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Economic analysis of CCUS: Accelerated development for CO2 EOR and storage in residual oil zones under the context of 45Q tax credit

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  • Ren, Bo
  • Male, Frank
  • Duncan, Ian J.

Abstract

Residual oil zones (ROZ) undergoing CO2 Enhanced Oil Recovery (CO2-EOR) may benefit from specific strategies to maximize their value. We evaluated several strategies for producing from a Permian Basin, West Texas, USA field’s ROZ. This ROZ lies below the main pay zone (MPZ) of the field. Such brownfield ROZs occur in the Permian Basin and elsewhere. Since brownfield ROZs are hydraulically connected to the MPZs, development sequences and schemes influence oil production, CO2 storage, and net present value (NPV). We conducted economic assessments of various CO2 injection/production schemes in the stacked ROZ-MPZ reservoir based on flow simulations of a high-resolution geocellular model built from wireline logs and core data and calibrated through production history matching. Flow simulations of water alternating gas (WAG) injection, such as switching injection from the MPZ to the ROZ and commingled production, were studied. Simulation results showed that simultaneous CO2 injection into the MPZ and ROZ lead to the largest oil production and, generally, the largest NPV. If instead, CO2 was simultaneously injected into the MPZ and ROZ, then into the ROZ alone, this maximized CO2 storage. CO2 storage can be used as a tax credit under the Internal Revenue Code, Section 45Q. Storage performance depends on the development approach and WAG ratio. Developing the ROZ increased storage compared to only producing from the MPZ. The WAG ratio to maximize oil production did not always yield the largest NPV. These findings are potentially applied to other Brownfield ROZs, which are common below San Andres reservoirs in the Permian Basin and other basins. ROZ development can increase oilfields’ NPV and carbon storage potential. Our study can serve as an analog for similar reservoirs. This work provides valuable insights into the further optimization of brownfield ROZ development and information for operators to plan to develop stacked ROZ-MPZ reservoirs.

Suggested Citation

  • Ren, Bo & Male, Frank & Duncan, Ian J., 2022. "Economic analysis of CCUS: Accelerated development for CO2 EOR and storage in residual oil zones under the context of 45Q tax credit," Applied Energy, Elsevier, vol. 321(C).
    • Handle: RePEc:eee:appene:v:321:y:2022:i:c:s0306261922007310
    DOI: 10.1016/j.apenergy.2022.119393
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    References listed on IDEAS

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    1. Ren, Bo & Duncan, Ian J., 2019. "Reservoir simulation of carbon storage associated with CO2 EOR in residual oil zones, San Andres formation of West Texas, Permian Basin, USA," Energy, Elsevier, vol. 167(C), pages 391-401.
    2. Wang, Xiao & van ’t Veld, Klaas & Marcy, Peter & Huzurbazar, Snehalata & Alvarado, Vladimir, 2018. "Economic co-optimization of oil recovery and CO2 sequestration," Applied Energy, Elsevier, vol. 222(C), pages 132-147.
    3. Jiang, Jieyun & Rui, Zhenhua & Hazlett, Randy & Lu, Jun, 2019. "An integrated technical-economic model for evaluating CO2 enhanced oil recovery development," Applied Energy, Elsevier, vol. 247(C), pages 190-211.
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