Enhanced Oil Recovery
Overview of the EOR Industry
The United States oil production is in a state of primary depletion where 98%+ of all wells are defined as stripper wells. Typically, oil reservoirs produce less than 20% of their Original Oil in Place (OOIP) through primary production techniques. The remaining 80%+ lies in a stranded state unless an Enhanced Oil Recovery technique is initiated. EOR history has shown that various EOR techniques can help with the recovery of 50% of the OOIP. Historically, EOR has been implemented in reservoirs that have progressed through their Primary and Secondary Production Phases (Water Flood). The common practice is to sweep fluid through a reservoir in a horizontal manner from an injector well to producing wells. The production response time in reservoirs using CO2, Nitrogen or a mixture is excellent, showing significant production increases in less than one year.
Currently, there are only 80 plus, Enhanced Oil Recovery Projects in the United States producing approximately 200,000 barrels of oil a day. Further development of EOR projects is expanding very gradually due to the shortage of pure CO2 from natural and industrial sources. Historically, EOR projects have the highest financial returns in the industry, even with the high development and infrastructure cost. Utilizing a new source of gas is critical to the expansion of EOR. A case in point is Denbury Resources.Denbury Resources is a company similar to our business model that has primarily focused its operations on EOR. Quote: “We particularly like this play as (i) it has a lower risk and is more predictable than most traditional exploration and development activities, (ii) it provides a reasonable rate of return at relatively low oil prices (we estimate our economic per barrel dollar cost on these projects at current oil prices is in the range of the mid-twenties, depending on the specific field and area), and (iii) we have virtually no competition for this type of activity in our geographic area. Generally, from East Texas to Florida, there are no known significant natural sources of CO2. Our plans are to build a moble unit to manufacure our own CO2 gas thus creating our opportunity for great recovery potential from the wells we will treat in the future.