Co-optimization of enhanced oil recovery and carbon sequestration
In this paper, we present an economic analysis of CO2-enhanced oil recovery (EOR). This technique entails injection of CO2 into mature oil fields in a manner that reduces the oil's viscosity, thereby enhancing the rate of extraction. As part of this process, significant quantities of CO2 remain sequestered in the reservoir. If CO2 emissions are regulated, oil producers using EOR should therefore be able to earn revenues from sequestration as well as from oil production. We develop a theoretical framework that analyzes the dynamic co-optimization of oil extraction and CO2 sequestration, through the producer's choice of the fraction of CO2 in the injection stream at each moment. We find that the optimal fraction of CO2 is likely to decline monotonically over time, and reach zero before the optimal termination time. Numerical simulations, based on an ongoing EOR project in Wyoming, confirm this result. We also find that cumulative sequestration is less responsive to the carbon tax than to the oil price. Only at very high taxes does a tradeoff between revenues from oil output and sequestration arise.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 33 (2011)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/505569|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dermot Gately & Hiliard G. Huntington, 2002.
"The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Number 1), pages 19-55.
- Gately, D. & Huntington, H.G., 2001. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," Working Papers 01-01, C.V. Starr Center for Applied Economics, New York University.
- Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39, pages 137-137.
- Davis, Graham A & Cairns, Robert D, 1999. "Valuing Petroleum Reserves Using Current Net Price," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 295-311, April.
- Dermot Gately, 2004. "OPEC's Incentives for Faster Output Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 75-96.
- Thompson, Andrew C., 2001. "The Hotelling Principle, backwardation of futures prices and the values of developed petroleum reserves -- the production constraint hypothesis," Resource and Energy Economics, Elsevier, vol. 23(2), pages 133-156, April.
- Robert D. Cairns and Graham A. Davis, 2001. "Adelman's Rule and the Petroleum Firm," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 31-54.
- Adelman, M A, 1990. "Mineral Depletion, with Special Reference to Petroleum," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 1-10, February.
- de Coninck, Heleen, 2008. "Trojan horse or horn of plenty? Reflections on allowing CCS in the CDM," Energy Policy, Elsevier, vol. 36(3), pages 929-936, March.
When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:33:y:2011:i:4:p:893-912. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.