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July 4, 2008

Occidental EOR leads the way for CCS

Analysis of: Occidental Petroleum Strikes Texas Deal | online.wsj.com
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Analysis By:
Hans Linhardt, PresidentHans Linhardt
President, LTDI, Inc.
Implications: Occidental Petroleum plans to spend $1.1 billion to extract oil from the aging Texas Permian Basin.  For this purpose Occidental is teaming with natural gas (NG) producer SandRidge Energy to build a gas processing plant, separating a high CO2 content for enhanced oil recovery (EOR) and sell the NG to the market.

Analysis: With oil prices above $80 per barrel, EOR becomes one of the most efficient methods to extract oil from old fields such as the Texas Permian Basin.  Occidental expects to produce additional 500 million barrels of oil from the field over the next five years.

The EOR is made possible die to a high CO2 (65% CO2 content) NG field belonging to SandRidge Energy.   Both companies will together build a gas processing plant to separate NG and CO2.  The CO2 will go to the EOR and 280 million cubic feet per day of NG will be sold to the market by the partners.

The CO2 is injected in the field to fracture the tough shale rock structure to free the NG and keep the CO2 locked in the structure. This is another significant oil & gas carbon capture and sequestration (CCS) example.

Coal gasification has been delayed due to CCS issues.  Occidental has worked on several projects, including the LA Basin IGCC (Carson BP) to provide CCS via EOR in their oil fields.  The other example is the operating North Dakota Gasification Plant sending CO2 to Canada for EOR.

In summary, with present oil prices EOR together with the latest drilling techniques is one of the most efficient and economical solution to extract additional oil from old depleted oil fields such as in Texas, Louisiana and Pennsylvania.


 


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