Mcf/BO as their future CO 2 /oil ratio for their Permian Basin oil properties is consistent with our projected CO 2 /oil ratio performance

for “Next Generation” CO 2 - EOR in the Permian B asin.

Of additional interest is a supporting set of analyses on the relationship of volumes of
CO 2 injection and enhanced oil recovery as provided by Marchant (2010) in the SPE paper “Life Beyond 80

– A Look at Conventional WAG Recovery Beyond 80% HCPV Inj ection in CO 2 Tertiary Floods.” 11

Size of CO 2 Slug His statement

-- “Tertiary oil recovery under CO 2 injection is a function of the total amount of CO 2 injected”

- - is supported by the following analysis in his paper, summarized on Table I II

- 4

.

Oil Recovery from CO 2

- EOR

(HCPV) (% OOIP)

50% 15%

100% 21%

190% 26%

3. Costs and Economic Viability

With recent higher oil prices, currently ranging from $7 5 to over $ 10 0 per barrel, and the rigorous pursuit of cost

- efficiencies, the economics of CO 2 - EOR have improved markedly.

Based on publicly presented information and using an oil price of $75 per barrel, Occidental Petroleum expects its Permian Basin CO 2 - EOR projects to provide a net

cas h margin of over $38 per barrel, after subtraction of royalties, operating costs, CO 2 purchase and amortized capital ( Figure I II

- 5 )

. At $100 per barrel and including more current information on costs, Occidental Petroleum expects a net cash margin of abo ut $56 per barrel (Figure III

- 6).

Even with the costs of conducting pilot floods and the delay between investment of capital and the production of oil typical of a CO 2 - EOR project, this cost analysis

indicates that the CO 2 - EOR projects in the Permian Basin can provide very favorable

economics

.

11 Merchant, D.H., “Life Beyond 80

– A Look at Conventional WAG Recovery Beyond 80% HCPV Injection in CO 2 Tertiary

Floods ” , SPE 139516, for presentation at the SPE International Conference on CO 2 Capture, Storage and Utilization, New
Orleans, LA, 10

- 12 November 2010. Table I II

- 4

. Relationship o f Oil Recovery to CO 2 Injection VolumesImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

22 June 2011 Figure I II

- 5. Typical Permian Basin CO 2 - EOR Project Cost Structure (Occidental Petroleum)

Figure III

- 6. Updated Typical Permian Basin CO 2 - EOR Project Cost Structure (Occidental Petroleum)

*$100/ Bbl Marker Price Source: Occidental Petroleum Corporation, May 2011

JAF028238.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

23 June 2011 

### I V. “ NEXT GENERATIO N” CO 2 

### - EOR TECHNOLOGIES

As set forth in the Executive Summary, “Next Generation” CO 2 - EOR consists of four realistically achievable advanced technologies:

1. Improvements in currently practiced CO 2 - EOR technolog y

,

2. A dvanced near miscible CO 2 - EOR technolog y

,

3. App lication of CO 2 - EOR to residual oil zones (ROZs) , and

4. Deployment of CO 2 - EOR in offshore oil fields.

Each of these “Next Generation” CO 2 - EOR technologies is further discussed in the

sections below.

**A**

**. Improvements in Current**  **ly Practiced CO**  **2 -**  **EOR Technology.**

The improved version of CO 2 - EOR technology envisioned under “Next Generation”

would address f ive of the opportunities for improving t he performance of currently practiced S tate of A rt (SOA) CO 2 - EOR technolog y , namely:

 Increasing the volume of CO 2 injected

,

 Capturing more of the remaining mobile and immobile oil

,

 Improv ing sweep efficiency and mobility control (reservoir conformance)

,

 Improving the technology of reservoir surveillance , and

 Lowering the threshold minimum miscibility pressure (MMP).

To examine the impact on oil recovery and CO 2 storage of these improv ements to currently practiced CO 2 - EOR technolog y, we selected an “example” San Andres oil reservoir in the Permian Basin, with reservoir properties and past oil recovery performance shown i n Table I V

- 1.

Reservoir Properties Oil Resource and Recovery Data

Depth 4, 200 ft Original Oil In

- Place 9 3

0 MMBbls

Net Pay 22 0 ft Ultimate P/S Rec. 325 MMBls

Porosity 9.40% Rec overy Effi ciency 35%

Initial Oil Saturation 0.77 Swept Zone Sor 0.32

Initial FVF 1.17 Current FVF 1.07

Initial Pressure 1,800 psi P/S Sweep Efficiency 64%

Temperature 99 o F “Unswept” Zone Sor 0.59
Oil Gravity 35 o API Min. Miscibility Pressure 1,300 psi

Oi l Viscosity 3.5 cp Dy k

stra

- Parsons 0.78 Table I V

- 1. Example Permian Basin San Andres Formation Oil ReservoirImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

24 June 2011 The “example” oil reservoir is large, with 9 3 0 million barrels of original oil in

- place (OOIP). The

reservoir is near

- depleted, with over 90% of its 3 25 million barrels of ultimate primary/secondary recovery alre ady produced . The oil recovery efficiency for this “example” San Andres Formation light oil (35 o API) reservoir is 35% of OOIP. However, this still leaves a most attractive “stranded” oil target of over 600 million barrels still in

- place.

Even with an o il viscosity of 3.5 cp and a Dykstra

- Parsons heterogeneity co

- efficient of 0.78, the waterflood sweep efficiency of this “example” oil reservoir is good at 64%. While the oil saturation in the swept zone of the reservoir has been reduced to 32%, additiona l mobile oil

remains in its poorly swept zones

.
With significant “stranded” (residual) oil and a minimum miscibility pressure of 1,300 psi, compared to an initial reservoir pressure of 1,800 psi, this “example” San Andres oil reservoir is

an attractive can didate for miscible CO 2 enhanced oil recovery.

1. Applying State of Art (SOA) CO 2 - EOR

As the starting point for the analysis, we modeled the “example” San Andres oil reservoir using PROPHET2 u nder “State of Art” (SOA) CO 2 - EOR technology.

In the “State of Art ” case, using 1 HCPV of CO 2 injection and a tapered WAG, the anticipated technical oil recovery for this “example” oil reservoir is 148 million barrels, produced from 174, forty acre inverted 5

- spot patterns.

 Overall technical oil recovery efficiency in th e SOA case is 1 5.9 % of OOIP, representative of a geologically favorable San Andres oil reservoir developed with

current CO 2 - EOR practices.

 The net (purchased) CO 2 to oil ratio is 7.6 Mcf of CO 2 per barrel of technically recovered oil (Mcf/BO), with a gross CO 2 to oil ratio of 15.7 Mcf/BO. This is reasonably representative of a somewhat higher viscosity (3.5 cp) and moderately heterogeneous (DP = 0.78) San Andres oil reservoir under a CO 2 flood.

 It is useful to note that in the SOA case, this “example” San Andres oil reservoir just barely achieve s its minimum rate of return (ROR) hurdle rate of 20%, before tax, at an oil price of $ 8 5 per barrel and a CO 2 market price of $40 per metric ton ($2.11 per

Mcf of CO 2 ). The reason is that the investment payback per iod is long, at 7 years.

 In addition, because ARI’s economic model features an economic truncation feature that stops a project once annual costs exceed annual revenues, approximately 6 million barrels of the technically recoverable oil remains unproduced

. This economic

truncation reduc es economic ( actual ) oil recovery efficiency to 15. 3 % and increasing
the net CO 2 /oil ratio to 7. 9 Mcf/BO.

In the sections below, we will examine the impact on technical and economic oil recovery and CO 2 demand ( storage ) of a pplying the various “Next Generation” CO 2 - EOR technologies, to this “example” oil reservoir first individually and then in

combination.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

25 June 2011 2

. Assessing Impacts of “Next Generation” CO 2 - EOR Technolog y

Each of the “ N ext G eneration” technologies ha s been form ulated to address one or more of the major problems impeding the more efficient performance of today’s “ State

of Art ” ( SOA ) CO 2 - EOR technology

.

 The first problem is less than optimum r eservoir contact by CO 2 due to inadequate

volume s of injected CO 2 . “Nex t Generation” technology involves injecting greater quantities of CO 2 , up to 1.5 HCPV.

 The second problem is p oor reservoir sweep efficiency due to a high fluid mobility

ratio , particularly in cases when the viscosity of the CO 2 and water is considerably

l ess than the viscosity of the reservoir oil. “Next Generation” technology involves improving the mobility ratio by increasing the viscosity of the displacing water in the WAG process to 2 cp.

 The third problem is i nefficient reservoir contact and low swee p efficiency (poor reservoir conformance) due to high geologic complexity and reservoir heterogeneity. “Next Generation” technology involves improving reservoir contact by drilling an

additional CO 2 injection well to target the mobile oil “stranded” in th e reservoir.

Supporting the application of each of the three specific “Next Generation” technologies

is the use of rigorous reservoir surveillance ( reservoir feedback, diagnostics and

control ). Without rigorous reservoir surveillance, the benefits of apply ing these three

“ N ext G eneration” CO 2 - EOR technologies would be much less.

**(a). Increasing the Volume of CO**  **2 Injected** 

**.** The first “Next Generation” technology option involves the increasing CO 2 injection volumes to 1.5 HCPV. Higher HCPVs of injected CO 2 enable more of the reservoir’s residual oil to be contacted by the injected CO 2 . However, higher volumes of CO 2 injection can also lead to longer overall project length and higher gross CO 2 to oil ratios. Because oil reservoirs with already high sweep efficiency may not gain sufficient benefits in relation to costs, the economic truncation algorithm within ARI’s CO 2 - EOR economic model limits the volume of CO 2 that is injected. This truncation algorithm works as a function of oil price and CO 2 costs.

R eservoir engineering theory and analyses argue that increasing the volume of CO 2 injected (V pD ), from 1.0 HCPV to 1.5 HCPV, should improve the areal sweep efficiency (E A ) from about 73% to about 8 2 % for a 4.4 mobility ratio (M) situation, as shown by the

t ype curves prepared by Claridge (1972) (Figure IV

- 1). This is equal to an increase in areal sweep efficiency of about 12 %.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

26 June 2011 Figure I V

- 1. Areal Sweep Efficiency in Miscible CO 2 F looding as a Function of HC PV CO 2

By increasing the volume of CO 2 injected f rom 1.0 HCPV to 1.5 HCPV, the PROPHET2

model show s an increase in oil recovery efficiency of 20 million barrels for the “example”

oil reservoir . This provides an increase of about 14% (168 MMB/148 MMB ) in oil recovery over the SOA ( 1.0 HCPV ) case . Techni cal oil recovery efficiency increases

from 15.9 % of OOIP with 1 HCPV of CO 2 injection to 18.1% of OOIP with 1

. 5 HCPV of

CO 2 injection, Table IV

- 2. Advanced reservoir surveillance is essential to en sure that the increased volumes of injected CO 2 contact mo re of the reservoir and does not merely circulate through already swept reservoir intervals

.

Interestingly, the economic benefits of injecting a higher HCPV of CO 2 are realized only with an ability to increase the CO 2 injection rate, enabling the 1.5 HCPV of CO 2 injection to be performed over the same time period as injecting the 1.0 HCPV of CO 2 . With 1.5
HCPV of CO 2 and a 50% higher CO 2 injection rate, the project achieves a 29.2% ROR compared to 21.5% ROR in the SOA (1.0 HCPV, regular rate) case. Source: Claridge , E.L., “Prediction of Recovery in Unstable Miscible Displacement ”, (J)SPE 12(2) 143

- 155 (April 1972). Note: V pD is hydrocarbon pore volumes of injected CO 2 . 1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0 0.2

0 0.5 1 2 10 5 50 20 200 100 1000 500 5.0

2.0 3.0

1.0 V p

D

0.1 0.2 1.5

0.6SweepEfficiency,EA

Mobility Ratio, M

JAF028238.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

27 June 2011 Table I V

- 2. Oil Recovery and Economic Impact of Increasing the Volume of CO 2 Injected

CO 2 Injection Volumes Technical Oil Recovery Project ROR

(HCPV /Injection Rate ) (MMBbls) (% OOIP) (Before Tax)

1.00 /Reg ular Rate 148 15.9 21.5%

1.5/Reg ular Rate 168 1 8.1 20.6%

1.5/Higher Rate 168 18.1 29.2%

**(b). Capturing More of the Re**  **maining Mobile and Immobile Oil.** It may be possible with optimized well design and placement to contact more of the remaining mobile oil (as well as more efficiently contact the swe pt zone residual oil) in a reservoir than continuing to use the existing waterflood pattern and well placement design.

The options for installing a modified CO 2 flood and well placement design include: (1) isolating the previously poorly

- swept reservoir i ntervals (with higher residual oil) for targeted CO 2 injection; (2) drilling horizontal injection wells to target lower permeability reservoir intervals; (3) modifying the well pattern alignment; (4) using physical (or chemical) means for diverting CO 2 int o previously poorly

- contacted portions of the reservoir; and (5) drilling the reservoir at closer well spacing.

For the “example” oil reservoir in the “Next Generation” case , we add ed one new vertical CO 2 injection well to each pattern to target the previo usly poorly contacted portions of the reservoir , as shown in Figure I V

- 2.

Figure I V

- 2. Using Modified P attern and Well Placement Design to Capture Mobil Oil

Source : Adapted by Advanced Resources Int’l from “Enhanced Oil Recovery”,

D.W. Green and G. P. Willhite , SPE, 1998. The low permeability, higher oil saturation portion of the reservoir is often inefficiently swept by the original waterflood. Drilling a second CO 2 injection well to flood low permeability Layer #1 (1/2 of 5 spot pattern).

478 Days (Breakthrough in Layer #2)

0 100 200 300

Distance, ft Layer #1

Layer #2 Layer #1 (k = 2 md; S

or = 0.60*)

Layer #2 (k = 10 md; S

or = 0.32*)

1839 Days (CO 2 channeling in Layer #2)

Layer #1

Layer #2 Well
P 1 Well
P 2 Original

Well

I 1 New
Well

I 2

JAF028238.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

28 June 2011 To properly model the addition of a second injection well in each pattern, the reservoir is split into “fully swept” and “partially swept” zones

. Adding a CO 2 injection well and modifying the flow pattern of the reservoir to contact the mobil e oil left after the waterflood improves oil recovery by 5. 1 % for the “example” oil reservoir . This improves technical oil recovery efficiency to 21% in the “modified pattern and well placement”

case versus 1 5.9 % in the SOA case

. Adding a second CO 2 injection well also enables the project to increase CO 2 injectivity in a pattern area by 50%. Advanced reservoir surveillance is a key enabling technology for implementing changes in patterns and well placement designs for targeting left behind mobile oil

.

While the drilling of the new CO 2 injection well adds $1. 2 million of CAPEX per pattern for the “example” oil r eservoir and increase O&M costs, the overall economics are significantly improved. The recovery of the additional 4 7 million barrels of oil and its earlier production (in the “modified pattern and well placement” case), increases the
ROR to 77 %

, Table I V

- 3.

Table I V

- 3. Oil Recovery and Economic Impact of Modified Pattern and Well Placement

Pattern/Well Design Technical Oil Recovery Project ROR
(MMBbls) (% OOIP) (Before Tax) Existing Design (SOA) 148 15.9 21.5% Modified Design ( “ Next Gen eration” ) 1 9 5 21. 0 77.2%

**(c). Improving**  **Sweep Efficiency and Mobility**  **Control (Reservoir**

**Conformance )** 

**.** Often the viscosities of the injected fluids (CO 2 and water) are considerably lower than the viscosity of the reservoir oil, leading to viscous fingering of

the CO 2 through the reservoir’s oil and thus inefficient macroscopic displacement (sweep efficiency) in the reservoir

, Figure I V

- 3. The extent of viscous fingering (and sweep efficiency) is governed by the mobility ratio

- - the viscosity of the reservoir oil divided by the viscosity of the displacing fluids.

The “example” oil reservoir has a mobility ratio of 4.4, based on an oil viscosity of 3.5 cp and a water viscosity (in the reservoir) of 0.8 cp. (The mobility ratio between the reservoir’s oil and the inj ected CO 2 is considerably higher.) Reservoir engineering theory and analysis argue that improving the oil/water mobility ratio from 4.4 to 1.7 (by increasing the viscosity of the water to 2 cp) should improve the areal sweep efficiency (E A ) from about 73% to about 8 1 %, as shown by the type curves prepared by Claridge (1972)

, Figure III

- 4. This is equal to an increase in the areal sweep efficiency of about

1 1 %.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

29 June 2011 Figure I V

- 3. Example of Viscous Fingering of CO 2 Due to Unfavorable Mobility Ratio*

Figure I V

- 4. Areal Sweep Efficiency in Miscible CO 2 Flooding as a Function of Mobility Ratio

(Five

- Spot Well Pattern) 

### Example A Example B

Source: Adapted by Advanced Resources Int’l from “Enhanced Oil Recovery”, D.W. Green and G. P. Willhite , SPE, 1998. Oil and Water

Water Oil and Water

Water Polymer

In Water

Waterflood Viscosity Enhanced Flood High Mobility Ratio Improved Mobility Ratio

*The mobility ratio is the viscosity of the reservoir oil divided by the viscosity of the displacing fluid.

JAF028238.PPT

Source: Claridge , E.L., “Prediction of Recovery in Unstable Miscible Displacement”, (J)SPE 12(2) 143

- 155 (April 1972). Note: V pD is displaceable fluid pore volumes of CO 2 injected. 1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0 0.2

0 0.5 1 2 10 5 50 20 200 100 1000 500 5.0

2.0 3.0

1.0 V p

D

0.1 0.2 1.5

0.6SweepEfficiency,EA

Mobility Ratio, M

JAF028247.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

30 June 2011 After adding a polymer or other viscosity increasing agent s to the drive water in the
WAG CO 2 flood to change the mobility ratio from 4.4 to 1. 7 , the PROPHET2 model

show s an increase in the oil recovery of 10 million barrels for the “example” oil reservoir. Technical oil recovery efficiency increases to 17.0% with a 2 cp water WAG compared

to 15.9 % recovery efficiency with an 0.8 cp water in the WAG

, Table I V

- 4

. Again, rigorous reservoir surveillance is important for capturing the full benefits of improving sweep efficiency (reservoir conformance) with improved mobility control.

Table I V

- 4. Oil Recovery and Economic Impact of Improving the Mob ility Ratio

Water Viscosity Mobility

Ratio Technical Oil Recovery Project ROR (cp) ( M ) (MMBbls) (% OOIP) (Before Tax)

0.8 4.4 148 15.9 21.5 %

2 1.7 158 17.0 27.0 %

Importantly, improving the mobility ratio helps improve early time oil production,

red ucing the investment payback period to 5 years in the “Next Generation” case from 7 years in the SOA case and achieve a higher rate of return . (at a $ 8 5 per barrel of oil price and a $40 per metric ton of CO 2 cost)

, Table I V

- 4.

**(d). Assessing Impact of**  **the Combined Application of “Next Generation” Technologies** 

**.** Not surprisingly, the integrated application of all three of the “ N ext
G eneration” technologies, combined with a rigorous program of reservoir feedback, diagnostics and control (“reservoir surve illance”)

, provide s the largest impact:

 Economically feasible oil recovery increases to 244 million barrels (26.2% of OOIP)

in the “Next Generation” case from 14 2 million barrels (15. 3 % of OOIP) in the SOA

case.

 Even though the volume of purchased CO 2 is 5 0% larger, the net CO 2 /oil ratio (due to higher oil recovery and improved control of the injected CO 2 ) is lower at 5.7 Mcf per barrel of oil in the “Next Generation” case versus 7. 9 Mcf per barrel of oil in the
SOA case.

 While overall CAPEX for the “Next G eneration” CO 2 flood is higher (due to drilling more wells and increasing the size of the CO 2 recycle equipment) and the overall OPEX is higher (due to the costs of adding polymers to the injected water and conducting reservoir surveillance), the economics are significantly better. As shown

in Table I V

- 5, the “Next Generation” CO 2 - EOR project achieves a rate of return (ROR) of nearly 94% compared to 21.5% in the SOA case.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

31 June 2011 Table I V

- 5. Impact of Integrated Application of “Next Generation” CO 2 - EOR Techn ology

Technology

Case Economic Oil Recovery Net CO 2 /Oil

Ratio Project

ROR
(MMBBbls) (% OOIP) (Mcf/BO) (Before Tax)

State of Art 14 2 15. 3 7. 9 21.5 %

“Next Generation” 244 26.2 5.7 93.8%

A particularly important finding emerges from the assessment of individual versus integrated application of “Next Generation” CO 2 - EOR technology in the “example” oil

reservoir:

 The sum of the individual (technology by technology) applications of “Next

Generation” CO 2 - EOR technology is 77 million barrels of increased oi l recovery.

 The integrated application of the three “Next Generation” CO 2 - EOR technologies provide 102 million barrels of increased oil recovery , about a third more than the sum from applying these technologies individually. Integrated application of

“Nex t Generation” CO 2 - EOR captures the beneficial synergistic interactions of

th ese three improved technologies and provides a “sum that is greater than the parts.”

**(e)**

**. Lowering the Threshold Minimum Miscibility Pressure (MMP)** 

**.** A significant number of oil r eservoirs, particularly in Appalachia, the Mid

- Continent and the Illinois Basin, have reservoir pressures somewhat below MMP, re legating these oil
reservoirs to use of less efficient near miscible or even immiscible CO 2 - EOR technology . “Next Generation” C O 2 - EOR technology, through use of miscibility enhancing additive s , has a goal of reducing the MMP of oil reservoirs by 250 psi, enabling a larger number of oil reservoirs to be processed with miscible and near
miscible CO 2 - EOR. ( The “example” oil reservoi r was already favorable for miscible
CO 2 - EOR and thus would not benefit from this specific “Next Generation” technology. )

**B. Advanced**  **Near Miscible CO 2**  **Enhanced Oil Recovery Technology** 

1. Background

A s discussed previously, a large number of oil reservoi rs, particularly in Appalachia, the

Illinois Basin and the Mid

- Continent, have depths and oil properties unsuitable for achieving miscible CO 2 and its efficient oil displacement. However, recent laboratory and analytical work indicate that if the achievab le reservoir pressure is close to minimum miscibility pressure (MMP), the oil reservoir can achieve reasonable oil recovery using near miscible CO 2 - EOR technology.

While the exact parameters of the pressure range for near miscible CO 2 - EOR have yet

to be de fined, we have established for this study a near miscibility reservoir pressureImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

32 June 2011 range of 75% to 99% of MMP. Reservoirs with achievable pressures of less than 7 5% of MMP would be assigned to immiscible CO 2 flooding, the analysis of which is beyond the scop e of work of this study.

2. Resource Target

Various investigators have identified attractive targets for applying near miscible CO 2 - EOR technologies to domestic oil fields . For example :

 The Illinois Geological Survey identified a large number of oil fie lds holding 3.8
billion barrels of OOIP in the Illinois Basin that would be attractive for near
miscible CO 2 - EOR technology . These reservoirs could provide 0.3 billion barrels of oil recovery and about 100 million metric tons of CO 2 storage capacity

. 12

 Wor k by the Chemical and Petroleum Engineering Department of the University of Kansas identified the Arbuckle Formation in Kansas as a large target for near
miscible CO 2 - EOR. To date, the Arbuckle Formation in Kansas has produced

2.2 billion barrels from abo ut 8 billion barrels of OOIP. Most of the Arbuckle oil fields are close to abandonment, with 90% of the wells producing less than 5

barrels of oil per day. The Kansas study noted that near miscible CO 2 - EOR offered the potential for recovery of up to 1 bi llion barrels from these Arbuckle

Formation reservoirs

. 13

3. Mechanisms of Near Miscible CO 2 - EOR

Three oil displacement mechanisms are important for near miscible CO 2 - EOR :

 First, the injection of CO 2 and its dissolution into the oil phase, reduces the

vis cosity of the oil/CO 2 mixture providing a more favorable mobility ratio and thus improved sweep efficiency. Figure I V

- 5 shows the sharp reduction in oil viscosity, achieved by injecting CO 2 at 1,100 psig, from an initial 4.5 cp to about 1 cp

, based on wor k by Kansas

, for a 33 o API oil at 110 o F.

 Second, the dissolution of CO 2 into the oil phase causes the oil to swell, with the volume above residual oil saturation becoming mobile and displaceable with CO 2 and water. Figure IV

- 6 shows the increase (swelling ) of the oil volume by about
30% due to dissolution of 0.7 mole fraction of CO 2 into the oil phase, in the near miscible region of 1,150 psig, as reported by the Kansas study, 13 for a 33 o API oil

at 110 o F.

12 Frailey, S.M., “CO 2 Flood Pilots in the Illinois Basin”, PTTC IOR/EOR Illinois Basin Workshop, CO 2 Enhanced Oil Recovery, Illinois Basin Pilot Projec ts, Midwest Geological Sequestration Consortium, March 2, 2011, Evansville, IN.

13 Bui, L.H., Tsau, J.S., and G.P. Willhite, “Laboratory Investigations of CO 2 Near

- Miscible Application in Arbuckle Reservoir”, SPE 129710, paper prepared and presented at the 2010 SPE Improved Oil Recovery Symposium, Tulsa, OK 24

- 28 April, 2010.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

33 June 2011 Fi gure IV

- 5. Effect of CO 2 Dissolution in Crude Oil on Viscosity.

Figure IV

- 6. Saturation Pressure/Swelling Factor for Near Miscible CO 2 - EOR Source: Bui, L.H., Tsau, J.S., and G.P. Willhite, “Laboratory Investigations of CO2 Near

- Miscible Application in Arbuckle Reserv oir”, SPE 129710, paper prepared and presented at the 2010 SPE Improved Oil Recovery Symposium, Tulsa, OK 24

- 28 April, 2010.

JAF028308.PPT

Source: Bui, L.H., Tsau, J.S., and G.P. Willhite, “Laboratory Investigations of CO2 Near

- Miscible Application in Arbuckle Reserv oir”, SPE 129710, paper prepared and presented at the 2010 SPE Improved Oil Recovery Symposium, Tulsa, OK 24

- 28 April, 2010.

JAF028308.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

34 June 2011  Third, as reservoir pressure enters the near miscible pressure response range, the extraction and vaporization of light hydrocarbon components from the crude
oil into the CO 2 vapor phase begins, the mixing of the CO 2 and oil phases progresses, and the interfacial tension (IFT) of the system is lowered

, promoting improved oil recovery. Figure IV

- 7 shows that the onset of this mixing and lower IFT begins at about 60% of minimum miscibility pressure for the oil composition examined by IFP. 14

Figure IV

- 7. Mechanisms of Near Miscible CO 2 - EOR

4. Oil Recovery with Near Miscible CO 2 - EOR

Figure I V

- 8 provides the classic al oil recovery versus pressure for a slim tube experiment of CO 2 injection . It shows that the efficiency of oil recovery begins to increase sharply in the near miscible pressure region

, defined in the figure as 80% of minimum miscibility pressure (MMP).

A somewhat more representative experiment is to conduct a core flow test of oil

recovery with pressure in the near miscible region. The Kansas study and laboratory

test s determined that oil recovery in the near miscibility pressure region (80% to 99%

MMP ) recovered 65% to 80% of the water flood residual oil in dolomite cores and 45%

to 60% of the water flood residual oil in sandstone cores. 13

14 Bossie

- Codreanu, IFP

– March 2009

. Source: Bossie

- Codreanu , IFP

– March 2009

JAF028308.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

35 June 2011 Figure I V

- 8. Relative Miscible Pressure, Pres/MMP

5. Application of Near Miscible CO 2 - EOR Technology by This Study

To capture the performance of near miscible CO 2 - EOR, the ARI study identified 67 oil

reservoirs holding 12 billion barrels of OOIP that had pressures of 75% to 99% of MMP

. It then performed PROPHET 2 stream tube reservoir simulations to calculate oil recovery
and CO 2 requirements for each of these oil reservoirs . In general, the results were consistent with the above laboratory finding s that the closer the reservoir pressure i s to MMP, the higher and more ef ficient is the oil recovery.

The near miscible reservoir s in the “Next Generation” CO 2 - EOR case w ere flooded with
1 HCPV of CO 2

. The residual oil to CO 2 was set at 80% of the residual oil in the reservoir after water flooding to incorporate the extracti on/vaporization and lower IFT oil recovery mechanisms inherent within near miscible CO 2 - EOR.

**C. Application of CO**  **2 -**  **EOR to Residual Oil Zones (ROZs).**

The third “Next Generation” CO 2 - EOR technology is the application of miscible CO 2 - EOR to the oil resourc e in residual oil zones. Residual oil zones exist below and beyond the main oil reservoir pay zone, below the traditional oil

- water contact , Figure

IV

- 9

.

Our own detailed log work and extensive work by others, notably, Mr. L. Stephen Melzer

of Melzer Cons ulting and Dr. Robert Trentham of UT Permian Basin, have confirmed that ROZs hold a massive, previously overlooked oil resource in the Permian and

numerous other domestic oil basins.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

36 June 2011 Figure IV

- 9. Oil Saturation Profile in the TZ/ROZ: Adapted from a Wasso n Denver Unit Well.

Briefly , residual oil zones exist in the portions of oil reservoirs that have been hydro

dynamically swept by the movement of water from outcrop to deeper horizons over a time period of millions of years. One may wish to label this m ovement of water and its displacement of oil as “nature’s waterflood”. Because residual oil saturation is low in the naturally water flooded ROZ, CO 2 - EOR is required to re

- mobiliz e and recover this oil

.

I nformation from previous reports prepared by Adva nced Resources and Melzer Consulting for U.S. DOE/NETL and more recent work by Melzer Consulting for RPSEA show that the ROZ resource occurs well beyond the outlines of existing oil fields and actually exists as a series of areally extensive “ROZ fairways” , as illustrated in Figure

I V

- 10

. However, because of limitations of scope, the current study only addresses the
ROZ resource below the main pay zone within the structural confinement of existing oil

fields and does not capture the much larger oil resour ce within the “ROZ fairways”

.

While the viability of recovering oil from ROZs is being demonstrated by a series of ROZ field projects (at Seminole by Hess, at Wasson Denver Unit by Occidental

, at Goldsmith by Legado, among others), a number of important te chnical issues remain to be addressed and solved before one can expect optimally efficient oil recovery from ROZs using miscible CO 2 - EOR. Some of the technical challenges are discussed in the three

ROZ basin studies cited previously

. 3

, 4

, 5 Main Pay Zone (MPZ)

Transition Zone (TZ)

Residual Oil Zone (ROZ)

Base of Ultimate OWC Base of Producing OWC 4900

4950 4800

4850

5000

5050

5400 5350 5300 5250 5200 5150 5100

5450 OWC 100 0 Oil Saturation %Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

37 June 2011 Figure IV

- 10. Map of ROZ Fairways.

D. Deployment of CO 2 - EOR in Offshore Oil Fields

The deep, light oils common to Gulf of Mexico (GOM) offshore oil fields are particularly

amenable to miscible CO 2 - EOR technology. And, with the continued discovery and development of oil fields in the deep waters of the Outer Continental Shelf, the size of this resource target continue d to grow.

Howe ver, the deployment of CO 2 - EOR technology in offshore oil fields faces many barriers and challenges, including inadequate platform space for CO 2 recycling equipment, the expense of drilling new CO 2 injection wells

, and the need to transport of
CO 2 from ons hore sources to offshore platforms. While these barriers and challenges can be addressed, they add substantial costs to the oil recovery process.

While CO 2 - EOR projects have been undertaken , in a small handful of offshore oil fields

near to shore and in s hallow GOM waters, none are currently operating. As such, the

fourth “Next Generation” CO 2 - EOR technology involves undertaking the challenge of deploying innovative designs and a dvanced CO 2 - EOR technology for offshore oil fields. Permian Basin
Outline TX NM Palo Duro Basin

Theorized U. Permian Hydrodynamic Fairways

Northwest
Shelf
Area

Central Basin Platform Midland
Basin Boundary of Northwest

Shelf San Andres
Platform Carbonate Play

JAF028247.PPT Source: Modified from Melzer Consulting (2010)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

38 June 2011 

### V. USING CO 2 

### ENHANCED O IL RECOVERY (CO 2 

### - EOR) TO
INCREASE DOMESTIC OIL PRODUCTION AND TO
ACCELERATE DEPLOYMENT OF CCS

**A. Overview of Benefits** 

Numerous benefits stem from using captured CO 2 emissions from power and industrial plants for enhanced oil recovery. The most compelling of the numerous benefits include:

 **Improved Domestic Energy Security**

. The implementation of “Next
Generation” CO 2 - EOR technology, including productively using captured CO 2 emissions from power plants

, w ould enable an additional 67 billion barrels of

domest ic oil to be economically recovered. This would support 4 million barrels per day of additional oil production by year 2030, greatly improving domestic energy security

.

 **Increased Revenue Streams**

. The sale and use of captured CO 2 would provide

revenue st ream s to the capturer of CO 2 emissions and to other entities involved

in the CO 2 value chain.

 **Accelerat ed Deployment o**  **f CCS**

. Selection of EOR as the CO 2 storage option would enable major CCS projects to be implemented in the near

- term (next ten years) whi le the “thorny issues” surrounding using saline formations for storing
CO 2 (e.g., pore space rights, regulatory approval, public acceptance) are

resolved.

These three benefits of integrating CO 2 - EOR with CO 2 capture and storage are further

discussed below.

The “poster child” for integrating CO 2 - EOR and CO 2 storage, the Weyburn oil field, provides a real world demonstration of the oil recovery and CO 2 storage benefits offered by integrated CO 2 - EOR and CO 2 sequestration

, Figure V

- 1. For example :

 The volume of oil recovery is estimated at 200 million barrels, add ing to Canadian energy security.

 The purchase of CO 2 by EnCana (now Cenovus) i s providing valuable revenues
to the Coal Gasification P lant at Beulah, North Dakota . The production of oil is providing royalties and economic activity for the Province of Saskatchewan.

 The storage of CO 2 while recovering the 200 million barrels of oil is estimated at

55 million metric with integrat ed EOR and CO 2 sequestration.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

39 June 2011 Figure V

- 1 " Poster Child" for Integrating CO 2 - EOR and CO 2 Storage

1

. Improving Energy Security by Using CO 2 - EOR to Increase Domestic Oil

Production.

The U.S. uses 19 million barrels of oil per day (about 7 billion barrels per year) primarily to power its massive tr ansportation fleet. Nearly two

- thirds of this oil is imported, from countries such as Canada, Mexico, the Middle East and other sources. These large and growing imports impact our energy security, the size of our trade deficit, and the health of our econo my.

While still a significant oil producer

- - the U.S. produced about 7 million barrels of oil per day (including crude oil, condensate and natural gas liquids) last year

- - domestic oil production has been steadily declining. (The recent development of t he Bakken Shale has helped stem the oil production decline.)

Yet, the nation has a vast resource of nearly 400 billion barrels of oil still left in the ground (“stranded”) that is unrecoverable with existing primary and secondary oil recovery technologies

, Figure V

- 2. Recovering a portion of this “stranded” oil is the goal of the CO 2 - EOR technologies clustered under the “Next Generation” technology umbrella. Regina Weyburn

CO 2 Beulah North Dakota Saskatchewan

Montana Manitoba Canada

USA Canada

USA

Source: EnCana, 2005 • Largest CO 2 EOR project in Canada:

– OOIP 1.4 Bbbls

– 200 MMB of incremental oil

• World ’ s largest geological CO 2 storage project

– 2.4 MMt/year (current)

– 13 MMt to date

– 30 MMt with EOR

– 55 MMt with EOR/sequestration

JAF028238.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

40 June 2011 Figure V

- 2. The Domestic Oil Resource Base

A recent report, prepared for the Natural Resources D efense Council by Advanced Resources International, entitled “U.S. Oil Production Potential from Accelerated Deployment of Carbon Capture and Storage 15

Achieving the total of 4 million barr els per day of oil production from CO 2 - EOR, with 3.4 million barrels per day directly linked to use of CO 2 from CCS, would significantly reduce oil imports. It

would also reduce annual CO 2 emissions by nearly 4 00 million metric tons in year 2030. , states that combining CCS with enhanced oil recovery could boost U.S. oil production by 3.4 million barr els per day by year 2030

, Figure V

- 3. This would be in addition
to CO 2 - EOR production of about 0.6 million barrels per day from use of currently available CO 2 supplies from natural sources and gas processing plants

.

15 Advanced Resources International, Inc., “U.S. Oil Production Potential from Accelerated Deployment of Carbon Capture and Storage”, prepared for the Natural Resources Defense Council, March 2010. This report draws heavily from the U.S. DOE/NETL

sponsored report, also prepared by Advanced Resources “Storing CO 2 and Producing Domestic Crude Oil with Next Generation

CO 2

- EOR Technology: An Update” Pub lication Number: DOE/NETL

- 2010/1417, April 2010. 

### Original Oil In

- Place: 597 B Barrels

“ Stranded ” Oil In

- Place: 393 B Barrels

Proved Reserves

22 Billion Barrels Future Challenge

393 Billion Barrels

Cumulative Production
182 Billion Barrels

Source: Advanced Resources Int ’ l. (2009) 

### Only about one

- third of the domestic oil resource is recoverable with traditional technologies.

JAF028247.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

41 June 2011 Figure V

- 3. Comparison of NRDC/ARI and EIA’s Outlook for CO 2 - EOR

2. Providing Revenue Streams from Sale of CO 2 and Production of Oil.

A most important benefit from integrating CO 2 - EOR and CO 2 storage is that use of CO 2 for oil recovery would provide new revenu e streams to a series of notable stakeholders

, Table V

- 1:

 An important revenue stream accrue s to the capturer s of CO 2 emissions , helping lower the overall cost of conducting CCS. In this report, we assume a price for
CO 2 of $40/metric ton, delivered to th e oil field at pressure. At 0. 3 metric tons of purchased (net) CO 2 per barrel of recovered oil, this results in a transfer of $ 12 of the $85 per barrel oil to entities selling the CO 2 to the oil industry

. Power and

other industries involved with CO 2 captu re would need to provide nearly 90% of

the future CO 2 demand , g aining $ 7 3 0 billion dollars of revenues

.

 A second revenue stream accrue s to local and state governments and the

Federal T reasury from royalties, severance and ad valorem taxes and income

taxes

. Our analysis shows that, at an oil price of $ 8 5 per barrel, $ 21.20 of this oil price is transferred directly to state and local governments and the Federal Treasury. With 67.2 billion barrels of economically recoverable oil from applying
“Next Generatio n” CO 2 - EOR, this equals $ 1, 420 billion of revenues transferred to domestic public treasuries rather than to foreign treasuries. These revenues, in

states such as Texas

, Wyoming and others , are a primary source of funds for school systems and other valuabl e public services. 0.0 1.0 2.0 3.0 4.0202020252030Million Barrels Per Day

0.0 1.0 2.0 3.0 4.0202020252030Million Barrels Per Day

*Discussions are underway among the U.S. EIA, U.S. DOE/NETL and the NRDC staff on how to represent the integration of CO 2 – EOR and CCS in energy
market forecasts

. Source: Advanced Resources International, Inc. (2011). EIA’s Current Outlook for CO 2 - EOR* (AEO 2010 Reference Case) NRDC / ARI Outlook for CO 2 - EOR

Base from

Natural and

Industrial

Sources Total, Including EOR from CCS Deployment

JAF2010_083.XLS

JAF028238.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

42 June 2011 1 Assumes $85 per barrel of oil.

2 Royalties are 17.5%; 1 of 6 barrels produced are from federal and state lands.

3 Production and ad valorem taxes of 5%, from FRS data.

4 CO 2 market price of $40/tonne, including transport; 0. 3 tonne of purchased CO 2 per barrel of oil ; CCS would provide about 90% of CO 2 demand

.
5 CO 2 recycle cost of $16/tonne; 0.6 tonne s of recycled CO 2 per barrel of oil.

6 O&M/G&A costs from ARI CO 2

- EOR cost models.

7 CAPEX from ARI CO 2

- EOR cost models.

8 Combined F ederal and state income taxes of 35%, from FRS data.

 A third revenue stream accrues to the general domestic economy from successful application of CO 2 - EOR technology. With $25.80 of the $ 8 5 barrel oil price being spent on domestic wages and purchases , this provides $ 1.7 trillion dollars of gross revenues to the domestic economy

.

 A fourth revenue stream accrue s to a variety of entities holding pri vate mineral rights from royalty payments ($7.70 per barrel) and to the U.S. oil industry ($19.50 per barrel) for return of and return on capital investment. The Texas economic model shows that every dollar of direct investment in oil development

has a mu ltiplier of 4 in terms of supporting economic activity.

 Finally, the domestic trade balance (foreign debt) from producing 67.2 billion barrels of domestic oil rather than importing this oil would be reduced by $5. 7

trillion. Notes Oil Industry Private

Minerals Federal/

State Power

Plant/Other U.S. Economy

1 Domestic Oil Price ($/B) $85.00

2 Less: Royalties ($14.90) $12.40 $2.50

3 Production Taxes ($3.50) ($0.60) $4.10

4 CO2 Purchase Costs ($12.00) $10.80 $1.20

5 CO2 Recycle Costs ($9.60) $9.60

6 O&M/G&A Costs ($9.00) $9.00

7 CAPEX ($6.00) $6.00

Total Costs ($55.00)

- Net Cash Margin $30.00 $11.80 $6.60 $10.80 $25.80

8 Income Taxes ($10.50) ($4.10) $14.60 ? ?
Net Income ($/B) $19.50 $7.70 $21.20

-

JAF2011_030.XLS Table V

- 1. Distribution of Economic Value of Incremental Oil Production from CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

43 June 2011 3

. Accelerating the Applicati on of CO 2 Storage.

The integration of CO 2 - EOR and CCS would greatly help accelerate the regulatory acceptance and implementation of CO 2 storage:

 Oil fields provide CO 2 storage options that can be permitted under existing (or slightly modified) regulatory guidelines, thereby avoiding the large delays inherent when waiting on new regulations and permitting for large

- scale storage
of CO 2 in saline formations.

 The pore space, mineral rights and long

- term liability issues of oil fields are already well establis hed and thus would not be impediments to a n integrated
CO 2 storage and CO 2 - EOR project

.

 Oil fields generally have existing subsurface data and often possess usable infrastructure such as injection wells and gathering systems, enabling more

accurate assessm ent of CO 2 storage capacity and substantial cost savings.

Beyond these three benefits, a number of other conditions favor the use of oil fields for injecting and storing CO 2 . First, oil fields are located in areas with an accepted history of subsurface fi eld activities contributing to public acceptance for storing CO 2 . Second, oil fields provide an existing “brown field” storage site versus having to establish a new “green field” site when preparing a
saline formation for CO 2 storage. Third, the footprin t of the CO 2 plume within an oil field would

be several times smaller than within a saline formation. Finally, the early reliance on EOR for storing CO 2 would help build the regional pipeline infrastructure for future CO 2 storage projects

in saline format ions.

**B. Proposed Use of Oil Fields for Storing CO**  **2**

To a large extent, industrial operators of proposed coal

- to

- liquids (CTL) plants, integrated gasification combined cycle (IGCC) facilities, and other carbon conversion projects have already

“voted with th eir feet” for first turning to oil fields for storing CO 2 . Three such projects are

discussed below 16

 Hydrogen Energy’s (BP/Rio Tinto) pet

- coke gasification plant in Kern County, California plans to deliver 2 MMt/yr of CO 2 to the giant Elk Hills oil field for CO 2 - EOR

, Figure V

- 4. :

 Southern Company’s Kemper County IGCC plant plans to provide 1.1 to 1.5 MMt/yr to Denbury Resources for CO 2 - EOR in oil fields in Louisiana and Mississippi

, Figure V

- 5.

 Summit Energy’s Texas Clean Energy IGCC project plans to sell 3 MMt/yr for

CO 2 - EOR in West Texas

, Figure V

- 6.

16 Various industry presentations and publications

.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

44 June 2011 Figure V

- 4 . Advanced Power Plants and Use of EOR for CO 2 Storage

Figure V

- 5 . Advanced Power Plants Using EOR for Storage • 250MW gasification of pet

- coke

• Capture 90% of CO 2 ; over 2 million

tons of CO 2 per year

• Oxy will take CO 2 for EOR at Elk Hills

oil field

• Operational by 2015

Source: Hydrogen Energy Elk Hills Oil Field near Bakersfield, CA

JAF028247.PPT Hydrogen Energy ’ s (Rio Tinto/BP)

Pet

- coke Gasification Plant

• 582 MW IGCC fueled by Mississippi lignite

• Capture 65% of CO 2

• Negotiating to sell 1.1 to

1.5 million tons of CO 2 per year for EOR

• Cost $2.4 B; operational by 2014

*Source: Mississippi Power, Denbury Resources Southern Company ’ s Kemper County IGCC Plant

JAF028247.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

45 June 2011 Figure V

- 6 . Advanced Power Plants Using EOR for Storage

* * * * *

Clearl y, many of the proposed new IGCC and coal to gas/liquids plants are look ing to CO 2 - EOR

as their primary CO 2 storage option. Because of this, some power companies have expressed concerns that these initial plants will “use up” all of the available EOR mark et and CO 2 storage capacity, leaving little for subsequent use.

As such, the key question s are: (1) H ow much CO 2 could be sold to and stored with “Next
Generation” CO 2 enhanced oil recovery , and (2) Where are the potential CO 2 demand (and storage) centers ? Th ese key question s are addressed in the following chapter. • 400 MW IGCC with 90% capture

• Located near Odessa in

Permian Basin

• Sell 3 million tons of CO 2 per year to EOR market

• Expected cost $1.75 B;
$350 MM award under CCPI

Round 3. Summit ’ s Texas Clean Energy IGCC Project

Source: Siemens Energy

JAF028247.PPTImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

46 June 2011 

### VI. A REGIONAL (“BASIN

- ORIENTED STRATEGY”) LOOK AT THE
CO 2 

### - EOR/STORAGE POTENTIAL

The CO 2 - EOR potential, for both storing CO 2 and producing oil, varies s ignificantly across the regions and b asins of the U.S. For example, the great Permian Basin of West Texas and New Mexico, while the “ birth place” of CO 2 - EOR, still offers major opportunities for applying “ N ext
G eneration” CO 2 - EOR technology.

Other regions of the country offer similar promis e but still face constraints. California, currently

lock ed out of natural CO 2 sources, has a host of deep, light oil reservoirs, such as the giant Elk Hills, ready for development with CO 2 - EOR. The giant oil fields in East and South Texas, now

with acces s to supplies of CO 2 , are being evaluated for CO 2 - EOR as the Green Pipeline beings
to deliver CO 2 to the region.

The oil fields in the offshore Gulf of Mexico, while technically attractive for CO 2 - EOR miscible flooding, face serious infrastructure and cost constraints. Alaska, with large declining oil fields

that c ould be revitalized with CO 2 - EOR, would need to see the launch of the Alaska Natural Gas Pipeline or the installation of a “world scale” energy processing and petrochemicals facility to

create su fficient supplies of CO 2

.
Chapter VII of the report provides a more detailed look at the oil production and CO 2 storage potential offered by the following eleven regions:

1. Appalachia 7. Rockies

2. California 8. Southeast Gulf Coast

3. East and Central Texas 9. Williston Basin

4. Michigan/Illinois 10. Alaska

5. Mid

- Continent 11. Offshore Gulf of Mexico

6. Permian BasinImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

47 June 2011 **1. Appalachia** 

**a**

**. Background** 

**.** The Appalachia Basin, the origin of the U.S. oil industry, provided much of the petroleum used by the U.S. during World War II. Currently

, oil production is 12 million barrels per year (about 33,000 barrels per day) from a series of very mature fields (Table V1

- 1.1).

Year New York Ohio Pennsylvania West Virginia TOTAL

2000 * 7 2 1 10

2001 * 6 2 1 9

2002 * 6 2 1 9

2003 * 6 2 1 9

2004 * 6 3 1 10

2005 * 6 4 2 12

2006 * 5 4 2 11

2007 * 5 4 2 11

2008 * 6 4 2 12

2009 * 6 4 2 12

*less than 0.5 million barrels . Source: EIA Crude Oil Production by State (March 2011).

**b**

**. Reservoirs Favorable for CO**  **2 -**  **EOR**

**.** Advanced Resources’ Big Oil Fields

Database for the Appalachian Basin contains 84 oil reservoirs that screen favorably for
miscible CO 2 - EOR plus 19 oil reservoirs th at screen favorably for near miscible CO 2 - EOR. These 103 reservoirs contain 9.4 billion barrels of OOIP out of a data base of 171

reservoirs with 10.2 billion of OOIP.

**c. Miscible CO**  **2 -**  **EOR.**

(1)

. Database

. The data for the 84 Appalachian Basin oil reserv oirs favorable for

miscible CO 2 - EOR are as follows:

Original Oil In

- Place 8.6 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 1.5 billion barrels

Primary/Secondary Oil Recovery Efficiency 17%

Remaining Oil In

- Place 7.1 billion barrels Table VI

- 1.1

. Crude Oil Production from the Appalachian Basin (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

48 June 2011 ( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR applied to these 84 oil reservoirs offers the potential for technically recovering 2.4 billion barrels of the remaining oil in

- place, equal to 28% of OOIP.

( 3

). Economically Recoverable. Using an o il price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 48 of the 84 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible.

These 48 reservoirs have an economicall y feasible oil recovery of 1.3 billion barrels.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 84 Appalachian Basin oil fields technically favorable for miscible CO 2 - EOR is 790 million metric tons ( 15 Tcf). The volume of purchase d CO 2 for the 48 Appalachian Basin oil reservoirs economically favorable for miscible CO 2 - EOR is 290 million metric tons (5 Tcf).

(5) Summary Table. Table VI

- 1.2 provides a summary of the oil recovery and

CO 2 demand ( and storage ) potential from the application of miscible “ Next Generation ”
CO 2 - EOR in the Appalachian Basin for the data base and extrapolated regional totals.

Oil Recovery CO 2 Dema nd
(Billion Barrels) (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 2.4 1.3 790 290

2. Regional Totals 3.3 1.3 1,080 290

* Database totals extrapolated to regional totals using a dividing factor of 0.73.

**d. Near**  **M iscible CO**  **2 -**  **EOR.**

(1)

. Database

. The data for the 19 Appalachian Basin oil reservoirs technically

favorable for near miscible CO 2 - EOR are as follows:

Original Oil In

- Place 0.78 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 0.16 bill ion barrels

Primary/Secondary Oil Recovery Efficiency 20%

Remaining Oil In

- Place 0.62 billion barrels

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR applied to these 19 oil reservoirs offers the potential for technically recovering 0.1 billion barrels of the remaining oil in

- place, equal to 8% of OOIP.

Table VI

- 1 .2 . Appalachian Basin Oil Recovery and CO 2 Demand from Miscible “Next Generation”
CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

49 June 2011 ( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), none of the 19 oil reservoirs provide a 20% rate of re turn (before tax) and thus none are economically

feasible.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 19 Appalachian Basin oil fields technically favorable for near miscible CO 2 - EOR is 60 million metric tons (1 Tcf).

(5) S ummary Table. Table VI

- 1.3 provides a summary of the oil recovery and

CO 2 demand ( and storage ) potential from the application of near miscible “ Next
Generation ” CO 2 - EOR in the Appalachian Basin for the database and extrapolated regional totals.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 0.1

- 60

-
2. Regional Totals 0.1

- 80

-

* Database totals extrapolated to regional totals using a dividing factor of 0.73.

**e**

**. Miscible and**  **Near M iscible CO**  **2 -**  **EOR.** Table VI

- 1.4 provides a summary of the oil recovery and CO 2 demand and storage potential from the application of “ Next
Generation ” CO 2 - EOR in the Appalachian Basin.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Datab ase Totals 2.5 1.3 850 290

2. Regional Totals 3.4 1.3 1,160 290

* Database totals extrapolated to regional totals using a dividing factor of 0.73. Table VI

- 1.3 . Appalachian Basin Oil Recovery and CO 2 Demand from Near Miscible “Next
Generation” CO 2 - EOR

Table VI

- 1.4. Appalachian Basin Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

50 June 2011 **f**

**. Comparison of State of Art and**  **“ Next Generation**  **” CO**  **2 -**  **EOR Technology** 

**.** Using

“ Next Generation ” CO 2 - EO R in the Appalachian Basin would provide significantly more oil recovery and CO 2 storage potential than would be realized from applying State of Art

CO 2 - EOR technology

, Table VI

- 1.5.

 Economic oil recovery would be 1.3 billion barrels with “ Next Generation ” technology compared to essentially zero with State of Art technology

.

 Economic CO 2 demand (and storage capacity) would be 290 million metric tons

with “ Next Generation ” technology compared to about 10 million metric tons with
State of Art technology

.

State of Art “Next Generation”

Oil Recovery (Billion Barrels)

▪ Technical 1.1 3.4

▪ Economic 0.0 1.3

CO 2 Demand (Mi llion Metric Tons)

▪ Technical 520 1,160

▪ Economic 10 290 Tabl e VI

- 1.5. Summary Table of Comparison of State of Art and “ Next

Generation ” CO 2 - EOR Technology : Appalachian Basin (Regional Totals)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

51 June 2011 **2. Onshore California** 

**a**

**. Background** 

**.** While much of the oil production from California is due to steam injection for heavy oil recovery, California (particularly the San Joaquin Basin) does have large, deep light oil reservoirs (such as Elk Hills) that account for an important part of California’s oil production. In 2009, California produced 194 million barrels (530,000 barrels per day) of heavy and light oil (Table VI

- 2.1).

Year Coastal Los Angeles San Joaquin TOTAL

2000 18 16 215 249

2001 18 16 220 238

2002 18 17 205 240

2003 17 16 197 230

2004 17 16 191 224

2005 15 16 184 215

2006 15 16 176 207

2007 15 17 173 205

2008 16 16 175 207

2009 18 15 161 194

Sources: EIA Proved Reserves and Production (December, 2010) and EIA Crude Oil Production by State (March 2011).

**b**

**. Reservoirs Favorable for CO**  **2 -**  **EOR**

**.** Advanced Resources’ Big Oil Fields

Database for California cont ains 76 oil reservoirs that screen favorably for miscible CO 2 - EOR plus 13 oil reservoirs that screen favorably for near miscible CO 2 - EOR. These 89

reservoirs contain 31.9 billion barrels of OOIP out of a data base of 187 reservoirs with

74.6 billion of OO IP.

c. **Miscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 76 California oil reservoirs favorable for miscible

CO 2 - EOR are as follows:

Original Oil In

- Place 28.2 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 8.8 billion barrels

Prima ry/Secondary Oil Recovery Efficiency 31%

Remaining Oil In

- Place 19.4 billion barrels Table V I

- 2.1. Oi l Production from Onshore California (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

52 June 2011 ( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to these 76 oil reservoirs offers the potential for technically recovering 6.9 billion barrel s of the remaining oil in

- place, equal to 25% of OOIP.

( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 69 of the 76 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. The economically feasible oil recovery is 6.5 billion barrels.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 76 California oil fields technically favorable for miscible CO 2 - EOR is 1,940 million metric tons (37 Tcf). The volume of purchased CO 2 for the 69 California oil reservoirs economically favorable for miscible CO 2 - EOR is 1,690 million metric tons (32 Tcf).

(5) Summary Table. Table VI

- 2.2 provides a summary of the oil recovery and
CO 2 demand and storage potential from the application of miscible “ Next Generation ”
CO 2 - EOR in California and extrapolated to regional tot a ls

.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 6.9 6.5 1,940 1,690

2. Regional Totals 7.7 6.5 2,160 1,690

* Database totals extrapolated to regional totals using a dividi ng factor of 0. 90

.

**d. Near M**  **iscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 13 California oil reservoirs favorable for near

miscible CO 2 - EOR are as follows:

Original Oil In

- Place 3.7 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 1. 1 billion barrels

Primary/Secondary Oil Recovery Efficiency 31%

Remaining Oil In

- Place 2.6 billion barrels

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to these 13 oil reservoirs offers the potential for technically recove ring 0.2 billion barrels of the remaining oil in

- place, equal to 5% of OOIP.

Table VI

- 2.2

. Onshore California Oil Recovery and CO 2 Demand from Miscible “Next Generation”
CO 2 - EO RImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

53 June 2011 ( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 2 of the 13 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. The economically feasible oil recovery is 0.2 billion barrels.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 13 California oil fields technically favorable for near miscible CO 2 - EOR is 140 million metric tons (3 Tcf). The volume of purchased CO 2 for the 2 California oil reservoirs economically favorable for near miscible CO 2 - EOR is 70 million metric tons (1Tcf).

(5) Summary Table. Table VI

- 2.3 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of near miscible “ Next
Generation ” CO 2 - EOR in California.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 0.2 0.2 140 70

2. Regional Totals 0.2 0.2 160 70

* Database totals extrapolated to regional totals using a dividing factor of 0. 90

.

**e**

**. Miscible and**  **Near M iscible CO**  **2 -**  **EOR.** Table VI

- 2.4 provides a summary of the oil recovery and CO 2 demand and storage potential from the application of “ Next
Generation ” CO 2 - EOR in California.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 7.1 6.7 2,080 1,760

2. Regional Totals 7.9 6.7 2,320 1,760

* database totals extrapolated t o regional totals using a dividing factor of 0. 90

. Table VI

- 2.3

. Onshore California Oil Recovery and CO 2 Demand from Near Miscible “Next
Generation” CO 2 - EOR

Table VI

- 2.4. Onshore California Oil Recovery and CO 2 Dema nd from “Next Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

54 June 2011 **f**

**. Comparison of State of Art and**  **“ Next Generation**  **” CO**  **2 -**  **EOR Technology** 

**.** Applying “ Next Generation ” CO 2 - EOR in California would provide valuable additional oil recovery and CO 2 storage, Table VI

- 2.5.

 E conomic oil recovery would be 6.7 billion barrels with “ Next Generation ” technology compared to 1.2 billion barrels with State of Art technology

.

 Economic CO 2 demand (and storage capacity) would be 1,760 million metric tons

with “ Next Generation ” technolog y compared to 480 million metric tons with State

of Art technology

.

State of Art “Next Generation”

Oil Recovery ( Billion Barrels)

▪ Technical 3.1 7.9

▪ Economic 1.2 6.7

CO 2 Demand (Million Metric Tons)

▪ Technical 1,340 2,320

▪ Economic 480 1,760 Table VI

- 2.5. Summary Table of Comparison of State of Art and “ Next

Generation ” CO 2 - EOR Technology : Onshore California (Regional Totals)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

55 June 2011 **3. East and Central Texas** 

**a**

**. Background** 

**.** East Texas ushered in the “oil boom” at historic oil fields such as Spindletop and Conroe. Today, this area provides 114 million barrels of oil per year (about 310,000 barrels per day) (Table VI

- 3.1).

Year East Texas (RR #1

- 6) Central Texas (RR 7B/7C and 9

- 10) TOTAL

2000 93 56 149

2001 78 53 131

2002 71 48 119

2003 67 48 115

2004 66 46 112

2005 64 45 109

2006 66 49 115

2007 64 49 113

2008 61 55 116

2009 55 59 114

Source: EIA Proved Reserves and Production (December, 2010).

**b**

**. Summary of**  **Results.** Advanced Resources’ Big Oil Fields Database for East and Central Texas contains 186 oil reservoirs that screen favorably for miscible CO 2 - EOR plus 7 oil reservoirs that screen favorably for near miscible CO 2 - EOR. These 193

reservoirs contain 61 .1 billion barrels of OOIP out of a data base of 213 reservoirs with

66.4 billion barrels of OOIP.

**c. Miscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 186 East and Central Texas oil reservoirs

favorable for miscible CO 2 - EOR are as follows:

Original O il In

- Place 59.4 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 21.2 billion barrels

Primary/Secondary Oil Recovery Efficiency 36%

Remaining Oil In

- Place 38.2 billion barrels Table VI

- 3.1 . Oil Production from East and Central Texas (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

56 June 2011 ( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR tec hnology applied to these 186 oil reservoirs offers the potential for technically recovering 15.3 billion barrels of the remaining oil in

- place, equal to 26% of OOIP.

( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metr ic ton of CO 2 (delivered at pressure to the basin), 162 of the 186 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. The economically feasible oil recovery is 13.5 billion barrels.

( 4

). Purchase and Sto rage of CO 2

. The volume of purchased CO 2 demand for the 186 East and Central Texas oil fields technically favorable for miscible CO 2 - EOR is 4,390 million metric tons (83 Tcf). The volume of purchased CO 2 demand for the 162
East and Central Texas oil reser voirs economically favorable for miscible CO 2 - EOR is 3,620 million metric tons (68 Tcf).

Subtracting out the 400 million metric tons (8 Tcf) of CO 2 expected to be

delivered to East Texas from natural sources still leaves a near

- to mid

- term economic

market for purchase (and storage) of anthropogenic CO 2 of 3,220 million metric tons (60 Tcf).

(5) Summary Table. Table VI

- 3.2 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of miscible “ Next Generation ”
CO 2 - EO R in East and Central Texas.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons) **

Technical* Economic Technical* Economic

1. Databas e Totals 15.3 13.5 4,390 3,620

2. Regional Totals 20.7 13.5 5,930 3,620

* Database totals extrapolated to regional totals using a dividing factor of 0.74.

**Includes 580 million metric tons of CO 2 demand expected to be provided by natural sources and gas processing plants.

**d. Near M**  **iscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 7 East and Central Texas oil reservoirs favorable

for near miscible CO 2 - EOR are as follows:

Original Oil In

- Place 1.8 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 0.5 billion barrels

Primary/Secondary Oil Recovery Efficiency 26%

Remaining Oil In

- Place 1.3 billion barrels Table VI

- 3.2

. East and Central Texas Oil Recovery and CO 2 Demand from Miscible “Next
Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

57 June 2011 ( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to these 7 oil reservoirs offers the potential for technica lly recovering 0.12 billion barrels of the remaining oil in

- place, equal to 7% of OOIP.

( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), none of the oil reservoirs provide at least a 20% rate of return (before tax) and thus none are economically

feasible.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 7 East and Central Texas oil fields technically favorable for near miscible CO 2 - EOR is 80

mi llion metric tons (2 Tcf).

(5) Summary Table. Table VI

- 3.3 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of near miscible “ Next
Generation ” CO 2 - EOR in East and Central Texas.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 0.1

- 80

-
2. Regional Totals 0.2

- 11 0

-

* Database totals extrapolated to regional totals using a dividing factor of 0.74

.

**e**

**. Miscible and**  **Near M iscible CO**  **2 -**  **EOR.** Table VI

- 3.4 provides a summary of the oil recovery and CO 2 demand and storage potential from the application of “ Next
Generation ” CO 2 - EOR in East and Central Texas.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons) **

Technical* Economic Technical* Economic

1. Databa se Totals 15.4 13.5 4,470 3,620

2. Regional Totals 20.9 13.5 6,040 3,620

* Database totals extrapolated to regional totals using a dividing factor of 0. 74

.

** Includes 400 million metric tons of CO 2 demand provided from natural sources. Table VI

- 3.3

. East and C entral Texas Oil Recovery and CO 2 Demand from Near Miscible “Next
Generation” CO 2 - EOR

Table VI

- 3.4 . East and Central Texas Oil Recovery and CO 2 Storage from “Next Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

58 June 2011 **f**

**. Compariso**  **n of State of Art and “**  **Next Generation ”**  **CO 2**  **- EOR**  **Technology**

**.** Applying “ Next Generation ” CO 2 - EOR in East and Central Texas would provide valuable additional oil recovery and CO 2 storage (Table VI

- 3.5).

 Economic oil recovery would be 13.5 billion barrels with “ Next Generation ” technology compared to 5.9 billion barrels with State of Art technology

.

 Economic CO 2 demand (and storage capacity) would be 3,620 million metric tons

with “ Next Generation ” technology compared to 2,120 million metric tons (gross)

with S tate of Art technology

.

State of Art “Next Generation”

Oil Recovery (Billion Barrels)

▪ Technical 11.1 20.9

▪ Economic 5.9 1 3.5

CO 2 Demand (Million Metric Tons)

▪ Technical 4,210 6,0 40

▪ Economic

– Gross* 2,120 3,620

– Net 1, 720 3 ,220

* Includes 400 million metric tons of CO 2 demand expected to be provided by natural sources and gas processing plants. Table VI

- 3.5. Summary Table of Comparison of State of Art and “ Next

Generation ” CO 2 - EOR Technology : East and Central TexasImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

59 June 2011 **4. Michigan**  **/Illinois Basin**

**a**

**. Background** 

**.** The mature Michigan and Illinois oil basins have seen a steady decline in production in recent years, reaching 20 million barrels per year (about 55,000 barrels per day) in 2009 (Table VI

- 4.1).

Year Michigan Illinois/Indiana Kentucky TOTAL

2000 8 14 3 25

2001 7 12 3 22

2002 7 14 3 24

2003 7 14 3 24

2004 6 12 3 21

2005 6 12 2 20

2006 5 12 3 20

2007 5 11 3 19

2008 6 11 3 20

2009 6 11 3 20

S ource: EIA Crude Oil Production by State (March 2011).

**b**

**. Summary of Results.**  Advanced Resources’ Big Oil Fields Database for Michigan/Illinois Basin contains 140 oil reservoirs that screen favorably for miscible

CO 2 - EOR plus 8 oil reservoirs that screen favorably for near miscible CO 2 - EOR. These

148 reservoirs contain 9.8 billion barrels of OOIP out of a data base of 190 reservoirs

with 10.2 billion barrels of OOIP.

c. Miscible CO 2 - EOR.

(1)

. Database

. The data for the 140 Michigan/Illinois Basin oil re servoirs
favorable for miscible CO 2 - EOR are as follows:

Original Oil In

- Place 8.4 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 3.2 billion barrels

Primary/Secondary Oil Recovery Efficiency 38%

Remaining Oil In

- Place 5.2 billion barr els

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to these 140 oil reservoirs offers the potential for technically recovering 2.1 billion barrels of the remaining oil in

- place, equal to 25% of OOIP. Table VI

- 4.1 . Oil Production f rom Michigan and Illinois Basins (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

60 June 2011 ( 3

). Economically Recoverab le. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 122 of the 140 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. The economically feasib le oil recovery is 1.8 billion barrels.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 140 Michigan/Illinois Basin oil fields technically favorable for miscible CO 2 - EOR is 710 million metric tons (13 Tcf). The volume of purchased CO 2 for the 122 Michigan/Illinois Basin oil reservoirs economically favorable for miscible CO 2 - EOR is 5 7 0 million metric tons (11 Tcf).

(5) Summary Table. Table VI

- 4.2 provides a summary of the oil recovery and CO 2 demand and storage potential from the application of miscible “ Next Generation ” CO 2 - EOR in Michigan/Illinois Basin.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Tec hnical* Economic Technical* Economic

1. Database Totals 2.1 1.8 710 570

2. Regional Totals 2.8 1.8 960 570

*Database totals extrapolated to regional totals using a dividing factor of 0.74

.

**d. Near Miscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 8 Michigan/Illinois Basin oil reservoirs favorable

for near miscible CO 2 - EOR are as follows:

Original Oil In

- Place 1.3 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 0.4 billion barrels

Primary/Secondary Oil Recovery Efficiency 32%

Rem aining Oil In

- Place 0.9 billion barrels

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to these 8 oil reservoirs offers the potential for technically recovering 0.1 billion barrels of the remaining oil in

- place, equal to 10% of OOIP.

( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), none of the oil reservoirs provide at least a 20% rate of return (before tax) and thus non e are economical ly

feasible. Table VI

- 4.2

. Michigan/Illinois Basin Oil Recovery and CO 2 Demand from Miscible “Next
Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

61 June 2011 ( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 8 Michigan/Illinois Basin oil fields technically favorable for near miscible CO 2 - EOR is 70 million metric tons (1 Tcf).

(5) Summary Table. Table VI

- 4.3 provides a sum mary of the oil recovery and

CO 2 demand and storage potential from the application of near miscible “ Next
Generation ” CO 2 - EOR in the Michigan/Illinois Basin.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 0.1

- 70 0

2. Regional Totals 0.2

- 90 0

* Database totals extrapolated to regional totals using a dividing fa ctor of 0.74

.

**e**

**. Miscible and**  **Near M iscible CO**  **2 -**  **EOR.** Table VII

- 4.4 provides a summary of the oil recovery and CO 2 demand and storage potential from the application of “ Next
Generation ” CO 2 - EOR in the Michigan/Illinois Basin.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 2.2 1.8 780 570

2. Regional Totals 3.0 1.8 1,050 57 0

* Database totals extrapolated to regional totals using a dividing factor of 0. 74

.

**f**

**. Comparison of State of Art and**  **“ Next Generation**  **” CO**  **2 -**  **EOR Technology** 

**.** Applying Next Generation CO 2 - EOR in the Michigan/Illinois Basin would provide

valuable additiona l oil recovery and CO 2 storage (Table VI

- 4.5).

 Economic oil recovery would be 1.8 billion barrels with “ Next Generation ” technology compared to 1.1 billion barrels with State of Art technology

.

 Economic CO 2 demand (and storage capacity) would be 570 millio n metric tons

with “ Next Generation ” technology compared to 390 million metric tons with State

of Art technology

. Table VI

- 4.3

. Michigan/Illinois Basin Oil Recovery and CO 2 Demand from Near Miscible “Next

Gener ation” CO 2 - EOR

Table VI

- 4.4

. Michigan/ Illinois Basin Oil Recovery and CO 2 Demand from “Next Generation”
CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

62 June 2011 State of A rt “Next Generation”

Oil Recovery (Billion Barrels)

▪ Technical 1.8 3.0

▪ Economic 1.1 1.8

CO 2 Demand (Million Metric Tons)

▪ Technical 660 1,050

▪ Economic 390 570 Table VI

- 4.5. Summary Table of Comparison of State of Art and “ Next

Generation ” CO 2 - EOR Technology : Michigan/Illinois BasinImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

63 June 2011 **5. Mid** 

**- Continent** 

**a**

**. Background** 

**.** After years of steady decline, oil production i n the Mid

- Content area, particularly in Oklahoma, has begun to rebound reaching 115 million barrels per year (315,000 barrels per day) in 2009 (Table VI

- 5.1).

Year Oklahoma Kansas/Nebraska Arkansas TOTAL

2000 70 37 7 114

2001 69 37 8 114

2002 67 36 7 110

2003 65 37 7 109

2004 62 36 7 105

2005 62 36 6 104

2006 63 38 6 107

2007 61 39 6 106

2008 64 42 6 112

2009 67 42 6 115

Source: EIA Crude Oil Production by State (March 2011).

**b**

**. Summary of Results.**  Advanced Resources’ Big Oil Fields Database for the Mid

Continent contains 174 oil reservoirs that screen favorably for miscible CO 2 - EOR plus 9 oil reservoirs that screen favorably for near miscible CO 2 - EOR. These 183 reservoirs

conta in 46.0 billion barrels of OOIP out of a database of 246 reservoirs with 53.1 billion

of OOIP.

**c. Miscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 174 the Mid

- Continent oil reservoirs favorable for

miscible CO 2 - EOR are as follows:

Original Oil In

- Place 43.7 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 12.0 billion barrels

Primary/Secondary Oil Recovery Efficiency 27%

Remaining Oil In

- Place 31.7 billion barrels

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology appl ied to these 174 oil reservoirs offers the potential for technically recovering 13.1 billion barrels of the remaining oil in

- place, equal to 30% of OOIP. Table V I

- 5.1 . Oil Production from the Mid

- Continent (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

64 June 2011 ( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 154 of the 174 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. The economically feasible oil recovery from these reservoirs is 11.9 billion

barrels.

( 4

). Purc hase and Storage of CO 2

. The volume of purchased CO 2 for the 174

Mid

- Continent oil fields technically favorable for miscible CO 2 - EOR is 3,740 million metric tons (71 Tcf). The volume of purchased CO 2 for the 154 Mid

- Continent oil reservoirs economically f avorable for miscible CO 2 - EOR is 3,240 million metric tons (61 Tcf).

(5) Summary Table. Table VI

- 5.2 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of miscible “Next Generation”

CO 2 - EOR in Mid

- Contine nt.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 13.1 11.9 3,740 3,240

2. Regional Totals 22.2 11.9 6,340 3,240

* Database totals extrapolated to regional totals using a dividing factor of 0. 59

.

**d. Near M**  **iscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 9 Mid

- Content oil reservoirs favorable for near

miscible CO 2 - EOR are a s follows:

Original Oil In

- Place 2.3 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 0.6 billion barrels

Primary/Secondary Oil Recovery Efficiency 28%

Remaining Oil In

- Place 1.7 billion barrels

( 2

). Technically Recoverable. “Next Gene ration” CO 2 - EOR technology applied to these 9 oil reservoirs offers the potential for technically recovering 0.17 billion barrels of the remaining oil in

- place, equal to 7% of OOIP.

( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 2 of the 9 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. The economically feasible oil recovery is 0.1 billion barrels. Table VI

- 5.2

. Mid

- Continent Oil Recovery and CO 2 Demand from Miscible “Next Generation”
CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

65 June 2011 ( 4

). Purc hase and Storage of CO 2

. The volume of purchased CO 2 for the 9 Mid

Continent oil fields technically favorable for near miscible CO 2 - EOR is 110 million metric tons (2 Tcf). The volume of purchased CO 2 for the 2 Mid

- Continent oil reservoirs economically fav orable for near miscible CO 2 - EOR is 30 million metric tons (1 Tcf).

(5) Summary Table. Table VI

- 5.3 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of near miscible “Next
Generation” CO 2 - EOR in the Mid

- Co ntent.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 0.2 0.1 110 30

2. Regional Totals 0.3 0.1 190 30

* Database totals extrapolated to regional totals using a dividing factor of 0.59

.

**e**

**. Miscible and**  **Near M iscible CO**  **2 -**  **EOR.** Table VI

- 5.4 provides a summary of the oil recovery and CO 2 demand and storage potential from the app lication of “ Next
Generation ” CO 2 - EOR in the Mid

- Continent.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 13.3 12.0 3,850 3,270

2. Regional Totals 22.5 12.0 6,530 3,270

* Database totals extrapolated to regional totals using a dividing factor of 0.59.

**f**

**. Comparison of State of Art and**  **“ Next Generation**  **” CO**  **2 -**  **EOR Technology** 

**.** Applying “ Nex t Generation ” CO 2 - EOR in the Mid

- Continent would provide valuable additional oil recovery and CO 2 storage (Table VI

- 5.5).

 Economic oil recovery would be 12.0 billion barrels with “ Next Generation ” technology compared to 6.6 billion barrels with State of Ar t technology

.

 Economic CO 2 demand (and storage capacity) would be 3,270 million metric tons

with “ Next Generation ” technology compared to 2,120 million metric tons with
State of Art technology

. Table VI

- 5.3

. Mid

- Content Oil Recovery and CO 2 Demand from Near Miscible “Next Generation”
CO 2 - EOR

Table V I

- 5.4 . Mid

- Continent Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

66 June 2011 State of Art “Next Generation”

Oil Recovery (Billion Barrels) *

▪ Technical 12.9 22.5

▪ Economic 6.6 12.0

CO 2 Demand (Million Metric Tons)

▪ Technical 4,220 6,530

▪ Econom ic 2,120 3,270

*Includes 0.1 billion barrels already produced or proven with miscible CO 2

- EOR technology. Table VI

- 5.5. Summary Table of Comparison of State of Art a nd “ Next

Generation ” CO 2 - EOR Technology : Mid

- Continent (Regional Totals) *Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

67 June 2011 **6. Permian Basin** 

**a. Background.**  The Permian Basin, located in West Texas (Texas Railroad Districts 8 and 8A) and East New Mexico, is still on e of the largest oil producing regions of the world. In 2009, this area with 289 million barrels of oil production (790 thousand barrels per day) ranked first for U.S. oil production. To date, the Permian Basin has produced 32 billion barrels of oil with 4.8 billion barrels of remaining proved reserves. (These values include production and proved reserves from applying CO 2 - EOR). Table VI

- 6.1 provides a tabulation of recent oil production rates for the Permian Basin as well as separately for West Texas a nd East New Mexico.

Year West Texas (1) East New Mexico (2) TOTAL

2000 259 66 325

2001 258 67 325

2002 248 66 314

2003 248 65 313

2004 245 63 308

2005 245 60 305

2006 240 59 299

200 7 237 58 295

2008 232 58 290

2009 229 60 289

Source s

: (1) EIA Proved Reserves and Production (December, 2010) ; (2) EIA Crude Oil Production by State (March, 2011)

The Permian Basin contains numerous large, deep, light oil fields and reservoirs

attract ive for CO 2 enhanced oil recovery. The oil fields are mature and, except for those
under CO 2 enhanced oil recovery, are in steep decline.

**b. Summary of Results.**  Advanced Resources’ Big Oil Fields Database for the

Permian Basin contains 215 oil reservoirs that screen favorably for miscible CO 2 - EOR plus 2 oil reservoirs that screen favorably for near miscible CO 2 - EOR. These 217

reservoirs contain 72.2 billion barrels of OOIP out of a database of 228 reservoirs with
72.5 billion OOIP

.

**c. Miscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 215 Permian Basin oil reservoirs favorable for

miscible CO 2 - EOR are as follows: Table VI

- 6.1 . Oil Production from the Permian Basin (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

68 June 2011 Original Oil In

- Place 71.0 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 23.3 billion barrels

P rimary/Secondary Oil Recov ery Efficiency 33%

Remaining Oil In

- Place 47.7 billion barrels

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to

these 215 oil reservoirs offers the potential for technically recovering 18.2 billion barrels of the remaining oi l in

- place, equal to 26 % of OOIP.

( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 151 of the 215 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. Because most of the giant oil fields in this basin, such as Wasson, Slaughter and Seminole, meet the 20% rate of return hurdle, the great bulk of the original oil in

place resource in this basin is in oil fields econom ic for CO 2 - EOR. The economically feasible oil recovery is 14.6 billion barrels.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 215 Permian Basin oil fields technically favorable for miscible CO 2 - EOR is 6,490 million metric tons ( 123 Tcf). The volume of purchased CO 2 for the 151 Permian Basin oil reservoirs economically favorable for miscible CO 2 - EOR is 4,750 million metric tons ( 90 Tcf).

(5) Summary Table. Table VI

- 6.2 provides a summary of the oil recovery and

CO 2 demand fr om the application of miscible “Next Generation” CO 2 - EOR in Permian

Basin for the 215 oil reservoirs in the data base and for regional totals.

Oil Recover y (Billion Barrels) CO 2 Demand** (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 18.2 14.6 6,490 4,750

2. Regional Totals 23.9 14.6 8,540 4,750

* Database totals extrapolated to regional totals using a dividing factor of 0.76. ** Includes 1, 730 million metric tons of CO 2 demand expected to be provided by natural sources and gas processing plants.

**d. Near Miscible CO**  **2 -**  **EOR.**

(1)

. Database

. The data for the 2 Permian Basin oil reservoirs favorable for near

miscible CO 2 - EOR are as follows: Table VI

- 6.2

. Permian Basin Oil Recovery and CO 2 Demand from Miscible “Next Generation”
CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

69 June 2011 Original Oil In

- Place 1.1 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 0.4 billion barrels

Primary/Secondary Oil Recovery Efficiency 31%

Remaining Oil In

- Place 0.8 billion barrels

( 2

). Technically Recoverable

. “Next Generation” CO 2 - EOR technology applied to these 2 oil reservoirs offers the potential for technically recovering 0.1 billion barrels of the remaining oil in

- place, equal to 9% of OOIP.

( 3

). Economically Recoverable. Using an oil price of $85 per ba rrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), none of the oil reservoirs provide at least a 20% rate of return (before tax) and thus none are economically

feasible.

( 4

). Purchase and Storage of CO 2

. The volume of purchase d CO 2 for the 2 Permian Basin oil fields technically favorable for near miscible CO 2 - EOR is 60 million metric tons (1 Tcf).

(5) Summary Table. Table VI

- 6.3 provides a summary of the oil recovery and

CO 2 demand and storage potential from the applicatio n of near miscible “ Next
Generation ” CO 2 - EOR in the Permian Basin.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Econom ic Technical* Economic

1. Database Totals 0.1

- 60

-
2. Regional Totals 0.1

- 80

-

* Database totals extrapolated to regional totals using a dividing factor of 0.76

.

**e**

**. Miscible and**  **Near M iscible CO**  **2 -**  **EOR.** Table VI

- 6.4 provides a summary of the oil

reco very and CO 2 demand and storage potential from the application of “Next
Generation” CO 2 - EOR in the Permian Basin. Table VI

- 6.3

. Permian Basin Oil Recovery and CO 2 Demand from Near Miscible “Next Generation”
CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

70 June 2011 Oil Recovery (Billion Barrels) CO 2 Demand** (Milli on Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 18.3 14.6 6,550 4,750

2. Regional Totals 24.0 14.6 8,620 4,750

* Database totals extrapolated to regional totals using a dividing factor of 0.76

**Includes 1,540 million metric tons of CO 2 demand expected to be provided from natural sources and gas processing plants

.

Of the 4,750 million metric tons ( 90 Tcf) of economic CO 2 demand in the Permian Basin, 1,540 million metric tons (29 Tcf) is expected to be provided from natural so urces and existing gas processing plants, leaving a net demand of 3,210 million metric tons ( 61 Tcf) as the market of anthropogenic CO 2 , primarily from power plants.

**f**

**. Comparison of State of Art and**  **“ Next Generation**  **” CO**  **2 -**  **EOR Technology**  **(Regional Totals)**

**.** Applying “ Next Generation ” CO 2 - EOR in the Permian Basin would provide significant additional oil recovery and CO 2 storage capacity, Table VI

- 6.5:

 Economic oil recovery would be 14.6 billion barrels with “Next Generation” CO 2 - EOR technology compared to 6. 4 billion barrels with State of Art technology.

 Economic CO 2 demand (and storage capacity) would be 4,750 million metric tons gross and 3,210 million metric tons net, with “Next Generation” technology compared to 2,690 million metric tons gross and 1,150 m illion metric tons net with State of Art technology.

State of Art “Next Generation”
Oil Recovery (Billion Barrels)

▪ Technical 13.6 24.0

▪ Economic 6.4 14.6

CO 2 Demand (Million Metric Tons)

▪ Technical 6,070 8,620

▪ Economic

– Gross* 2,690 4,750

– Net 1,150 3,210

* Includes 1,540 million metric tons of CO 2 demand expected to be provided by natural sources and g as processing plants. **Includes 2.2 billion barrels already produced or proven with miscible CO 2

- EOR technology. Table VI

- 6.4 . Permian Basin Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EOR

Table VI

- 6.5. Summary Table of Comparison of State of Art and “ Next

Generation ” CO 2 - EOR Technology : Permian Basin Regional Totals **Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

71 June 2011 In addition, with “Next Generation” CO 2 - EOR technology, the massive oil resource in the

ROZs of the Permian Basin below 56 existing oil fie lds became feasible to be pursued, providing 11.9 billion barrels of technically recoverable resource and 4.8 million metric
tons of CO 2 demand and storage capacity

.

Expanding the understanding of ROZs beneath existing oil fields (reflected in the above resource number) to regionally extensive ROZ “fairways” would significantly increase the oil resource available from residual oil zones. This represents a major opportunity
for “Next Generation” CO 2 - EOR R&D.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

72 June 2011 **7. Rockies** 

**a**

**. Background** 

**.** The pursuit of new o il plays as well as the liquids

- rich shale plays such

as the Niobrara and Mancos shales have increase d the rate of oil production in this region to 103 million barrels per year (280,000 barrels per day) in 2009 (Table VI

- 7.1).

Year Colorado* Utah Wyoming TOTAL

2000 19 16 61 96

2001 18 15 57 90

2002 19 14 55 88

2003 22 13 52 87

2004 23 15 52 90

2005 24 17 52 93

2006 24 18 53 95

2007 24 20 54 98

2008 25 22 53 100

2009 29 23 51 103

*Inclu des New Mexico West. Source: EIA Crude Oil Production by State (March 2011).

**b**

**. Summary of Results.**  Advanced Resources’ Big Oil Fields Database for the Rockies contains 142 oil reservoirs that screen favorably for miscible CO 2 - EOR plus 4 oil

reservoirs t hat screen favorably for near miscible CO 2 - EOR. These 146 reservoirs

contain 22.5 billion barrels of OOIP out of a database of 172 reservoirs with 24.7 billion

of OOIP.

**c. Miscible CO**  **2 -**  **EOR.**

(1)

. Database

. The data for the 142 the Rockies oil reservoirs favorable for

miscible CO 2 - EOR are as follows:

Original Oil In

- Place 21.9 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 7.1 billion barrels

Primary/Secondary Oil Recovery Efficiency 33%

Remaining Oil In

- Place 14.7 billion barrels

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to these 142 oil reservoirs offers the potential for technically recovering 5.8 billion barrels of the remaining oil in

- place, equal to 26% of OOIP. Table V I

- 7.1 . Oil Production from the Rockies (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

73 June 2011 ( 3

). Economically Recoverable. Us ing an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 120 of the 142 oil reservoirs provide at least a 20% rate of return (before tax) and thus are deemed to be economically feasible. The economically feasible oil recovery is 4.7 billion barrels.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 142 Rockies oil fields technically favorable for miscible CO 2 - EOR is 1,650 million metric tons (31 Tcf). The volume of purchased CO 2 for the 120 Rockies oil reservoirs economically
favorable for miscible CO 2 - EOR is 1,270 million metric tons (24 Tcf).

(5) Summary Table. Table VI

- 7.2 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of miscib le “ Next Generation ”
CO 2 - EOR in Rockies.

Oil Recovery (Billion Barrels) CO 2 Demand** (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database T otals 5.8 4.7 1,650 1,270

2. Regional Totals 9. 6 4.7 2,750 1,270

* Database totals extrapolated to regional totals using a dividing factor of 0. 6

. ** Includes 3 30 million metric tons of CO 2 demand expected to be provided by natural sources and gas proces sing plants.

**d. Near M**  **iscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the Rockies oil reservoirs favorable for near miscible

CO 2 - EOR are as follows:

Original Oil In

- Place 0.6 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 0.2 billion barrels

Primary/Secondary Oil Recovery Efficiency 24%

Remaining Oil In

- Place 0.5 billion barrels

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to these 4 oil reservoirs offers the potential for technically recovering less t han a tenth of one billion barrels of the remaining oil in

- place, equal to 4% of OOIP.

( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 , none of the oil reservoirs provide at least a 20% rate of

return (before tax) and thus none are economically feasible.

Table VI

- 7.2

. Rockies Oil Recovery and CO 2 Demand from Miscible “Next Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

74 June 2011 ( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 4 Rockies oil fields technically favorable for near miscible CO 2 - EOR is 30 million metric tons (<1 Tcf).

(5) Summary Table. Ta ble VI

- 7.3 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of near m iscible “ Next
Generation ” CO 2 - EOR in the Rockies.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals <1

- 30

-
2. Regional Totals <1

- 40

-

* Database totals extrapolated to regional totals using a dividing factor o f 0.6

.

**e**

**. Miscible and**  **Near M iscible CO**  **2 -**  **EOR.** Table VI

- 7.4 provides a summary of the oil recovery and CO 2 demand and storage potential from the application of “ Next
Generation ” CO 2 - EOR in Rockies.

Oil Recovery (Billion Barrels) CO 2 Demand** (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 5.8 4.7 1,670 1,270

2. Regional Totals 9.7 4.7 2,790 1,270

* Database totals extrapolated to regional totals using a dividing factor of 0. 6

. ** Includes 2 30 million metric tons of CO2 demand expected to be provided by natural sources and gas processing plants.

**f**

**. Comparison of State of Art and**  **“ Next Generation**  **” CO**  **2 -**  **EOR Technology** 

**.** Applying “ Next Gener ation ” CO 2 - EOR in the Rockies would provide valuable additional oil recovery and CO 2 storage (Table VI

- 7.5).

 Economic oil recovery would be 4.7 billion barrels with “ Next Generation ” technology compared to 1.9 billion barrels with State of Art technology

.

 Economic CO 2 demand (and storage capacity) would be 1,270 million metric tons

with “ Next Generation ” technology compared to 710 million metric tons (gross)

with State of Art technology

. Table VI

- 7.3

. Rockies Oil Recovery and CO 2 Demand from N ear M iscible “Next Generatio n”
CO 2 - EOR

Table VI

- 7.4 . Rockies Oil Recovery and CO 2 Demand from “Ne xt Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

75 June 2011 State of Art “Next Generation”
Oil Recovery (Billion Barrels) **

▪ Technical 4.5 9.7

▪ Economic 1.9 4.7

CO 2 Demand (Million Metric Tons)

▪ Technical 1,930 2,790

▪ Economic

– Gross * 710 1,270

– Net 4 80 1,0 40

* Includes 230 million metric tons of CO 2 demand expected to be provided by natural sources and gas processing plants

. **Includes 0.3 billion barrels already produced or proven with miscible CO 2

- EOR technology.

In addition, with “Ne xt Generation” CO 2 - EOR technology, the residual oil zone (ROZ) resources in the Big Horn would provide 1.1 billion barrels of technically recoverable resources below 13 existing oil fields and would provide 0.4 million metric tons of CO 2 demand and storage capacity. Table VI

- 7.5. Summary Table of Comparison of State of Art and “ Next

Generation ” CO 2 - EOR Technology : Rockies (Regional Totals)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

76 June 2011 **8. Southeast Gulf Coast** 

**a**

**. Background** 

**.** The recent introduction of CO 2 - EOR in Mississippi and Louisiana has helped stem the decline in oil production in this area. Oil production from the Southeast

Gulf Coast was 100 million barrels (270,000 b arrels per day) in 2009 (Table VI

- 8.1).

Year Louisiana Mississippi Alabama/Florida TOTAL

2000 105 20 15 140

2001 105 20 14 139

2002 93 18 12 123

2003 90 17 11 118

2004 83 17 10 110

2005 75 18 10 103

2006 74 17 10 101

2007 77 20 9 106

2008 73 22 10 105

2009 69 23 8 100

Source: EIA Crude Oil Production by State (March 2011).

**b**

**. Summary of Results.**  Advanced Resources’ Big Oil Fields Database for the
Southeast Gulf Coast cont ains 204 oil reservoirs that screen favorably for miscible CO 2 - EOR plus 5 oil reservoirs that screen favorably for near miscible CO 2 - EOR. These 209

reservoirs contain 23.8 billion barrels of OOIP out of a database of 298 reservoirs with

26.4 billion of OO IP.

**c. Miscible CO 2**  **- EOR.**  (1)

. Database

. The data for the 204 Southeast Gulf Coast oil reservoirs favorable for
miscible CO 2 - EOR are as follows:

Original Oil In

- Place 23.3 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 9.1 billion barr els

Primary/Secondary Oil Recovery Efficiency 39%

Remaining Oil In

- Place 14.2 billion barrels

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to these 204 oil reservoirs offers the potential for technically recovering 6.0 bill ion barrels of the remaining oil in

- place, equal to 26 % of OOIP. Table V I

- 8.1 . Oil Production from the Southeast Gulf Coast (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

77 June 2011 ( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 146 of the 204 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. The economically feasible oil recovery is 4.8 billion barrels.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 204

Southeast Gulf Coast oil fields technically fa vorable for miscible CO 2 - EOR is 2,010 million metric tons (38 Tcf). The volume of purchased CO 2 for the 146 Southeast Gulf

Coast oil reservoirs economically favorable for miscible CO 2 - EOR is 1,440 million metric tons (27 Tcf).

Subtracting out the 1 3 0 mill ion metric tons (3 Tcf) of CO 2 expected to be delivered to the Gulf Coast from natural sources ( at 0.3 Bcfd for 30 years), still leaves a

near

- to mid

- term market for purchase (and storage) of anthropogenic CO 2 of 1, 310 million metric tons (24 Tcf).

(5) Summary Table. Table VI

- 8.2 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of miscible Next Generation

CO 2 - EOR in Southeast Gulf Coast for the database and extrapolated to regional totals.

Oil Recovery (Billion Barrels) CO 2 Demand** (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 6.0 4.8 2,010 1,440

2. Regional Tot als 10.1 4.8 3,350 1,440

*Database totals extrapolated to regional totals using a dividing factor of 0.60.

** Includes 13 0 million metric tons of CO 2 demand expected to be provided by natural sources and gas processing plants

.

**d. Near M**  **iscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 5 Southeast Gulf Coast oil reservoirs favorable

for near miscible CO 2 - EOR are as follows:

Original Oil In

- Place 0.54 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 0.16 billion barrels

Primary/Seconda ry Oil Recovery Efficiency 30%

Remaining Oil In

- Place 0.38 billion barrels Table VI

- 8.2

. Southeast Gulf Coast Oil Recovery and CO 2 Demand from Miscible “Next
Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

78 June 2011 ( 2

). Technically Recoverable. “ Next Generation ” CO 2 - EOR technology applied to these 5 oil reservoirs offers the potential for technically recovering less than a tenth of

one bil lion barrels of the remaining oil in

- place, equal to 7% of OOIP.

( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), none of the oil reservoirs provide at least a 20 % rate of return (before tax) and thus none are economically

feasible.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 5 Southeast Gulf Coast oil fields technically favorable for near miscible CO 2 - EOR is 30 million metric tons (1 Tcf ).

(5) Summary Table. Table VI

- 8.3 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of near miscible “ Next
Generation ” CO 2 - EOR in Southeast Gulf Coast

.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals <0.1

- 30

-
2. Regional Totals 0.1

- 40

-

* Database totals extrap olated to regional totals using a dividing factor of 0.6

.

**e**

**. Miscible and**  **Near M iscible CO**  **2 -**  **EOR.** Table VI

- 8.4 provides a summary of the oil recovery and CO 2 demand storage potential available from the application of “ Next
Generation ” CO 2 - EOR in Southeast Gulf Coast.

Oil Recovery (Billion Barrels) CO 2 Demand** (Million Metric Tons)

Technical * Economic Technical* Economic

1. Database Totals 6.1 4.8 2,04 0 1,440

2. Regional Totals 10.1 4.8 3,390 1,440

*Database totals extrapolated to regional totals using a dividing factor of 0.60.

** Includes 1 3 0 million metric tons of CO 2 demand provided by natural sources and gas processing plants

. Table VI

- 8.3

. Southeast Gulf Coast Oil Recovery a nd CO 2 Demand from Near Miscible “Next
Generation” CO 2 - EOR

Table V I

- 8.4

. Southeast Gulf Coast Oil Recovery and CO 2 Demand from “Next Generation”
CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

79 June 2011 **f**

**. Comparison**  **of State of Art and “**  **Next Generation ”**  **CO 2**  **- EOR**  **Technology**

**.** Applying “ Next Generation ” CO 2 - EOR in the Southeast Gulf Coast would provide valuable additional oil recovery and CO 2 storage (Table VI

- 8.5).

 Economic oil recovery would be 4.8 billion barrels with “ Next Generation ” technology compared to 0.9 billion barrels with State of Art technology

.

 Economic CO 2 demand (and storage capacity) would be 1,440 million metric tons (gross) with “ Next Generation ” technology compared to 290 million metric tons (gross) w ith State of Art technology

.

State of Art Next Generation
Oil Recovery (Billion Barrels)

▪ Technical 5.4 10.1

▪ Economic 0.9 4.8

CO 2 Demand (Million Metric Tons)

▪ Technical 2,5 90 3,390

▪ Economic

– Gross* 290 1,440

– Net 1 6 0 1, 310

* Includes 130 million metric tons of CO 2 demand expected to be provided by natural sources and gas processing plants. Table VI

- 8.5. Summary Table of Comparison of State of Art and “ Next

Generation ” CO 2 - EOR Technology : Southeast Gulf Coast (Regional Totals)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

80 June 2011 **9. Williston Basin** 

**a**

**. Background** 

**.** With the discovery and aggressive development of the Bakken Shale, oil production from the Williston Basin has more than doubled during this decade, reaching 109 million barrels per year (300,000 barrels per day)

, Table VI

- 9.1.

Year N/S Dakota Montana TOTAL

2000 34 15 49

2001 33 16 49

2002 32 17 49

2003 31 19 50

2004 33 25 58

2005 37 33 70

2006 41 36 77

2007 47 35 82

2008 64 32 96

2009 81 28 109

Source: EIA Crude Oil Production by State (March 2011).

**b**

**. Summary of Results.**  Advanced Resources’ Big Oil Fields Database for the Williston

Basin contains 86 oil reservoirs that screen favorably for miscible CO 2 - EOR. These 86

reservoirs contain 9.3 bil lion barrels of OOIP out of a database of 95 reservoirs with 9.4

billion of OOIP.

**c. Miscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 86 Williston Basin oil reservoirs favorable for

miscible CO 2 - EOR are as follows:

Original Oil In

- Place 9.3 billion barr els

Expected Ultimate Primary/Secondary Oil Recovery 2.6 billion barrels

Primary/Secondary Oil Recovery Efficiency 28 %

Remaining Oil In

- Place 6.7 billion barrels

( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to

these 86 oi l reservoirs offers the potential for technically recovering 2.8 billion barrels of the remaining oil in

- place, equal to 30% of OOIP. Table VI

- 9.1 . Oil Production from the Williston Basin (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

81 June 2011 ( 3

). Economically Recoverable. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pres sure to the basin), 40 of the 86 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. The economically feasible oil recovery is 1.3 billion barrels.

( 4

). Purchase and Storage of CO 2

. The volume of purcha sed CO 2 demand for the

86 Williston Basin oil fields technically favorable for miscible CO 2 - EOR is 820 million metric tons (15 Tcf). The volume of purchased CO 2 demand for the 40 Williston Basin oil reservoirs economically favorable for miscible CO 2 - EOR is 360 million metric tons (7 Tcf).

(5). Summary. Table VI

- 9.2 provides a summary of the oil recovery and CO 2 demand storage potential from the application of “ Next Generation ” CO 2 - EOR in

Williston Basin.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 2.8 1.3 820 360

2. Regional Totals 4.0 1.3 1,150 360

* Database totals extrapolated t o regional totals using a dividing factor of 0.71.

**d**

**. Near Miscible CO**  **2 -**  **EOR**

**.** At this time, no oil reservoirs in the Williston Basin screen favorably for near miscible CO 2 - EOR.

**e. Comparison of State of Art and “**  **Next Generation ”**  **CO 2**  **- EOR**  **Technology**

**.** Ap plying “ Next Generation ” CO 2 - EOR in the Williston Basin would provide valuable additional oil recovery and CO 2 storage (Table VI

- 9.3).

 Economic oil recovery would be 1.3 billion barrels with “ Next Generation ” technology compared to 0.3 billion barrels with State of Art technology

.

 Economic CO 2 demand (and storage capacity) would be 360 million metric tons

with “ Next Generation ” technology compared to 130 million metric tons with State

of Art technology

. Table V I

- 9.2 . Williston Basin Oil Recovery and C O 2 Demand from “Next Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

82 June 2011 State of Art “Next Generation”

Oil Recovery (Billion Barrels)

▪ Technical 2.1 4.0

▪ Economic 0.3 1.3

CO 2 Demand (Million Metric Tons)

▪ Technical 820 1,150

▪ Ec onomic 130 360

In addition, with “Next Generation” CO 2 - EOR technology, the residual oil zone (ROZ) resources below 20 existing oil fields in the Williston Basin would provide 3.3 billion barrels of technically recoverable resources and would provide 1.3 million metric tons of
CO 2 demand and storage capacity. Table VI

- 9.3. Summary Table of Comparison of State of Art and “ Next

Generation ” CO 2 - EOR Technology : Williston Basin (Regional Totals)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

83 June 2011 **10. Alaska** 

**a**

**. Background** 

**.** From a peak of 738 million barrels (2 million barrels per day) in 1988, oil production from Alaska’s North Slope and Cook Inlets declined steadily

- - 355 million

barrels (1 million barrels per day) in 2000 and has 219 million barrels (600,000 barrels per day) in 2010 (Table VI

- 10.1).

Year TOTAL

2000 355

2001 351

2002 359

2003 356

2004 332

2005 315

2006 270

2

007 266

2008 250

2009 236

2010 219

Source: EIA Crude Oil Production by State (March 2011).

**b**

**. Reservoirs Favorable for CO**  **2 -**  **EOR**

**.** Advanced Resources’ Big Oil Fields Database

for Alaska contains 36 oil reservoirs that screen favorably for miscible CO 2 - EOR.

These 36 reservoirs contain 50.1 billion barrels of OOIP out of a data base of 43
reservoirs with 50.7 billion of OOIP.

**c. Miscible CO 2**  **- EOR.** 

(1)

. Database

. The data for the 36 Alaska oil reservoirs favorable for miscible

CO 2 - EOR are as follows:

Original Oil In

- Place 50.1 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 21.7 billion barrels

Primary/Secondary Oil Recovery Efficiency * 43%

Remaining Oil In

- Place 28.4 billion barrels

*Includes oil recovery from hydrocarbon miscible EOR. Table VI

- 10.1 . Oil Production from Alaska (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

84 June 2011 ( 2

). Technically Recoverable. “Next Generation” CO 2 - EOR technology applied to

these 36 oil reservoirs offers the potential for technically recovering 8.7 billion barrels of the remaining oil in

- place, equal to 17% of OOIP.

( 3

). Economically Recovera ble. Using an oil price of $85 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 19 of the 36 oil reservoirs provide at least a 20% rate of return (before tax) and thus are economically feasible. The economically feasibl e oil recovery is 5.7 billion barrels

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 36 Alaska oil fields technically favorable for miscible CO 2 - EOR is 4, 070 million metric tons (77 Tcf). The volume of purchased CO 2 for the 19 Alas ka oil reservoirs economically
favorable for miscible CO 2 - EOR is 2,330 million metric tons (44 Tcf).

(5). Summary Table

. Table VI

- 10.2 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of miscible “ Next Gene ration ”
CO 2 - EOR in Alaska.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical* Economic Technical* Economic

1. Database Totals 8.7 5.7 4, 070 2,330

2. Regional Totals 8. 8 5.7 4, 110 2,330

* Database totals extrapolated to regional totals using a dividing factor of 0.99

.

**d. Near Miscible CO 2**  **- EOR** 

**.** At this time, no oil reservoirs in Alaska screened favorably
for near miscible CO 2 - EOR.

**e. Comparison of State of Art and**  **“ Next Generation**  **” CO**  **2 -**  **EOR Technology** 

**.** Applying “ Next Generation ” CO 2 - EOR in Alaska would provide valuable additional oil recovery and CO 2 storage (Table VI

- 10.3).

 Economic oil recovery would be 5.7 billion barrels with “ Next Generation ” technology compared to 2.6 billion barrels with State of Art technology

.

 Economic CO 2 demand (and storage capacity) would be 2,330 million metric tons

with “ Next Generation ” technology compared to 1,490 million metric tons with
State of Art technology

. Table VI

- 10.2 . Alaska Oil Recovery and CO 2 Demand from “Next Generation” CO 2 - EORImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

85 June 2011 State of Art “Next Generation”

Oil Recovery (Billion Barrels)

▪ Technical 5.8 8. 8

▪ Economic 2.6 5.7

CO 2 Demand (Milli on Metric Tons)

▪ Technical 3, 320 4, 110

▪ Economic 1,490 2,330 Table VI

- 10.3. Summary Table of Comparison of State of Art and “ Next

Generation ” CO 2 - EOR Technology : Alaska (Regional Totals)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

86 June 2011 **11. Offshore Gulf of Mexico** 

**a**

**. Background** 

**.** W ith the onset of new oil fields from deep waters, oil production from
the Federal Offshore Gulf of Mexico and the state waters rebounded to 576 million

barrels in 200 9 ( 1,580,000 barrels per day) ( Table VI

- 1 1

. 1 )

.

Year Federal

Offshore Louisiana

State Offshore Texas

State Offshore TOTAL

2000 523 13 1 537

2001 56 0 13 1 574

2002 568 11 1 580

2003 569 11 1 581

2004 532 10 1 543

2005 468 8 1 477

2006 474 8 * 482

2007 466 8 1 475

2008 422 6 1 429

2009 569 6 1 576

*Less than 0.5 million barrels. Source: EIA Crude Oil Production by State (March 2011).

**b**

**. Summ**  **ary of Results.** Advanced Resources’ Big Oil Fields Database for the
Off shore Gulf of Mexico contains 64 6 oil reservoirs (in 146 fields) that screen favorably
for miscible CO 2 - EOR. These 64 6 reservoirs contain 29. 5 billion barrels of OOIP

.

**c. Miscible CO**  **2 -**  **EOR.**

(1)

. Database

. The data for the 64 6 Offshore Gulf of Mexico oil reservoirs
favorable for miscible CO 2 - EOR are as follows:

Original Oil In

- Place 29. 5 billion barrels

Expected Ultimate Primary/Secondary Oil Recovery 12.1 billion barrels

Primary/Se condary Oil Recovery Efficiency 41 %

Remaining Oil In

- Place 17. 4 billion barrels

( 2

). Technically Recoverable. “ Next G eneration ” CO 2 - EOR technology applied to

these 64 6 oil reservoirs offers the potential for technically recovering 6.0 billion barrels

o f the remaining oil in

- place, equal to 20 % of OOIP. Table VI

- 1 1

. 1 . Oil Production from the Offshore Gulf of Mexico (MM Bbls/Yr)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

87 June 2011 ( 3

). Economically Recoverable. Using an oil price of $ 8 5 per barrel (WTI) and $40 per metric ton of CO 2 (delivered at pressure to the basin), 123 oil reservoirs provide at least a 20% rate of return (befo re tax) and thus are economically feasible. The economically feasible oil recovery is 0.9 billion barrels.

( 4

). Purchase and Storage of CO 2

. The volume of purchased CO 2 for the 146
Off shore Gulf of Mexico oil fields (64 6 reservoirs) technically favora ble for miscible CO 2 - EOR is 1,770 million metric tons ( 3 3 Tcf). The volume of purchased CO 2 for the 123
Off shore Gulf of Mexico oil reservoirs economically favorable for miscible CO 2 - EOR is

2 60 million metric tons ( 4 Tcf).

(5). Summary Table

. Table V I

- 1 1

. 2 provides a summary of the oil recovery and

CO 2 demand and storage potential from the application of “ Next Generation ” CO 2 - EOR

in Off shore Gulf of Mexico

.

Oil Recovery (Billion Barrels) CO 2 Demand (Million Metric Tons)

Technical * Economic Technical * Economic

1. Database Totals 6.0 0. 9 1,770 2 6

0

2. Regional Totals 6.0 0. 9 1,770 2 6

0

* Regional totals equal data base totals.

**d. Near M**  **iscible CO 2**  **- EOR** 

**.** At this time, no oil reservoirs in the Offshore Gulf of Mexico screened favorably for near miscible CO 2 - EOR.

**e. Comparison of State of Art and “**  **Next Generation ”**  **CO 2**  **- EOR**  **Technology**

**.** Given the barriers, complexities and economic challenges of initiating CO 2 - EOR in the
Offshore Gulf of Mexico oil fields, this region, only feasible with “ Next Generation ” technology.

Table VI

- 1 1

. 2

. Offshore Gulf of Mexico Oil Recovery and CO 2 Demand from “Next Generation”
CO 2 - EO RImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

88 June 2011 

### VII. OVERVIEW OF METHODOLOGY

A. Six Step Methodology

A six part methodology was used to assess the CO 2 storage potential of applying “ N ext
G eneration ” CO 2 - EOR technology to domestic oil reservoirs. The six steps were: (1) assembling and updating the Major Oil Reservoirs Database containing over 6,300 large domestic oil reservoirs ; (2) calculating the minimum miscibility pressure for applying CO 2 - EOR; (3) using minimum miscibility pressure and other criteria to screen

reservoirs favorable for miscible and near miscible CO 2 - EOR; (4) calculating oil recovery from applying “ N ext G eneration” CO 2 - EOR technology; and (5) applying the updated cost a nd economic model. Step 6 was to incorporate the prior work conducted by Advanced Resources and Melzer Consulting on residual oil zones (ROZs) into th is study and report.

B. Cost Model

The cost model includes costs for: (1) drilling new wells or reworking existing wells; (2) providing surface equipment for new wells; (3) installing the CO 2 recycle plant; (4) constructing a CO 2 spur

- line from the main CO 2 trunkline to the oil field; and (5) other capital investment costs. The cost model also accounts for n ormal well operation and maintenance (O&M), for lifting costs of the produced fluids, and for costs of capturing, separating and reinjecting the produced CO 2

.

C. Economic Model

The economic model used by the study is an industry standard cash flow model r un on either a pattern or a field

- wide basis. The key inputs and assumptions of the economic model include the following: (1) Oil Price

- - $85 per barrel (WTI reference price); (2)

CO 2 Purchase Costs

- - $40 per metric ton (delivered at pressure to the o il field); (3)

Financial Hurdle Rate

- - 20% ROR (before tax); (4) Royalties

- - 17.5%; (5) State

Severance/Ad Valorem Taxes

- - State specific; (6) CO 2 Reinjection Cost ($/Mcf)

- - 1% of oil price ($/barrel) (for compression and treatment); and (7) CAPEX and OPEX

- -

s tate and depth specific.

D. Regional Scaling Factors

A series of scaling factors are used to extrapolate the technical oil recovery from the sample of oil fields in the Big Oil Fields Database to r egional totals, as shown in Chapter

6 for eac h region. For two of the regions, Alaska and the Offshore Gulf of Mexico, the Big Oil Fields Database contains essentially all of the past oil production and proved reserves for these two regions. For other regions, the scaling factor s range from 59 % to

9 9 %.

The scaling factor for technically recoverable oil for each region is based on the volume of oil production and proved reserves represented by the oil fields in the data base to total oil production and proved reserves reported for the region.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

89 June 2011 No scal ing factors are used for extrapolating economically recoverable oil from the oil fields in the data base to regional totals. T he economic results from the large oil fields in the data base, which tend to have more favorable economics due to resource size and scale, may not be representative of the economics of the thousands of smaller oil fields in a given region.

E. Additional “Next Generation” Model Features

The study incorporated the following additional features into this version of the “Next
Generatio n” CO 2 - EOR Model:

 The analysis assumes that the thinner, edge areas of the oil field, accounting for 20% of and reservoir area and 10% of the OOIP, will not be feasible for application

of CO 2 - EOR.

 The oil recovery model assumes that the residual oil left i n the pore space after CO 2 injection (S orm ) is 8%. This compares to the previous analysis that used a more complex algorithm that related the S orm to volumes of CO 2 injected.

 The model currently uses tapered WAG ratios starting with an initial large slug of
CO 2 before introducing water for mobility control. The previous analysis used a consistent (“simple”) WAG ratio. A n economic truncation algorithm (comparing annual revenues with annual costs) halts project operation and CO 2 injection once

annual cash flow becomes negative.

 The analysis assumes that 25% of the injected CO 2 is dissolved in the reservoirs water or is lost outside the pattern area and thus is not available as recycled CO 2 for meeting total CO 2 injection needs

.

Additional detail on the “Nex t Generation” CO 2 - EOR study methodology is provided in Appendix A

.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

A

- 1 

## APPENDIX A Discussion of Study MethodologyImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix A A

- 1 June 1, 2011 Study Methodology STUDY METHODOLOGY

A five part methodology was used to assess the CO 2 storage and EOR potential of domestic oil reservoirs. The six steps w ere: (1) assembling and updating the Major Oil Reservoirs Database; (2) calculating the minimum miscibility pressure for applying CO 2

- EOR; (3) using minimum miscibility pressure and other criteria to screen reservoirs

favorable for CO 2 - EOR; (4) calculatin g oil recovery from applying “ N ext G eneration”
CO 2 - EOR technology; and (5) applying the updated cost and economic model.

A. Assembling The Major Oil Reservoirs Database

Overall, the Major Oil Reservoirs Database contains over 6,300 reservoirs, accounting

for 75 % of the oil expected to be ultimately produced in the U.S. by primary and secondary oil recovery processes. Figure A

- 1 illustrates a portion of the reservoir data included in the Major Oil Reservoirs Database

.

Considerable effort has been investe d to construct an up

- to

- date, volumetrically consistent database that contained all of the essential data, formats and interfaces to enable the study to: (1) develop an accurate estimate of the size of the original and remaining oil in

- place; (2) reliably screen the reservoirs as to their amenability for
miscible and immiscible CO 2 - EOR; and, (3) provide the CO 2 - PROPHET Model the essential input data for calculating CO 2 injection requirements and oil recovery.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix A A

- 2 June 1, 2011 Study Methodology Figure A

- 1. Reservoir Data Format: Major Oil Re servoirs Database

B. Calculating Minimum Miscibility Pressure

The miscibility of a reservoir’s oil with injected CO 2 is a function of pressure, temperature and the composition of the reservoir’s oil. The study’s approach to estimating whether a rese rvoir’s oil will be miscible with CO 2 , given fixed temperature and oil composition, i s to determine whether the reservoir would hold sufficient pressure to attain miscibility. To determine the minimum miscibility pressure (MMP) for any given reservoir, t he study used the Cronquist correlation. This formulation determines MMP based on reservoir temperature and the molecular weight (MW) of the pentanes and heavier fractions of the reservoir oil, as set forth below:



### MMP = 15.988*T (0.744206+0.0011038*MW C5+ )

Where: T is Temperature in °F, and MW C5+ is the molecular weight of pentanes and heavier fractions in

the reservoir’s oil.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix A A

- 3 June 1, 2011 Study Methodology A similar approach to estimating minimum miscibility pressure, prepared by Mungan (1981), is shown on Figure A

- 2.

Figure A

- 2. E stimating CO 2 Minimum Miscibility Pressure

The temperature of the reservoir was taken from the database or estimated from the thermal gradient in the basin. The molecular weight of the pentanes and heavier

fraction of the oil was obtained from the data base or was estimated from a correlative plot of MW C5+ and oil gravity, shown in Figure A

- 3

. Mole Weight C 5 +

70 110 150 190 230 270 0 1000 2000 3000 4000 5000 6000Miscibility Pressure,psi

Temperature, o F 340 300 280 260 240 220 200

180 Correlation for CO 2 Minimum Pressure as a Function of Temperature
( Mungan , N., Carbon Dioxide Flooding Fundamentals, 1981)

Mole Weight C 5 +

70 110 150 190 230 270 0 1000 2000 3000 4000 5000 6000Miscibility Pressure,psi

Temperature, o F 340 300 280 260 240 220 200

180 Correlation for CO 2 Minimum Pressure as a Function of Temperature
( Mungan , N., Carbon Dioxide Flooding Fundamentals, 1981)Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix A A

- 4 June 1, 2011 Study Methodology Figure A

- 3. Correlation of MW C5+ to Tank Oil Gravity

C. Screening Reservoirs f or CO 2 - EOR

The preliminary screening steps involved selecting the deeper oil r eservoirs that had sufficiently high oil gravity. A minimum reservoir depth of 2,500 to 3,000 feet, at the

mid

- point of the reservoir, was used to ensure the reservoir could accommodate high pressure CO 2 injection. A minimum oil gravity of 17.5 o API was used to ensure the reservoir’s oil had sufficient mobility, without requiring thermal injection.

The next step was comparing the minimum miscibility pressure (MMP) to the maximum allowable pressure. The maximum pressure was determined using a pressure g radient of 0.6 to 0.7 psi/foot, depending on the region. If the minimum miscibility pressure was below the maximum injection pressure, the reservoir was classified as a miscible flood candidate. Oil reservoirs that did not screen positively for miscible CO 2 - EOR were selected for consideration by near miscible CO 2 - EOR. y = 4247.98641x -0.87022

R 2 = 0.99763

0 100 200 300 400 500

0 20 40 60 80 100

Tank Oil Gravity, o APIMolecular WT C5+ y = 4247.98641x -0.87022

R 2 = 0.99763

0 100 200 300 400 500

0 20 40 60 80 100

Tank Oil Gravity, o APIMolecular WT C5+Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix A A

- 5 June 1, 2011 Study Methodology D. Calculating Oil Recovery

The study utilized CO 2 - PROPHET to calculate incremental oil produced using “Next

Generation” CO 2 - EOR technology

.

 CO 2 - PROPHET generates streamlines for fluid flow between injection and

production wells, and

 The model performs oil displacement and recovery calculations along the

established streamlines. (A finite difference routine is used for oil displacement

calculations.)

Even with these features , it is impor tant to note the CO 2 - PROPHET is still primarily a “screening

- type” model, and lacks some of the key features, such as gravity override and compositional changes to fluid phases, available in more sophisticated reservoir

simulators. More detailed assessmen ts of CO 2 - EOR would need to use a compositional, 3D reservoir simulator.

E. Assembling The Cost and Economics Models

A detailed, up

- to

- date CO 2 - EOR Cost Model was developed for the study. The model includes costs for: (1) drilling new wells or reworking existing wells; (2) providing surface equipment for new wells; (3) installing the CO 2 recycle plant; (4) constructing a CO 2 spur

- line from the main CO 2 trunkline to the oil field; and (5) other costs.

The cost model also accounts for normal well operation and maintenance (O&M), for lifting costs of the produced fluids, and for costs of capturing, separating and reinjecting the produced CO 2

.

The economic model used by the study is an industry standard cash flow model that can be run on either a pattern or a field

- wide basis. The economic model accounts for royalties, severance and ad valorem taxes, as well as any oil gravity and market location discounts (or premiums) from the “marker” oil price.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix A A

- 6 June 1, 2011 Study Methodology The key inputs and assumptions of the economic model includ e the following:

 Oil Price

- - $ 8 5 per barrel (WTI reference price) . The oil price selected for the analysis is consistent with EIA’s Annual Energy Outlook oil price for years 2012 and

2013.

 CO 2 Purchase Price

- - $40 per metric ton (delivered at pressure to the oil field) . The
CO 2 purchase price selected is consistent with historical ratios relating to CO 2 purchase to oil price using a value of 2.5% (with a range of 2% to 3%) of the oil price
to calculate the CO 2 purchase price in $/Mcf. For example at an $85 per barrel oil price, the CO 2 purchase price would be $2.12/Mcf equal to about $40 per metric ton.

 Financial Hurdle Rate

- - 20% ROR (before tax)

 Royalties

- - 17.5%

 State Severance/Ad Valorem Taxes

- - State specific

 CO 2 Reinjection Cost

- - 1% of oil price (for compression and treatment)

 CAPEX and OPEX

- - State and depth specific.

G. Other Considerations

Based on discussions with operators, the study incorporated the following additional
features into this version of the “Next Generation” CO 2 - EOR Model:

 The analysis assumes that the thinner, edge areas of the oil field, accounting for 20% of the field and reservoir area and 10% of the OOIP, will not be feasible for application of CO 2 - EOR.

 The oil recovery model assumes that the residual oil left in the pore space after CO 2 injection is 8%.

 The quantity of CO 2 injected is up to 1.5 HCPV. The tapered WAG ratios includes an initial large slug of CO 2 plus water for mobility control.

 An economic truncation algorithm (comparing annual revenues with annu al costs) halts project operation and CO 2 injection once annual cash flow becomes negative.

 The analysis assumes that 25% of the injected CO 2 is dissolved in water or i s lost outside the pattern area.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix B B

- 1 June 1, 2011 Major Observations and Recommendations 

## APPENDIX B

A Summary of the Meetings with Industry P ractitionersImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix B B

- 2 June 1, 2011 Major Observations and Recommendations Background

A series of “field” visits and meetings were held with industry experts active in applying CO 2 - EOR technology . The purpose of the visits and meetings were to: (1) obtain industry feedback on the methodology and results of the NET L/ARI studies of CO 2 - EOR; and (2) to discuss observations and recommendations for conducting an updated assessment of “ N ext
G eneration” CO 2 - EOR and CO 2 storage.

Three specific industry review meetings were held in September 2010 involving Don Remson of

NET L, Vello Kuuskraa, Robert Ferguson and Tyler Van Leeuwen of Advanced Resources

International and Bob Blaylock of BAH

.

**•** The first meeting was on September 9, 2010 in Houston, Texas with Kinder Morgan. This meeting involved two Kinder Morgan staff

- - Lanny Schoeling, Vice President, Engineering & Technical Development and Steve Pontious, Staff Engineer.

**•** The second meeting was during the afternoon of September 9, 2010 in Houston, Texas with Hess Corporation. This meeting involved four staff

- - Manuel De

Jes us Valle, Geological Advisor, Americas Onshore Subsurface; Ed De Zabala, Senior Reservoir Engineering Advisor, EOR Exploration and Production Technology; Alvaro Grijalba, Subsurface Team Lead, Americas Technical

– Permian; and Paul Carmody, Facilities Engi neering Advisor, Americas

Production Excellence.

**•** The third meeting was on September 16, 2010 in Midland, Texas with a number of industry experts from eight companies. The meeting involved:

– Steve Melzer, President of Melzer Consulting

– Barry Schneider o f Denbury Resources

– Scott Wehner, Manager

– Engineering; Andrew Parker, Geoscientists

– Permian Basin; and Tom Beebe, Sr. Reservoir Engineer of Whiting Petroleum Corporation

– Mike Moore, Vice President, External Affairs & Business Development CCS

of Blu e Source

– Dr. Robert Trentham, Director, Center for Energy and Economic Diversification, University of Texas of the Permian Basin

– Brian Hargrove and Barry Petty, Trinity CO 2

– Michael Rushing, CO 2 /EOR Manager, Apache Corporation, and

– Tom Thurmond, Eng ineering Manager, Legado ResourcesImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix B B

- 3 June 1, 2011 Major Observations and Recommendations Overall Industry Observations

The industry experts found that the methodology and results of the CO 2 - EOR studies of

NETL/ARI were reasonable. While a number of excellent suggestions were made as to how specific areas o f the methodology could be improved (e.g., current higher costs of CO 2 pipelines), the overall response, as stated by one respondent was “if we were asked to do this, we probably would have done it the same way.”

T he industry reviewers found the oil recove ry efficiencies of 15% to 20% of OOIP for oil reservoirs geologically favorable for CO 2 to be reasonable. (Overall, the NETL/ARI results for

“state of art” CO 2 - EOR provides 17.5% recovery of OOIP, after eliminating oil reservoirs not

favorable for miscibl e CO 2 - EOR.) The industry experts cited examples of CO 2 - EOR projects that were recovering 17% to 18% of OOIP and, with additional reservoir surveillance and technology, were looking to push this over 20% of OOIP.

Two specific observations were made with re spect to observed oil recovery efficiencies in actual
CO2

- EOR floods:

**•** Whiting noted that their Postle CO 2 - EOR project is currently expected to recover 17% to 18% of OOIP and, with application of cross

- well seismic and increased
use of CO 2 in selected patte rns, the company looks to push up the recovery efficiency to the mid

- twenties.

**•** Denbury noted that their oil recovery expectations are for 17% to 18% of OOIP for straight CO 2 flooding. With incorporation of a WAG process at the end of the straight CO 2 - floo d, Denbury look s to boost oil recoveries to 20% OOIP. Denbury specifically cited the West Heidelberg oil field which already has an expected 18% recovery of OOIP from CO 2 - EOR (60% OOIP overall recovery). They are considering converting this field to a WA G process to further increase oil

recovery.

T he exclusion of NGL production from the liquids production reported for CO 2 - EOR projects is one reason reported oil recovery efficiencies are lower than actual total liquids recoveries. (A
barrel of NGLs has ab out two

- thirds of the Btu content and sales value of crude oil.) For example:

**•** The S ACROC CO 2 - EOR project operated by Kinder Morgan reports (for 2010) about 29,000 barrels per day of oil production and about 16,000 barrels per day
of NGL production from th e S ACROC gas plant. (A small portion of the input stream to the gas plant is from other nearby oil fields.) Adding the NGL production (after adjusting for Btu content) would increase the reported liquids production value by 37 %, see Table B

- 1.

**•** Whiting r eports that their long

- term observation is that CO 2 - EOR strips the light ends from the crude oil (the propane, butane, etc.) leading to significantly higher incremental NGL production volumes after the initiation of a CO 2 flood.

Future assessments of the p erformance of CO 2 - EOR would benefit from the incorporation of NGL production into overall oil recovery estimates and economics

.

Table B

- 1. Oil and Gas Segment: Production and DCFImproving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix B B

- 4 June 1, 2011 Major Observations and Recommendations Source: KinderMorgan, 2011

Major Recommendations

The industry ex perts made ten significant recommendations for improving the modeling of “ N ext
G eneration” CO 2 - EOR.

Recommendation #1 . Consider modifying the injected CO 2 to water ratio, including using a larger initial slug of CO 2 or even straight CO 2 in low permeabilit y oil reservoirs, to increase the processing rate and reduce the need to “drill down” the pattern.

Currently, the model uses the same WAG ratio, independent of the permeability (and thus injectivity) of the reservoir, often causing the model to use closer well spacing than currently exists to achieve a 15 to 30 year flood (per pattern).

Modifying the WAG ratio or eliminating the use of water would enable the model to use larger well spacing, reducing the need to drill additional wells and thus improving eco nomics.

The PROPHET 2 model has been revised to set the minimum pattern size to 40 acres, to
increase minimum CO 2 injectivity

, and to incorporate a larger initial CO 2 slug, as part of a tapered WAG.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix B B

- 5 June 1, 2011 Major Observations and Recommendations Recommendation #2 . Consider applying the CO 2 flood t o only 80% of the reservoir area to eliminate the low quality edge of the reservoir from being flooded. The exact factor could be related to field size, with large fields having a higher factor of developable acreage.

Currently, the model selects one type pattern and applies the results from this type pattern to the entire reservoir. A key input is the average reservoir net thickness which includes both the thicker central area and the thinner edge area. Reducing the CO 2 flood to the higher quality,

thic ker pay central area of the oil reservoir would provide somewhat higher recovery per pattern and enable fewer patterns to flood the bulk of the OOIP.

The PROPHET model has been revised to flood only 80% of the field area containing 90% of
the OOIP.

Recom mendation #3. Consider allowing higher gravity oils to become miscible or near

miscible CO 2 candidates due to achieving multi

- contact miscibility with time. Currently, lower gravity oil reservoir, say 18 o to 20 o API, are generally categorized as immiscib le floods, relegated to low recovery of the OOIP.

Certain lower gravity floods in relatively shallow oilfields, such as the Eucutta oil field , are achieving higher oil recovery efficiency than would be realized from an immiscible model. A

similar lower oi l gravity CO 2 flood with higher expected performance is in planning stages for the shallower Wall reservoir in the Salt Creek field in Wyoming. Applying near miscible CO 2 flooding to these lower oil gravity oil reservoirs would provide higher oil recovery efficiencies.

This recommendation has been incorporated, in a preliminary way, into the model, but requires further analytical work.

Recommendation #4. Incorporate the oil resources and production from the Residual Oil Zones ( ROZ s) into “Next Generati on” ROZ. Currently the model only floods the MPZ (main pay zone of the oil reservoir). However, evidence is mounting that the San Andres ROZ in the Permian Basin is of high quality, with a thick pay and favorable oil saturation.

Adding the ROZ of the S an Andres formation in the Permian Basin would increase the size of the target oil producible with CO 2 - EOR. It would also significantly increase the storage volume
for CO 2

.
The already performed study of the Permian, Big Horn and Williston basins’ ROZ r esources (beneath existing fields) will be incorporated into th is “Next Generation” study

. Further study of ROZ resources, with a particular emphasis on the oil resources held in ROZ “fairways” and on the economic feasibility of producing oil from ROZs wo uld significantly improve the understanding of this important domestic oil resource.Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix B B

- 6 June 1, 2011 Major Observations and Recommendations Recommendation #5. Use marginal oil productivity and costs to set the maximum HCPV of

CO 2 to be injected.

Currently, the PROPHET2 model uses 1.0 HCPV for the “State o f Art” CO 2 - EOR case and uses

1.5 HCPV for the “Next Generation” CO 2 - EOR case. Making the volume of CO 2 injected in the
“Next Generation” CO 2 - EOR case a function of marginal costs would provide a more realistic representation of current EOR operations.

Th is feature has been incorporated into th is “ N ext G eneration” study

.

Recommendation #6. Consider including a “combination technology case”, involving injection

of CO 2 and surfactant, for improving oil recovery from immiscible CO 2 - EOR projects, such as

Yate s.

Currently, oil reservoirs categorized as immiscible are not included in this study. Adding a low

concentration of surfactant slug followed by CO 2 could substantially increase oil recovery efficiency in shallower, immiscible flooded CO 2 - EOR projects.

This feature is being investigated for use in subsequent model updates.

Recommendation #7. Increase the size of the initial CO 2 slug to 0.4 HCPV before starting a

CO 2 WAG.

Currently, the CO 2 flooding design is to conduct a 1 to 3 WAG for the first 0.4 HCPV of injected
CO 2 , followed by a 1 to 2.5 WAG for the remaining 0.6 HCPV of injected CO 2

. Increasing the
volume of the CO 2 slug at the start of the project will provide a quicker oil response and potentially help promote miscibility, helping improve t he economics of the CO 2 flood.

The tapered WAG feature has been incorporated into th is “Next Generation” study.

Recommendation #8 . Modify the CO 2 injection and production algorithm in PROPHET2 to reflect a higher net CO 2 to oil ratio, to account for de ad

- end pores and loss of CO 2 outside the pattern.

Currently, the model does not include dead

- end pore space or loss of CO 2 outside the pattern, thus providing a relatively favorable CO 2 material balance. Reducing the production of CO 2 to
about 75% of what would otherwise occur, to account for dead

- end pore space and CO 2 losses

, would raise the required purchase volumes of CO 2

.

This feature has been incorporated into th is “ N ext G eneration” C O 2 - EOR study

.

Recommendation #9. Consider incorporating the higher NGL production achieved from CO 2 - EOR floods in the overall economics.

Currently, only the oil production from a CO 2 flood is included in the recovery efficiency and

economic calculation. Past experience shows that implementation of CO 2 - EOR signif icantly improves the stripping of light ends from the crude oil.

This feature is being investigated for use in subsequent model updates.

Recommendation #10. Consider using basin

- by

- basin criteria for establishing the maximum pressure gradient for MMP (m inimum miscibility pressure).Improving Domestic Energy Security and Lowering CO 2 Emissions with

Next Generation CO 2

- Enhanced Oil Recovery (CO 2

- EOR)

Appendix B B

- 7 June 1, 2011 Major Observations and Recommendations Currently, the screening criteria for miscibility use a maximum pressure gradient of 0.6 psi/ft. for

all basins. Increasing the pressure gradient to a higher, say 0.7 psi/ft. for the Illinois Basin would enable a shallower, 2,700 reservoir with a MMP of 1,800 psi to be a miscible CO 2 flood (maximum pressure of 1,890 psi) instead of being processed as an immiscible CO 2 flood (maximum pressure of 1,620 psi).

This feature has been incorporated into the “Next Generation” analy sis of the Illinois Basin.