Squeezing more oil out of aging fields

Kinder Morgan raises hopes of using CO2 expertise to exploit 70-80 percent of crude still beyond reach in Alberta reservoirs

Gary Park

Petroleum News Canadian Correspondent

The carbon dioxide business is on a convergence path in Canada, with the impending arrival of Kinder Morgan, the biggest name in CO2 marketing and transporting in the United States, and the emergence of more leading companies ready to inject the gas to enhance oil recovery.

Once its takeover of Terasen is completed, Kinder Morgan is eager to apply its CO2 expertise over the long term, said Chairman and Chief Executive Officer Richard Kinder.

That prospect is being welcomed by Penn West Energy Trust, which hopes to have a major deal in place by the end of September to buy CO2.

For Alberta Energy Minister Greg Melchin these developments raise hopes of using new technology, led by CO2 injections, to extract more of the 70-80 percent of oil that remains in the ground because it is too costly to remove.

Kinder Morgan Energy Partners, a division of the Houston-based pipeline giant, runs the CO2 businesses, which accounts for 27 percent of its earnings from refined-products pipelines, natural gas pipelines, terminals and CO2 production, transport and marketing.

CO2 investment opportunity in Canada

He said sequestering CO2 is a natural extension of his company’s role in operating pipelines and compression equipment in both Canada and the United States.

Because of Canada’s decision to implement the Kyoto Accord and Alberta’s enthusiasm for squeezing more out of aging oilfields “we would not be surprised if eventually there’s … CO2 sequestration opportunities up there,” he said. “We think we will be able to apply our CO2 expertise.”

Kinder Morgan has substantial interest in CO2 in the United States, notably as operator and 50 percent owner of the McElmo Dome in southwest Colorado which has one of the world’s largest accumulations of the gas.

Now in its 21st year of production, the McElmo Dome is currently pumping about 950 million cubic feet per day from fewer than 50 wells. After being dehydrated and compressed, the CO2 is shipped 500 miles to Texas through Kinder Morgan pipelines for use in Permian Basin oilfields.

EOR in West Texas

Canada’s participation in Kyoto is seen by industry as leverage to move from dabbling in CO2 floods to start exploiting the vast majority of conventional light oil that is being left in the ground.

Saskatchewan talks optimistically of exploiting 30 billion barrels beyond what is accessible by traditional, vertical well drilling, and expanding on the modest beginning by EnCana, which has pointed the way with its Weyburn venture to recover 130 million barrels and left 14 million metric tons of CO2 in the process.

One of the greatest current needs is the absence of a large source of pure or near-pure CO2 and the absence of a regional pipeline to capture CO2 from bitumen upgraders, rather than vent the leading source of greenhouse gases.

Penn West President Bill Andrew pointed to a possible breakthrough from talks involving the Canadian and Alberta governments and industry partners to advance a possible C$500 million pipeline network, with possible connections to the oil sands region.

The company has a long-range plan to spend C$1 billion in the Pembina field of central Alberta, with the initial goal of tripling CO2 production to 36,000 bpd.

Andrew said Kinder Morgan’s “very aggressive” style should ultimately see it have a big impact on the CO2 business.

That could give added encouragement to EnCana, Penn West and Apache Canada, the three pacesetters in the CO2 field.