Saturday, October 4, 2014

CO2-EOR; CO2 As A Commodity

October 4, 2014: be sure to see first comment below about UND-EERC; and, GE and Statoil partnering on CO2-EOR studies.

Original Post
I got a couple of articles sent to me today regarding CO2-EOR and carbon capture and storage (CCS). Time to have a page devoted to CO2-EOR updates.

October 4, 2014: CBC is reporting --
Saskatchewan made history this week by launching the world's first commercial-scale carbon-capture and storage operation at a coal-fired power plant.
With the $1.4-billion mega project, Saskatchewan has leapfrogged past Alberta to take the lead in the race to capture carbon in Canada.The facility in Estevan will take a million tonnes of CO2 a year from a SaskPower station, convert it to liquid and bury it deep underground.
SaskPower says the captured emissions are equivalent to taking a quarter of a million cars off the road.
Alberta’s plans sounded even more ambitious six years ago when the government announced it would invest $2 billion in four major carbon capture and storage (CCS) projects to slash emissions.
But since then two projects have been scrapped and new Premier Jim Prentice now seems lukewarm on CCS.
CCS simply for environmental reasons is costly; may not make economic sense. However, treating CO2 as a commodity for CO2-EOR is a completely different story.


This is simply some housekeeping:

January 18, 2014: Barron's on DNR.
The first 20% of an oil well's production gushes out, thanks to natural pressure. That eventually drops, and you can push out another 20% by flooding the well with water. When that's finished, you can do carbon-dioxide flooding, a highly effective technique that is Denbury's specialty. Carbon dioxide is an unusual gas. It loves oil. Denbury injects highly pressurized CO2 into a well. It finds the oil, bonds to it, and pushes it out. 
The biggest user of this oil-recovery procedure is Occidental Petroleum. The next largest, and the purest play, is Denbury, which produces 72,000 barrels of oil equivalent a day.
This quarter, the Plano, Texas-based company will pay its first-ever dividend, of 25 cents. Next year, that dividend will grow to between 50 cents and 60 cents a share, giving the stock a yield of about 3%. At a recent $16.46 a share, the stock trades at 4.5 times free cash flow, well below the industry average of 6.8. Closing the gap could push the shares up at least 20%, to $20, not including the dividend.
January 3, 2014: The Dickinson Press, for some reason, ran a story today suggesting that DNR will begin waterflooding in southwestern North Dakota around 2020, but needs to lay a CO2 pipeline first. Not sure why the story was printed at this time. Don updates DNR's plans for southwestern North Dakota:
One year ago this field was supposed to have CO2 in 2018. DNR is currently laying the pipeline for CO2 from Belle Creek, MT, to Baker, MT. I believe the injection in the Baker, Montana, field is to start in 2015. There are also fields northwest and southeast of Baker
DNR's plans were delayed somewhat because the company decided in late 2013 to transition to a "dividend company" rather than a growth company. In 2014 DRN will start paying dividends and are slowing down the growth pace. This meant that the field in North Dakota got pushed back two years (to 2020).
Timing Is Everything

This article "found" just after I was putting together this CO2-EOR page.

For the warmists who love graphs, this is a good one.

PowerLine is reporting:
One fundamental question in the global warming debate is, what is the Earth’s equilibrium climate sensitivity? That is, how much will the Earth’s average surface temperature rise, ceteris paribus, on account of a doubling of the concentration of carbon dioxide in the atmosphere? Global warming hysteria is predicated on the belief that average temperature will rise by up to 6 degrees C as a result of doubling atmospheric CO2. All of the scare headlines you see about polar bears, droughts, flooded cities, etc., rely on that assumption.
The problem for alarmists is that contemporary research doesn’t support any such scenario. The most recent nail in the alarmists’ coffin is a paper by Nic Lewis and Judith Curry titled “The implications for climate sensitivity of AR5 forcing and heat uptake estimates,” which concluded that the best estimate of equilibrium climate sensitivity is 1.64 degrees. C. Lewis describes the paper’s methodology at the link at the PowerLine article.
Why is 1.64 degrees so important? Because it's the range of normal variability. Furthermore, it is like the 1.64 degrees is "too high," anyway.

Yes, the science is settled. Has been for quite some time.


Upon Further Review -- Oh, Oh -- The Jobs Report -- October 4, 2014; Subtract Texas' Hiring Gains And US Jobs Report Still Down From 2008; Germany Energy Policy And Rube Goldberg; Joe Biden: I Started A Joke

The September jobs report was huge; it was the first time in six years the rate has dropped below 6.0%.

How do we get to 5.9%? Easy: remove 93 million people from the labor force.
While by now everyone should know the answer, for those curious why the US unemployment rate just slid once more to a meager 5.9%, the lowest print since the summer of 2008, the answer is the same one we have shown every month since 2010: the collapse in the labor force participation rate, which in September slid from an already three decade low 62.8% to 62.7% - the lowest in over 36 years, matching the February 1978 lows.
And while according to the Household Survey, 232,000 people found jobs, what is more disturbing is that the people not in the labor force, rose to a new record high, increasing by 315,000 to 92.6 million!
Now, today, in this week's issue of BloombergBusinessweek (it will be on newsstands Monday): "In many states, jobs aren't coming back."
  • subtract Texas' hiring gains and the US is still down from 2008
  • "this is not like any other recovery. There is a tremendous disparity."
Those are the two bullets headlining the story in the October 6 - 12, 2014 issue of BBW, page 20.

The article starts out:
Kevin Yearout has added about 80 jobs at his Albuquerque contracting company since July 2013. That still leaves him with fewer than half the 750 workers he employed in 2009..."
Another data point:
  • 29 states have not recovered all the jobs they lost in the recession 
This is the regional disparity (change in regional GDP, 2010 - 2013, rounded):
  • Southwest (TX, NM, AZ): 13%
  • Rocky Mts (MT, ID, UT, WY): 9%
  • Great Plains (ND, SD, MN, IA, NE, KS, MS): 7%
  • Far West (CA, NV, WA, OR): 7% -- this is actually quite surprising
  • Great Lakes (MI, IL, IN, OH, WI): 5%
  • Southeast (a bunch of states, including FL, VA, NC, SC, GA): 4%
  • New England (ME, NH, VT, MA, CT, RI): 4%
  • Mid-Atlantic (NY, PA, NJ, MD, DC): 3% -- the president's backyard
Upon Further Review -- The Germany "Green" Miracle

This is quite a story. Think of a Rube Goldberg cartoon when reading the story:
1) because of the Japanese debacle, Merkle turned off the nuclear energy switch a few years ago and made the decision to go "green" 
2) German utilities are going broke because of net metering and renewables
3) to survive, or make a profit, the German utilities must use cheap coal -- even cheaper than natural gas
4) Russia shutting off Europe's main source of natural gas due to sanctions
5) German utilities have little recourse but to use coal to survive (Russia cutting natural gas deliveries; fracking not allowed in much of Europe; nuclear energy verboten)
6) German utilities, to survive, or make a profit, are generating more electricity than the country needs, using cheap coal 
7) to survive, or make a profit, German utilities are selling their cheap, excess electricity made from very dirty coal to countries like the Netherlands, destroying the natural gas industry there (remember the article on the Netherlands and natural gas?)
and, the result, the Rube Goldberg outcome:
a paradox of Germany's "Energiewende," the energy revolution aimed at weaning the country off fossil fuel by 2050, that CO2 emissions were now rising despite the rapid expansion of solar and wind power. In 2014, the surcharge on electricity bills will provide some $30 billion of subsidies for renewable energies. A four-person household will pay a surcharge of almost $275 this year.
Perception is important: the Germans and the world think highly of Ms Merckle, but it certainly seems she took the wrong fork in the road. 

Der Spiegel is reporting:
In 1990, Germany's brown coal-fired power stations produced almost 171 billion kilowatt hours of power. At the time, many old eastern German plants were still in operation.
It was a situation that the German government wanted to change, with the aim being that of radically reducing the output of the CO2-polluting lignite plants, but that's not happening.
In 2013, it rose to 162 billion kilowatt hours, the highest level since reunification in 1990.
As a result, Germany's CO2 output is expected to have risen in 2013, even as power from renewable sources has reached 25 percent of the energy mix. [That's quite a feat.]
Part of the reason is the low price of CO2 emissions permits in EU trading scheme. Another reason is that new brown coal plants, with a capacity of 2,743 megawatts, came on line in 2012, far exceeding the 1,321 megawatts from old plants shut down that year.
"Brown coal power stations, after nuclear plants, are the main source of profit for RWE and Co.," said Höhn, referring to Germany's major utilities. "So they don't even switch off the really old power stations."
Power output from anthracite coal also rose, by eight billion kilowatt hours to over 124 billion, while output from gas-fired plants fell by 10 billion to 66 billion. That means that coal plants are making up for the bulk of the energy production lost due to the 2011 shutdown of eight nuclear plants, while gas plants, which emit less CO2 but are more expensive to run, are barely profitable at present.
The increase in coal-generated power also led to a new record in German electricity exports to around 33 billion kilowatt hours.
"In 2013 Germany exported more power than it imported on eight out of 10 days. Most of it was generated by from brown coal and anthracite power stations," said Patrick Graichen, a power market analyst at Berlin-based think tank Agora Energiewende.
"They are crowding out gas plants not just in Germany but also abroad -- especially in the Netherlands."
Bloomberg Businessweek
The numbers:
  • 92 pages (not counting cover, back cover, inside cover, inside back cover)
  • 40 pages of advertising (not counting inside cover, inside back cover, back)
  • three "special" advertising sections (which I detest above all)
Full page articles, each on:
  • crickets for lunch: the insect food of the future is finally here
  • what I wear to work (mostly a full-page photo with a few boxes of text)
  • how did I get here (Facebook timeline of Judith Rodin, President, Rockefeller Foundation)
  • full page pictures introducing articles (6)
  • one 3/4 page picture of Bill Gross
Unless you like advertising and photographs that add little substance, I would never recommend BBW; I only get it because I get it practically for free ($10/year); and it's delivered to the door with the Wall Street Journal. 

I track the demise of the mainstream media here.  

I Started A Joke

I Started A Joke, The Bee Gees

The AP is reporting that the vice president was just joking; calls Turkish president who didn't get the joke --
U.S. Vice President Joe Biden apologized Saturday to Turkish President Recep Tayyip Erdogan, who was angry over comments in which Biden said Erdogan had admitted that Turkey had made mistakes by allowing foreign fighters to cross into Syria.
Erdogan denied ever saying that and told reporters in Istanbul before Biden's apology that he "will be history for me if he has indeed used such expressions."
Biden spoke with Erdogan by phone on Saturday, the White House said.
"The vice president apologized for any implication that Turkey or other allies and partners in the region had intentionally supplied or facilitated the growth of ISIL or other violent extremists in Syria," the White House said, referring to an acronym for the Islamic State group.
Wow, one really has to parse Biden's statement of apology (obviously he was taking something from a briefing, perhaps classified, when he spoke of Turkey's actions).

I can't make this stuff up. Okay, okay -- the AP didn't call it a joke, but everyone knows ...

The only question was which video to use....

Random Graphic Of Stratigraphic View Of The "Pronghorn"

[See comments: a reader has simplified this, and has also provided a link to a pdf.  It's really quite a great link: 173 pages with great graphics, and very, very recent (2013); Colorado School of Mines.]

In the process of looking up something else, I came across this nice graphic showing where the Pronghorn formation is, sitting between the Lower Bakken and the Three Forks.  

See comments below. One of the comments: 
Some operators (Continental comes to mind) appear to be calling the Sanish/ Pronghorn 'TF1'. If one compares the TVD/ target depth of their TF1 wells to offsetting well logs they are often targeting within 30' of the basal Lower Bakken Shale- which would be in the Pronghorn. The September Investor Presentation illustrates this on page 14.

I haven't compared the geologic presence of the Pronghorn to the number of Three Forks target intervals in Continental's experimental high-density areas, but perhaps they are drilling fewer wells per pad where this formation is absent.
From an OXY USA report in the Manning oil field, general area of Whiting's Pronghorn prospect:
Bakken Geology

This might be a good time to review the geology of the Bakken (for newbies).

The following is taken from the geologist's report for #27139:
Tyler formation: 7,736 feet TVD; shale inter-bedded with limestone in the upper half of the formaiton; shale inter-bedded with limestone in the lower half; the shale is red to orange in the uper formaiton; dark gray to black in the bottom half of the formation.

Mission Canyon formation (Madison Group): 9,190 feet TVD; primarily limestone interbedded with dolomitic limestone; gray to brown limestone.

Lodgepole formation (Madison Group): 9,824 feet TVD; gray to light gray-grown, mudstone

False Bakken: 10,730 feet TVD; dark brown earthy shale; multiple fracture gas shows reaching upwards of 2,000 units

Upper Bakken Shale member, the top of the Bakken formation: 10,672 feet TVD; shale; 1,655 unit gas show was recorded.

Middle Bakken member: 10,689 feet TVD; a sequence of siltstone, limestone, and silty sandstone;

End of this report; the target was the middle Bakken.


The following is taken from the geologist's report for #24694:
Tyler: shale, soft to very soft

False Bakken (Mississippian Lodgepole): earthy texture, slightly calcareous

Bakken formation: two black shales with a silty, calcite and dolomite-cemented sandstone middle member; the middle Bakken is a clean limestone that is harder than the rest of the formation; usually ranges from 4 - 12 feet thick with hardest formation being near the base close to the sandstones; the Sandstones units of the middle Bakken formation was 9 - 10 feet thick

Pronghorn / Three Forks formation: the dolomite within the Pronghorn formation was 31 feet thick; medium gray dolomite;

Carbon shows: the highest gas recorded in this well in the middle Bakken porosity was 5,000 units.

Target zone was 13 feet to 23 feet below the lowest Bakken shale, about 10 feet thick.

Reason #2471 Why I Like To Blog -- Natural Gas Fill Rate -- Zeits

It all started with a short note from Don some months ago; since then I have enjoyed following the "NG fill rate." The link takes you to an earlier post to provide the background; I have a tag at the bottom of the blog, "NG_Fill_Rate."

The subject was a spin-off from "The Road to New England," another tag at the bottom of the blog.

Now that I have a better picture / worldview / feeling for the natural gas fill rate, I can enjoy Richard Zeit's analysis over at Seeking Alpha. A year ago I would have skipped over this article. In fact, I almost skipped over this article until I saw it was written by Zeits. His summary:
  • Natural gas supply and demand appear well-balanced, lending support to the Henry Hub stability thesis at ~$4/MMBtu.
  • New takeaway capacity schedule in the Northeast Region defines the trajectory of natural gas supply, and is the key driver to monitor.
  • Chesapeake sees no relief to the Marcellus North constrained situation in 2015, with gradual relief in 2016-2017. 
Other data points:
The storage deficit versus the 5-year average went from ~900 Bcf at the beginning of the injection season to ~373 Bcf currently. Goes without saying, neither figure should be interpreted as a measure or indication of imbalance between supply and demand, but rather, as a reflection of abnormal weather pattern: the initial deficit was the consequence of the severe winter, and the strong contraction of that deficit is in large part explained by the abnormally cool summer.
The most recent storage injection data provides evidence that supply and demand are in fact in almost a "goldilocks" balance. While storage injections are running at a rate that exceeds the five-year weather-adjusted average, this excess supply is hardly a threat to the Henry Hub price.
First, this surplus is moderate, while storage capacity remains ample, particularly in the producing region.
Second, current injection rate excess over the five-year average is somewhat overstated by weekly headline figures, due to the fact that available storage capacity is more broadly distributed at the moment, relative to what would be a seasonal norm. At the end of a typical injection season, when capacity is near full, some injection points begin to experience congestion, leading to a slowdown in the injection rate. That point has not been reached during this injection season yet.
Folks may want to save this article in another format than simple bookmarking; these articles have a way of disappearing after awhile, requiring a subscription.

By the way, I have said the same thing with regard to Canadian oil sands and the Bakken; a takeaway constraint is not necessarily bad for investors.
It may take some time before the severe constraints can be relieved. The Marcellus North region is particularly constrained. Chesapeake Energy presenting at an industry conference yesterday, made the following comment on the pricing outlook for the Marcellus North:
The pipe access in the Northeast is a challenge. There is a lot of pipes under construction and more in the planning stages. We have an active discussion with all of those pipes, trying to figure out where the best access to markets are going to be, what the best cost structure is going to be. You can map it out and see that there is not a whole lot to expect in terms of huge improvement in 2015. There is more to see in 2016 and then even more in 2017. So, when I think about the basis issue in the Northeast, I do not expect 2015 from a pricing standpoint to be really any better than 2014 and we are planning our business accordingly, that's why we like to keep production flat.
Of note, Chesapeake mentioned that it only needs to run 3-4 operated rigs to maintain its gas production in the Marcellus North flat. This is substantially lower than the 5 rigs/$300 million net maintenance capital estimate that Chesapeake provided earlier year. Chesapeake's net production in the Marcellus North during Q2 2014 was ~0.9 Bcf/d. The company's gross operated production is much higher, at ~2.2 Bcf/d. 3-4 rigs maintaining 2.2 Bcf/d of production flat - this is a truly impressive metric.
The remarkably low rig requirement to keep production flat is a testament to the productive capacity of the Marcellus' sweet spots and shallow production declines from the existing wells after operators put them on restricted choke programs. With Utica demonstrating equally strong productive potential in the dry gas area, production deliverability from the region is very powerful.