SPE 94922

Economic Evaluation of Oil Production Project with EOR: CO2 Sequestration in

Depleted Oil Field
A.T.F.S. Gaspar, SPE, S.B. Suslick, SPE, D.F. Ferreira, and G.A.C. Lima, SPE, State U. of Campinas

Copyright 2005, Society of Petroleum Engineers

the pre-industrial Era, CO2 concentration was about 280 ppm.
This paper was prepared for presentation at the SPE Latin American and Caribbean Petroleum Presently, it reaches 370 ppm.
Engineering Conference held in Rio de Janeiro, Brazil, 20 – 23 June 2005.

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Abstract
This paper presents an economic feasibility study for CO2
coupled with EOR in a small mature Brazilian oilfield. The
present study considers two important and complementary
reasons: (1) EOR improvement - CO2 displaces residual oil
left in place after primary production and secondary water
flooding and has been successfully injected in mature fields
for forty years, in order to extend the oilfield life; (2) storing
this gas in the oil reservoir and, hence, a contribution to reduce
its emissions. The physical aspects of this project are
described, and a breakdown cost methodology is proposed in
order to estimate the main financial determinants of the
integrated EOR with CO2 sequestration (cost of capture,
compression, transportation and storage). Project evaluation is
derived from a cash flow model, regarding reservoir
production profile, price and costs, capital expenditures
(CAPEX), operating expenditures (OPEX), carbon credits,
depreciation time, fiscal assumptions, etc. A sensitivity
analysis study was carried out in order to identify the most
critical variables. Results indicate that project NPV is around
US$ 3.2 million, what is significant for a small mature field.
Additionally, it contributes by removing Green House Gases
(GHG) from the atmosphere by storing 0.73 million tons of
CO2 over a period of 20 years. Project feasibility, as expected,
was found to be very sensitive to oil price, oil production, and
CAPEX.
Although, there is much uncertainty regarding the
impacts of these GHG emissions, governmental authorities
and non-governmental organizations have discussed the
implementation of some approaches to minimize their build-
up in the atmosphere. One of the available methods for
minimizing CO2 concentration in the atmosphere is the
application of carbon sequestration techniques, which has the
advantage of maintaining the use of fossil fuels while reducing
the CO2 concentration in the atmosphere.
One of the challenges to be overcome in the
implementation of a sound CO2 sequestration policy is the
high cost of the whole process, which comprises costs of
capture, compression, transportation and storage. Costs for
CO2 sequestration are estimated between US$ 40 and US$ 60
per ton of CO2 avoided)1 depending on the methodology used
in the capture process, the amount of required compression,
the distance from the source to the storage site, as well as the
site where CO2 is going to be injected.
Possible sites and methods for CO2 storage include:
• depleted oil and gas reservoirs;
• deep saline formations;
• aquifers;
• oceans;
• forests;
• enhanced oil recovery (EOR);
• enhanced coalbed methane production
(ECBM).

There are several possibilities where CO2 could be stored.

1 - Introduction
The ever-increasing intensity of carbon dioxide (CO2), as well
as other gases, in the atmosphere is caused by anthropogenic
activities since the Industrial Revolution, mainly due to the
increasing burning of fossil fuels (coal, oil and natural gas). In
Nevertheless, the first requirement is to reduce the high costs
associated with the whole process in order to stimulate the
adoption of CO2 sequestration procedures. The urgent need for
reducing current high costs (mainly costs of capture) depends
on further research and development into CO2 sequestration,
2 SPE 94922
as well as, the incentive of mechanisms such as the ones
offered by the Kyoto Protocol, which will create more
opportunities for cost reduction. If the carbon credits are
internalized, the costs of CO2 sequestration will be offset and
sequestration may become attractive. It may also be necessary
to implement a CO2 tax regime in order to generate incentives
for the reduction of CO2 emissions into the atmosphere. If no
incentives are provided, capture and disposal methods may
never be used2.
Currently, market prices for carbon are still uncertain. If
carbon price is greater than zero, capture and disposal methods
will become attractive and should be used. Additionally, on
the basis of economic return alone, Enhanced Oil Recovery
(EOR) tends to be an attractive geologic disposal option for
CO23.
Storage of CO2 in reservoirs submitted to EOR operations
is a direct consequence of CO2 utilization. The gas is used in
its supercritical form for extracting more oil out of mature
reservoirs in the Enhanced Oil Recovery process. CO2
displaces residual oil left in place after primary production and
secondary recovery and has been successfully injected for
forty years in mature fields in order to extend the life on
oilfields. Some of the CO2 injected will remain stored in the
reservoir. Currently there are about 84 projects of CO2
applications for EOR (commercial or research-level)
worldwide. About 71 of these projects are in USA. The
amount of enhanced oil being produced from these CO2 –
EOR projects averages approximately 206,000 bbl/day4.
Approximately 20,000 tons of CO2 are daily delivered into oil
fields for EOR projects5. According to EPRI6 estimates, 3
million metric tons/year of CO2 are currently being
sequestered (permanently stored) in depleted oil fields in the
western United States; although, data concerning the specific
volumes and flow rates of CO2 injected into depleted oil fields
for EOR are generally not publicly available.
CO2 combined with EOR can be used to recover oil which
otherwise would not be produced. Then, the revenues from oil
selling could offset the costs of CO2 storage in many
instances7. CO2 sequestration with EOR is the most viable
route for technology cost reductions in the near term, due to
the high oil prices8. The possibility of reducing costs in other
CO2 sequestration options such as aquifers and depleted fields
(without production of hydrocarbons) will probably be less
than EOR9. Moreover, in agreement with Heddle10, CO2
floods for EOR are also considered a very attractive option,
since most oil fields have already undergone primary and
secondary recovery. Note that infrastructure is already present
in the field (i.e. wells, pipelines) requiring just some
adaptation for CO2 storage purposes.
The present study is focused on the utilization of CO2 in
active oil reservoirs through enhanced oil recovery. The
objective of this paper is to analyze if anthropogenic carbon
dioxide utilization in enhanced oil recovery can impact the
reduction of emissions to the atmosphere, as wells as
economic analysis for the process of CO2 sequestration in
depleted oil reservoirs.
This paper is divided into seven sections. In section 2,
the economics of CO2 sequestration is described in details,
followed by the methodology for the economic analysis in
section 3. The next section provides a case study of a mature
oilfield. The energy requirements of the enhanced oil recovery
using CO2 are discussed in section 5 and results are analyzed
in section 6.
2 - Economics of the CO2 sequestration process
Total costs of CO2 sequestration can be divided into costs for
capture, compression, transport, and storage. As indicated by
Gough and Shackley11, in many cases, cost estimates cannot
be directly compared because they involve different
assumptions about fuel prices, discount rates, and different
elements of total costs. By convention, some organizations
like the IEA Greenhouse Gas R & D Programme incorporate
the cost of compression into cost of capture12 impeding direct
comparison with just capture or compression cost components.
In this section, costs of each stage of CO2 sequestration
process are briefly described.
2.1 - Capture and Compression Costs
In the sequestration system, a great contribution to the total
cost formation comes from the capital and operation cost for
the compression, associated cooling and dehydration
equipment13.
For estimating compression costs, the amount of
required compression and the unit costs of compression should
be considered. However, these two elements can vary from
project to project. In addition, compression costs are
considerably higher for small flows9. Estimates for CO2
compression costs range from US$ 7.4 to 12.4/tonne9.
In addition to the compression costs, one issue which
causes concern is the high cost of capture. Capture costs
account for about 75% of total cost of sequestration (the
dominant parameter for the current technology) and has been
one of the key barriers to the introduction of CO2
sequestration technology12. Capture costs depend on the
amount of CO2 to be captured, CO2 concentration and pressure
in the stream of emissions source, and the nature of the
capture process (chemical or physical absorption, chemical or
physical adsorption, membranes, cryogenic fractionation,
etc.). Nevertheless, some technologies are not suitable for
capturing CO2 under some of the flue gas conditions,
suggesting that another technique should be applied. For
instance, cryogenics is just appropriate for high CO2
concentration in the gas stream, whereas, gas-solid adsorption
is practical at very low CO2 concentrations14.
As suggested by van Bergen et al15, high capture costs
are attributed to requirements involving the intensive use of
equipment to scrub CO2 from exhaust gas streams derived
from power plants where CO2 is presented in low
SPE 94922
concentrations (8 –14% by volume). Nguyen and Allinson16
states that CO2 capture is the area where additional R & D
potentially holds the most promising mechanism for reducing
overall costs for curbing CO2 emissions. Research must be
focused on chemical absorption and membranes, due to their
large potential for reducing costs17. Moreover, further research
is also needed to the development of new solvents and
adsorbents as well as better understanding of those that have
already been in use.
There are opportunities to capture CO2 at lower costs.
For instance, recovering CO2 from industrial processes usually
provides higher concentrations and, therefore, requires less
energy. In agreement with Lysen18, if CO2 is nearly pure, it
can be captured at low cost, at best, only dehydration and
compression may be required before transportation. Farla et
al19 mentioned that so far, little attention has been given to
CO2 recovery from industrial processes, although large
amounts of CO2 are emitted at high concentration by few
industries. Such industrial processes are ammonia
manufacturing, fermentation and hydrogen production (i.e., in
oil refining). Table 1 presents mitigation cost data for some
cases involving CO2 capture and compression processes.
2.2 - Transportation Cost
The most common means of transport of CO2 is by pipeline.
This option of transportation is recommended for large
quantities and long distances. Trucks can be used for reduced
quantities and short distances. For large distances over sea,
tanker transport might be the best option9.
For estimating operation costs for transportation of CO2
via pipeline, the following variables should be considered:
CO2 flow rate and distance from the source to the storage site.
The costs for transportation are likely to be reduced when
large scale of operation is deployed. Obviously, the closer the
oilfield to the CO2 plants, the lower the cost of the
transportation. Moreover, larger flow size reduces cost. For
capital costs, the following parameters should be considered:
pipeline geometry (internal diameter), terrain characteristics,
for example if it is a mountainous area, because it would lead
to higher construction costs. Population density should also be
considered, since higher safety is required for populated areas
(i.e., more valves required) which may increase costs9
considerably.
Considering these issues, transportation cost can vary
significantly for different projects. For instance, Hedle et al10
quoted pipeline construction costs as around US$ 21/in/km,
that is, US$21 per inch of diameter per km of length, and
operational and maintenance (O&M) costs at US$ 3.1/km
(costs do not depend on pipeline diameter). Turkenburg20 cited
that pipeline transportation costs of CO2 are US$ 3-12/t C per
100km (depending on the size and capacity of the pipeline).
According to van Bergen et al15, transport costs can be
reduced by limiting the distance between CO2 point sources
and reservoir to 100Km (or less). Thus, whenever possible,
3
transportation costs can be reduced if there is an
anthropogenic source near the oilfield, for example.
2.3 - Storage Cost
Cost components for CO2 injection into storage sites include
mainly capital costs for drilling wells, and costs related to the
operation and maintenance of the system16. The composition
of total storage cost includes the following parameters:
location, injection costs, reservoir depth, average temperature,
reservoir radius, environmental regulatory framework and
flow rate.
It should be kept in mind that, the costs vary for type of
reservoirs and from location to location, that is, costs are very
site specific. For example, Nguyen and Allison16 pointed out
that in most CO2 storage cases in geological reservoir, costs
range from below US$ 5 to above US$$ 20 per ton.
Onshore storage is generally less expensive than offshore
storage. In the latter option, platforms are required leading to a
significant increase in costs. Surely, costs vary considerably
from project to project9.
In some cases (including the case study of this paper),
there are opportunities for storage at small cost or even net
benefits, by means of improving oil or gas by injection of CO2
into the reservoir and, as result, generating some offsetting
income. As mentioned earlier, a good option is to apply CO2
in EOR and ECBM. However, ECBM option is more
expensive since it requires a large number of wells9.
Some issues should be carefully considered regarding
CO2 storage costs. Smith et al13 states that the cost to
construct and operate injection wells contributes with only a
small portion of the total cost for the system. Moreover,
currently, operators must cover the costs of purchased CO2, as
well as, other capital and operating costs, solely on the basis of
sales of oil production, because operators receive no financial
benefit for sequestering CO26.
3 – Methodology for economic analysis
This section presents the economic analysis used to
evaluate the feasibility of the CO2 sequestration with EOR.
Costs for each stage of the project including capture,
compression, transportation and storage are divided into
capital expenditures (CAPEX) and operating expenditures
(OPEX). Typically in carbon sequestration, the OPEX of the
process include labor, materials, maintenance, and possibly
seismic monitoring costs16. Moreover, the economic data that
must be considered to calculate the costs of CO2 sequestration
are: market prices to equipment and services, operational life
of the project, fiscal regime, CO2 purchase, operating expenses
with CO2 recycle, operating cost of the well, investments in
compressors, separation equipment, well conversions, drilling
costs, fuel cost, etc.
4 SPE 94922
The company net cash flow is estimated using the
following simplified relationship every year:
NCF=(R+CCO2– Roy–PIS–OPEX–IW– D)*(1–T)+D– CAPEX
(1)
It was derived from the cash flow (Equation 1), the net
present value (NPV) indicator. The net present value is the
sum of all net cash flows over the life of the project.
The estimation of R (gross revenue) was carried out by
multiplying the oil production by its oil price, i.e., the inflows
are generated by the oil production.
The cash flow is found by deducting from the inflows
(gross revenue and the possible CO2 credits to be gain due to
the sequestration), the IW (investments costs)1*, OPEX, and
taxation according to the Brazilian fiscal regime (royalties,
PIS/PASEP, rental area, corporate tax and other taxes). Due to
its linear character, with some pertinent adaptations, Equation
(1) could be applied to any R & D system, despite the
differences between the incidence of taxes and levies of
several fiscal systems.
The choice of the correct discount rate is one of the key
predicaments in the model of valuation and decision-making.
The discount rate for this EOR – CO2 sequestration project
must reflect the following considerations:
¾ The opportunity cost of investing in this project
rather than, in other with the same risk and return
characteristics;
¾ The preference of the corporation for cash (liquidity);
¾ The social opportunity cost of not investing in this
project and, consequently, keeping on delivering CO2 to the
atmosphere.
The terms CAPEX and OPEX presented in the net cash
flow (Equation 1) are estimated as follow:
The estimative of total CAPEX taking into account the
investment in each step of a CO2 sequestration project is:
CAPEXt=CAPEXcap+CAPEXcomp+CAPEXtransp+CAPEXstor (2)
The total OPEX is estimating similarly to the CAPEX
approach:
OPEXt=OPEXcap+OPEXcomp+OPEXtransp+OPEXstor (3)
Finally, the next step is to apply this model to a mature
oilfield in the Brazilian sedimentary basin.
1
* Some costs such as drilling and completion expenditures,
may be accounted as yearly cost in some fiscal regimes.
4 – Case study: Feasibility of CO2 injection in a
depleted onshore reservoir
The present study is based on a mature standstone reservoir
located within the Reconcavo Basin in Brazil. This is a small
basin where petroleum was discovered in the late thirties. It is
assumed that light oil is produced. Data are derived based on
information from the literature as well as from experts in CO2-
EOR. The main technical and economical characteristics of
the oilfield can be seen in Table 2.
CO2 for this flood is supplied by a fertilizer plant. The
selected technology to capture and isolate the CO2 from the
ammonia production is the conventional chemical absorption
based on hot potassium carbonate. After this, CO2 is
compressed to a supercritical state and transported via pipeline
(78 km) to the oilfield where it is injected through a single
well. CO2 flood extends over an area of 12 km2. CO2 is
injected into the reservoir at a depth of about 1800m.
Reservoir permeability averages 300 mD. Moreover, leakage
of CO2 in the project is negligible here.
In this project, current expenditures on CO2
transportation are: 20 000 US$/Km/in, in a paved road, i.e.,
the simulation includes an adequate infrastructure for
transportation of goods and services. The investments in
compression are approximately US$ 3 million for power
ranging from 2200 to 2400 HP.
In this study, it is assumed that the total oil production is
attributed to the injection of CO2, i.e., oil cannot be produced
without EOR. For simplicity, it is assumed a simple
production profile with a constant enhanced oil production
over the total lifetime. The amount of enhanced oil recovered
is calculated using a CO2 effectiveness factor of 0.40 ton of
CO2 injected per barrel of enhanced oil. Also, it is considered
here that well costs are not accounted in the economics of this
project, since these are assumed to be present in the field. It is
also assumed that cost of CO2 storage include costs of
separation, compression and recycling of CO2 produced along
with the oil besides costs of monitoring of CO2 sequestration.
Moreover, it is also assumed that 50% of the CO2 injected
remains stored in the reservoir. By the time the project is
completed, an estimated 3.65 MMbbl of oil will have been
recovered, as well as 0.73 million tons of CO2 will have been
stored.
Table 3 presents the fiscal and economical assumptions
used in this model. The cash flow of the CO2 sequestration
project in oil fields is estimated using the following
assumptions: revenues from selling oil, project costs like fixed
operating costs, variable operating costs, capital costs such as
CO2 capture, compression, transportation, injection, taxes like
income tax, COFINS/PIS, Government Take such as
(royalties, rental area, etc). Possible CO2 credits are included
in the cash flow as project credits. There are no taxes imposed
on CO2 injection.
A discount rate of 12% is assumed for the project. As
discussed earlier in the previous section, the discount rate
SPE 94922
reflects the opportunity cost of investing in this project, which
depends on the macroeconomic setting, nature of the process,
oil field stage (marginal fields, etc.), among others.
Depreciation of facilities has started in the first year. In
addition, abandonment costs are depreciated from the fourth
year.
5 – Energy Requirements for Enhanced Oil Recovery
using CO2
A very important factor to be considered is the energy
required in the whole CO2 sequestration-EOR process.
Substantial amounts of energy are also needed to compress the
CO2 to a supercritical state for pipeline transportation to the
storage site.
Normally, in the total process of CO2 sequestration, there
is a little amount of CO2 directly or indirectly emitted into the
atmosphere because of the intensive use of energy in the
capture, compression, transportation and storage of CO2
combined with enhanced oil recovery stages. CO2 is
additionally generated in these stages resulting in CO2
emissions. Direct emissions result from the use of on-site
electricity generation while indirect emissions result from the
use of off-site electricity generation.
In order to quantify these secondary emissions, it should
be considered each step where energy was used. Firstly, in this
study, CO2 is a by-product of ammonia production and the
stream source contains almost pure CO2 (approximately 98%).
In view of this, no significant quantities of CO2 are emitted in
the capture process (no substantial amounts of energy to purify
the stream are required). However, some emissions occur
when CO2 is compressed, transported, and utilized in
enhanced oil recovery operations. EOR methods are highly
energy intensive. Electricity, as well as natural gas is an
important power source for EOR operations6.
In this particular case, the external power source for each
operation is based on natural gas. Steam is also utilized for
drying CO2 in the compression stage. The energy requirement
for each stage of this CO2 EOR sequestration project, as well
as the emission factors from energy generation, was based on
published data. Emission factors depend on the composition of
the fuel type consumed. For example, burning coal will release
more CO2 than will burning natural gas (117.080lbs/106Btu).
According to Farla et al19, the carbon dioxide from
ammonia production in the fertilizer industry instead of be
vented may be compressed in a four-isentropic compression
process. The compression energy amounts to 393 kJ/kg-CO2.
Most of the water will be removed in the first compression
stages. Additional drying consumes 8 kJ/kg-CO2 of heat, and
cooling takes 8 kJ/kg-CO2 of electricity.
When CO2 is injected in EOR operations, it consumes
significantly more electric energy per barrel of oil produced
than thermal EOR methods, for example. CO2-EOR methods
require about 5 hp per barrel of oil per day, while thermal
EOR methods use about 0.75 hp per barrel of oil per day. The
electric power for gas EOR is required for pumping fluids
from the wells, separating product from produced and break
through gases, compression for gas injection and re-injection,
and pumping product to market and produced water to
treatment and re-injection6.
5
Some venting of CO2 is inevitable at various stages in
the life of an EOR project6. For example, in the EOR
operation, CO2 is emitted because of the utilization of
equipments on-site, besides the utilization of energy outside
the boundaries of the field. By the other hand, for EOR, it is
utilized CO2 that otherwise would be vented to the
atmosphere.
In this project it is assumed a carbon dioxide emission
factor of 51 kg-CO2/GJ, based on the fuel input in the
electricity production in the region of the project. The carbon
dioxide emission factor of 62 kg-CO2/GJ is assumed for
steam.
The Stella® Software has been used in order to analyze
de dynamics of the whole process of CO2 sequestration in
enhanced oil recovery, considering each step of the process
with its respective energy requirements. Stella® is a useful tool
for dynamic modeling. It is also an excellent didactic tool to
demonstrate changes in variables and their impact on the
project. This is only a preliminary stage in the development of
the model. The preliminary results will need refinements.
Therefore, a simplified preliminary conceptual model
using Stella® Research version for WindowsTM was developed.
Emission factors and energy requirements of each step of the
project were used as inputs to analyze the net storage of CO2
in the active oil reservoir. Figure 5 shows a sample screen of
the conceptual CO2 storage model located in the interface
level of the model.
This model can be applicable to any oil reservoir. Each
component that should be used to estimate the net storage of
CO2 is described in details in the mapping level of the
conceptual diagram illustrated in Figure 6.
6 - Results and Discussion
It is important to keep in mind that it was assumed that the
costs of CO2 incorporated in the cash flow are in a CO2
captured base, i.e., the gross amount of CO2 stored. To
incorporate each component of sequestration cost in a CO2
avoided base, it is necessary to take into account the CO2
emissions generated associated with the energy use in each
stage of CO2 sequestration.
The stand-alone NPV, i.e., the NPV before taxes is US$ 6.95
million (US$ 1.90/bbl), whereas the NPV including the CO2
credits is US$ 9.67 million (US$ 2.65/bbl). The effective NPV
considering the usual government take, i.e. the NPV after all
taxes was US$ 3.16 million (US$ 0.86/bbl). A comparative
analysis of NPV magnitude is depicted in Figures 1a and 1b.
Low values for effective NPV are attributable to the high
value of CAPEX and the limited production from the small
field.
The NPV is a result of future cash flows under a static
scenario. Since the future is always uncertain, the NPV may
be considered as a random variable so that the confidence
level in its mean value is not absolute. The influence of
parameters such as oil price, carbon credits, oil production,
CAPEX, and OPEX were further analyzed through a
sensitivity analysis. Graphs for each input variable were
6 SPE 94922
obtained in order to assess planning regarding CO2-EOR
economics optimization.
For the sensitivity analysis of NPV, the selected
variables are submitted to a range of 50% of their original
input values, except the oil production value, which varied
from minus 50% to 0 (because oil has been produced close to
its limit). Table 4 shows the parameters accounted for the
sensitivity analysis. The range of the variables was based on
data from the literature. These uncertainties and variability
reflect differences in assumptions and applications.
Figure 2a indicates the sensitivity of NPV in relation to
oil price, oil production, CAPEX, and OPEX of capture,
compression, transportation and storage, as well as CO2
credits. In this project, it can be noted that uncertainties in the
oil price and oil production, followed by CAPEX play an
important role in the total CO2 sequestration - EOR process
economics. However, in this hypothetical case, due to the
limited range of values considered (i.e., for the base case
values assumed), the values of CO2 credits and OPEX of
capture, compression, transportation, and storage are very
small resulting in NPV relatively less sensitive to changes in
these variables. Taking this into account, CO2 credits as well
as OPEX of capture, compression, transportation and storage
were isolated and submitted to an additional sensitivity
analysis. From figure 2b, it can be noted that CO2 credits are a
significant parameter and an increase in its value results in an
increase in the NPV.
The sensitivity of NPV to these variables can be
exemplified as follows: increasing US$ 1.00 in the oil price
input can result in a NPV of about US$ 1.00 million higher
from the base case. While a reduction of US$ 1.00 million in
CAPEX would result in an increase of about US$ 860.000 in
the NPV. An increase of US$ 1.00 in the value of CO2 credits
parameter would result in an increase of about US$ 187,000.
A risk analysis was also applied to quantify the
uncertainty in the project NPV. The required input parameters
for the risk analysis are: oil price, amount of injected CO2,
discount rate, capture cost, compression cost, transportation
cost, and storage cost besides storage ratio. The range of
variation of the respective uncertain inputs variables is
presented in Table 5 via probabilistic distribution. For
example, oil price and discount rate uncertainty are modeled
using lognormal distribution, whereas the storage ratio is
modeled using normal distribution. Triangular distribution
(min, median, max) were used for the OPEX of capture,
compression, transportation and storage and amount of CO2
injected parameters.
As a result of this simulation, a frequency of distribution
of the NPV was obtained as illustrated in Figure 4. From this
figure it can be seen that there is a risk of about 50% that the
NPV will be lower than its expected value. In addition, it can
also be seen, for example, that there is 10% of probability of
obtaining an effective NPV above US$ 24 million, or a risk of
90% that the true value will be lower than US$ 24 million.
The maximum financial exposure was in the beginning
of the project, mostly because of high capital investments.
Nevertheless, the payback time occurred within six years,
which is relatively early considering the lifetime of this
oilfield.
In this work the net storage of the CO2 in the reservoir
per kg of oil recovered, was also analyzed (the storage of CO2
considering the energy requirements and related CO2
emissions of the whole process using Stella® software).
It is assumed that 3.00 kg of CO2 are required for
injection in order to produce 1 kg of oil. The injected amount
depends on the characteristics of the reservoir. From this
required amount, 1.50 kg is supposed to remain in the ground,
the rest of the CO2 is produced along with the oil. However,
the net amount of CO2 stored per kg of oil produced is about
1.32 kg oil, since CO2 is emitted from the use of energy (an
amount of approximately 0.18 kg of CO2 emitted per kg of oil
produced). It can be noticed that even so, it is still worthwhile
sequestering CO2 in active oil reservoirs because in each kg of
oil produced, 1.32 kg of CO2 remains stored in the ground,
that is 0.18 ton CO2 per barrel of oil. This result is in
agreement with the available literature. According to Wilson
et al21, a net amount of about 0.15 ton of CO2 are stored per
barrel of oil, while Espie22 reports a value of 3.3 barrels of oil
for each ton of CO2 stored in the Permian settings in the North
Sea area, or 0.3 ton of CO2 per barrel of oil. According to
Stalkup23, the net ratio in four field experiments varies
between 0.17 and 0.78 tons per barrel of oil, gross ratios are
roughly twice as high.
7 - Conclusions
Currently, the main obstacles for the implementation of CO2
sequestration are the high costs of the whole process.
However, with an increasing level of knowledge and
contributions of new technologies in the field of CO2
sequestration as well as the increasing level of expertise will
probably further reduce these costs. Another constraint is the
lack proactive taxes to reduce the level of emissions. A way to
minimize the high costs is combining CO2 sequestration with
enhanced oil recovery. In this case, revenues from the extra oil
recovered can help to offset the costs of the whole process of
CO2 sequestration.
Simulations results in this paper indicate that the
injection of CO2 leads to the reactivation of this small
marginal project allowing enough profit to assist in the
reduction of injection costs, besides the contribution to
mitigate the environmental impact caused by industrial
sources of greenhouse gases. The NPV is around US$ 3.2
million (US$0.86/bbl). In addition the project will contribute
to store CO2 that otherwise would be launched into the
atmosphere.
SPE 94922 7

In addition, changes in oil price and oil production have IW = Investment accounted as costs
the greatest effect on NPV followed closely by changes in
CAPEX. It can be noted that higher oil prices can incentive MMbbl= Million of barrels
investments in CO2 sequestration combined with enhanced oil
recovery projects. In this simulation, the value of CO2 credits NCF = Net Cash Flow
can be considered small, not having a great effect on NPV.
However if the value of this variable increase substantially in OM =Operational and Maintenance
the future, it will strongly impact the economics of the project.
OPEX = Operational Expenditure
Oilfield operators can gain good returns sequestering CO2 in
the reservoirs if the values of credits increase substantially. PIS = Social tax, directly charged over gross revenue
Finally it must be considered that not all the CO2 injected R = Gross revenue, given by k * p * q (where p is the
remains stored in the reservoir. Some of this amount is price of Brent Dated oil and q is the number of
produced along with the oil and the rest remains stored in the barrels produced in the considered year. The
reservoir. From this amount we should consider the energy conversion factor k depends only on oil quality
used to carry out all the process from the capture in the (ºAPI, sulfur content, etc)
emissions source to the storage site.
Roy = Total amount paid in Royalties

scf = Standard cubic feet

Acknowledgements
T = Corporate tax rate
The authors like to thank CAPES, CNPq, CEPETRO, and
ANP for the financial support for this research. t = Metric tons

Nomenclature

bbl = Barrel of Oil References

C = Carbon 1. Davison, J. E., Freund, P. Smith, A.. "Putting carbon back

in the ground", published by . IEA Greenhouse Gas R & D
CAPEX = Capital Expenditure (Sum of all investments, Programme, Cheltenham, U. K., ISBN1 89837328, 2001.
except IW, and is considered linearly depreciable in
10 years)
2. Eckaus, R. S., Jacoby, H. D., Ellerman, A. D., Leung, W-
Ct = Total Cost C. and Yang, Z.: "Economic Assessment of CO2 Capture
and Disposal", MIT Joint Program on the Science and
Ccap = Capture Cost Policy of Global Change, 1996, Report Nº 15.

Ccomp = Compression Cost 3. Dahowski, R. T., Dooley, J., Brown, D. R., and Stephan,
A. J.: "Economic Screening of Geologic Sequestration
Ctransp = Transportation Cost Options in the United States with a Carbon Management
Geographic Information System"., 2001. available online:
Cstor = Storage Cost http://www.globalchange.umd.edu/

CO2 = Carbon Dioxide

4. Moritis, G., “2004 Worldwide EOR Survey", Oil and Gas
DCF = Discounted Cash Flow Journal, 2004.

D = Total Depreciation 5. Moritis, G., “1998 Worldwide EOR Survey", Oil and Gas
Journal, 1998.
ECBM = Enhanced Coal Bed Methane Recovery

EOR = Enhanced Oil Recovery 6. EPRI – 1999, Enhanced Oil Recovery Scoping Study. Palo
Alto, CA: TR - 11386, 1999.
GHG = Green House Gases
7. Herzog, H., and Golomb, D.: "Carbon Capture and Storage
GtC = Gigaton of Carbon (billion tonnes of Carbon)
from Fossil Fuel Use", Encyclopedia of Energy, 2004, Vol.
GtCO2= Gigaton of Carbon Dioxide (billion tonnes of
Carbon Dioxide)
8 SPE 94922
8. Hustad, C. W. and Bjonnes, G.: "The Norwegian CO2-
Infrastructure Initiative: The Economics and Socio-
Economics of using CO2 for Enhanced Oil Recovery in the
North-Sea Basin". Third Dixy Lee Ray Memorial
Symposium, International Conferences on Global Carbon
Management and Sequestration Technologies and Life
Cycle analysis, 2000.
9. Ecofys & TNO – NITG.: "Global carbon dioxide storage
potential and costs", report, nº EEP – 02001, 2004.
10. Hedle,G., Herzog, H., Klett, M.: "The Economics of CO2
Storage". MIT LFEE 2003-003 RP, 2003. available in:
http://lfee.mit.edu/publications/reports
11. Gough, C. and Shackley, S.: "Evaluating the options for
carbon sequestration". Tyndall Centre Technical Report Nº
2, 2002.
12. Freund, P. and Davison, J.: "General Overview of Costs",
Proceedings of the IPCC workshop on carbon dioxide
capture and storage, Regina, Canada, 2002.
13. Smith, L. A., Gupta, N., Sass, B. M., and Bubenik, T. A.:
"Engineering and Economic Assessment of Carbon
Dioxide Sequestration in Saline Formations". Journal of
Energy & Environmental Research, 2002, Volume 2,
pp.5.
14. Riemer, P. W. F. and Ormerod, W. G.: "International
Perspectives and the Results of Carbon Dioxide Capture,
Disposal and Utilization Studies". Energy Convers. Mgmt.,
1995, Vol.36, Nº 6 -9, pp: 813.
15. van Bergen, F., Wildenborg, T., Gale and J., Damen,
K.:"Worldwide Selection of Early Opportunities of CO2-
EOR". Netherlands Institute of Applied Geosciences TNO,
National Geological Survey, 2002.
16. Nguyen, N. and Allinson, W. G.: "The economics of CO2
capture and geological storage", paper 77810 presented at
the 2002 SPE Asia Pacific Oil and Gas Conference and
Exhibition held in Melbourne, Australia.
17. Knuffman, N.: "Carbon Sequestration – A better alternative
for climate change?" School of public affairs, University of
Maryland, 1999.
18. Lysen, E. H.. "PEACS - Opportunities for early application
of CO2 sequestration technology", IEA GHG R & D
Programme, 2002.
19. Farla, F. C., M., Hendriks, C. A., Blok, K.: "Carbon
Dioxide Recovery from Industrial Processes". Energy
Covers. Mgmt. , 1995, Vol. 36, Nº 6-9, pp. 827.
20. Turkenburg, W. C.: "Sustainable Development, Climate
Change, and Carbon Dioxide removal (CDR)". Energy
Convers. Mgmt., 1997, Vol. 38. Suppl., pp. S3.
21. Wilson, M., Moberg, R., Stewart, B., and Thambimuthu,
K.: CO2 Sequestration in oil reservoirs - a monitoring and
research opportunity, 2000; apud Ecofys & TNO –
NITG.: "Global carbon dioxide storage potential and
costs", report, nº EEP – 02001, 2004.
22. Espie , A.A.: Options for Establishing a North Sea
Geological Storage Hub., 2000; apud Ecofys & TNO –
NITG.: "Global carbon dioxide storage potential and
costs", report, nº EEP – 02001, 2004.
23. Stalkup, F. I.: Miscible Displacement. Monograph
Series, Vol.8, ISBN 0-89520-319-7.(1984)
24. Hendriks, C. A.: "Carbon Dioxide Removal from Coal-
Fired Power Plants", Kluwer Academic Publishers,
Dordrecht, 1994. apud Farla, F. C., M., Hendriks, C. A.,
Blok, K.: "Carbon Dioxide Recovery from Industrial
Processes". Energy Covers. Mgmt., 1995, Vol. 36, Nº 6-9,
pp. 827.
SPE 94922 9

Table 1: OPEX of capture and compression from several sources of CO2

Source of Emissions Costs of Capture and Recompression (US$/ ton CO2) Literature Source

Fertilizer Industry 8 19
Ethylene Oxide Production 9 19
Iron Steel Production 35 19
Power Plant 35-40 24
Petrochemical 46 19

Table 2: Reservoir Technical Characteristics

Proved Reserves (MMbbl) 3.97
API Gravity 35
2
Field Area (Km ) 12.00
CO2 Injected (ton/day) 200
Storage ratio (%) 50
Oil Production (bbl/year) 182,500
CO2 Injection versus Oil Production Ratio 0.398
Investments in capture (million US$) 6.00
Investment in compression (million US$) 3.00
Investment in transportation (million US$) 6.00
Investment in storage (million US$) 1.00
Costs of abandonment (million US$) 1.10
Capture cost (US$/ton) 3.00
Compression cost (US$/ton) 7.50
Transport cost (US$/ton) 8.00
Storage cost (US$/ton) 3.00
Operating costs (million US$/ year) 1.46

Table 3: Economic Model: Fiscal and Economic Assumptions

Useful Life of the project (years) 20
Oil Price (US$/ bbl) 25
Discount Rate 12%
Corporate Tax 25%
Other Corporate Taxes under Net Revenue (PIS/ PASEP + COFINS) 3.65%
Royalties (net production) 5%
2
Rental Area (US$/Km ) 300

Table 4: Economic Model: Parameters for Sensitivity Analysis

Parameter Assumed Value Range
Oil Price (US$/bbl) 25.00 12.50 – 37.50
Oil Production (bbl/year) 182,500.00 91,250.00 – 182,500.00
CAPEX (MMUS$/ton CO2) 16.00 8.00-24.00
Capture Cost (US$/ton CO2) 3.00 1.50 – 4.50
Compression Cost (US$/ton CO2) 7.50 3.75 – 11.25
Transportation Cost (US$/ ton CO2) 8.00 4.00 – 12.00
Storage Cost (US$/ton CO2) 3.00 1.50 – 4.50
Credits (US$/ ton CO2) 10 5.00 – 15.00

Table 5: Input Parameters of Risk Analysis

Uncertain Variables Selected Distribution Input Parameter Values
Oil Price (US$/bbl) lognormal mean = 25; standard deviation= 10
Amount of CO2 Injected triangular 150; 200; 250
Storage Ratio normal mean = 50%; standard deviation= 10%
Discount Rate lognormal mean = 12%; standard deviation = 4%
CO2 Credits lognormal mean=10; stand deviation= 5
Opex Transport triangular 6; 8; 10
Opex Compression triangular 6; 7,5; 9
Opex Storage triangular 1,5; 3; 4,5
Opex Capture triangular 1,5; 3; 4,5

The values of the parameters referring to the triangular distribution are the optimistic, most likely and pessimistic ones, respectively.
10 SPE 94922

12,00

10,00

8,00

MMUS$ 6,00

4,00

2,00

0,00
NPV Stand-alone Tax NPV + Carbon NPV effective
Credits

2,5

2
U S $/ bbl

1,5

0,5

Stand-alone Tax NPV + Carbon Effective NPV

NPV Credits

Figure 1: a) Net Present Value of CO2 Sequestration-EOR project; b) Net Present Value per oil barrel
SPE 94922 11

20

Oil Price
15
Oil Production
Net Present Value (MMUS$)

10
CAPEX

5
Transportation
Cost
o
0 Compression
-60% -40% -20% 0% 20% 40% 60% Cost

Storage Cost
-5

Capture Cost
-10

CO2 Credits
-15
Variation

4 Opex
Net Present Value (MMUS$)

Transport

Opex
3 Compress

Opex
Storage

2
Opex
Capture

CO2 Credits
1

0
-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50%
Variation

Figure 2: a) Sensitivity Analysis of CO2 Sequestration-EOR project considering all variables; b) considering OPEX and CO2 credits
12 SPE 94922

100%
90%
Cumulative Probability of NPV

80%
70%
60%
50%
40%
30%
20%
10%
0%
-30 -10 10 30 50 70 90 110
effective NPV (US$ Million)

Figure 3: Distribution of Cumulative Probability of NPV

1
0,9
Cumulative Probability of NPV

OpexCapture
0,8
0,7
0,6 OpexCompr

0,5
0,4 OpexTransport

0,3
0,2 OpexStorage

0,1
0 CO2Credits
1 2 3 4 5 6 7 8
NPV (MMUS$)

Figure 4: Results of Risk Analysis

SPE 94922 13

Figure 5: Interface level: Basic Conceptual Conditions of the CO2 Sequestration- EOR
Process

Run
Source of CO2 and ReÉ
Annual total tonnes É 24,333.33
inject production ratio 3.00 Annual Emission in toÉ 9,124.1
Gross CO2 Stored in É 1.50
Source of CO2
CO2 Emitted per Kg É 0.37
and Recycling
Net CO2 stored per É 1.13

Energy Oil Production

Energy per
Annual total
Drying
Energy per oil production tonnes of
Energy per pumping rate
Compressing oil produced
Cooling

Energy per
Energy Requirement
Transportation inject production
in the Reservoir
ratio

Total Heat daily total oil

Total Energy produced
period

Emission Factors CO2 Emissions CO2 Storage

Net CO2 stored
CO2 Emitted per kg of
per Kg of oil oil produced
CO2 per Energy Gross CO2 Stored in
Unit derived from Total Daily reservoir per kg
Steam CO2
of oil
Emitted
CO2
CO2 per Energy
stored rate
Unit derived from
GN Annual Emission
in tonnes of CO2

Figure 6: Mapping Level of CO2 Sequestration in EOR operation