Financing Enhanced Recovery
Authors: Simpson J.J. 
Published: December 2007

The rising costs of tertiary recovery suggest the need for multibillion-dollar outlays to extract the billions of barrels of oil said to be producible by such methods. Financing will require governmental policies that will enable the industry to attract investors and increase policies that will enable the industry to attract investors and increase its cash-flow generating capability.

Introduction

The energy situation that has evolved in the United States points up more than anything else the need for increased points up more than anything else the need for increased usage of enhanced recovery techniques. Estimates of oil in place in known formations (as well as estimates of undiscovered reserves) promise that petroleum's role in our national energy picture is far from played out. In fact, petroleum will remain the mainstay of our energy petroleum will remain the mainstay of our energy economy for some decades to come. This is assured by delays in the utilization of our two promising and readily available energy resources - coal and nuclear power. Furthermore, shale oil has been rendered uneconomic for the time being because of escalating costs. Solar energy and wind power also have been relegated to the long-term category insofar as important energy-problem solutions are concerned. Thus, it is logical for the U.S. to concentrate on maximizing output of conventional oil and gas. A program of this nature will call for increased emphasis on secondary and tertiary techniques as well as substantial cash outlays to finance such projects. To accomplish this, an economic and political climate is needed that will make it possible for the oil industry to finance enhanced recovery applications, to the greatest extent possible, on a pay-as-you-go basis.

U.S. Energy Situation

No sector of our economy - industrial, governmental, residential, commercial, or military - could long operate without adequate energy supplies. Energy is the lifeblood of our economy. Fig. 1 confirms this. The close, almost "lock-step," relationship between the growth of the economy, as measured by real gross national product (GNP), and energy demand is readily apparent. Historically, over the relatively short time span considered, energy demand has grown at an average annual rate of 3.2 percent and real GNP has grown 3.3 percent - practically percent and real GNP has grown 3.3 percent - practically a one-to-one relationship. During 1975-85, reflecting ing the increased cost of oil and other energy forms, conservation will take hold and the economy will become slightly less energy-intensive. But, in any case, energy demand will remain high, and more than 48 million B/D of oil equivalent will be required to fuel an economy of more than $1.75 trillion in 1985.

Most observers of the U.S. energy scene agree that, despite the passage of the Energy Conservation and Conversion Act of 1975 (the so-called "Omnibus Energy Bill"), no firm national energy policy exists that will help bring about a substantial increase in indigenous energy supplies to meet the economy's needs less than 10 years from now. Indeed, I have seen many articles decrying the lack of a viable national energy policy. A case in point was a recent article in World Oil. The former Federal Energy Administrator himself likened Washington's indecisiveness in energy matters to rearranging the furniture on the deck of the doomed Titanic.

U.S. Petroleum Situation

As Fig. 1 indicates, petroleum has met and will continue to meet the major portion of our energy needs. In 1960, oil demand of 9.8 million B/D accounted for more than 44 percent of total energy demand.

JPT

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