1 Induced Austerity in CO 2 EOR: A Look to Crashes of the Past 1, What is Happening Today 2 and What May Come in the Future 3 CO 2 Flooding Conference; December 11, 2015 1 L. Stephen Melzer, Melzer Consulting 2 Gary Bullock, Whiting Petroleum 3 Charles Fox, Windy Cove Midland Center Midland, Texas
2 A Look to Oil Price Crashes of the Past
3 In the world of oil prices: It is déjà vu all over again * * Quote attributed to an American sports icon, Yogi Berra (we ll miss you)
The Range of Impacts of Oil Price Crashes on CO 2 EOR 4 What History Tells us About Oil Price Crashes on CO 2 EOR Activity Impacts on Oil Production, Flood Starts, CO 2 Sales, Flood Longevity, Innovation, etc.
West Texas Intermediate Oil Price vs. Year and Oil Price Crashes Over the Last Four Decades AVE. WTI CRUDE OIL PRICE, $/bbl $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 1978 AVE. WTI POSTED CRUDE OIL PRICE - 1978-2015 Source: Energy Information Agency 1981 1984 1987 1990 1993 2015 1986 2009 5 1 2 3 4 45% 30% 1999 2002 2005 2008 38% 2011 45% 2014 YEAR
CO 2 EOR and its Steady Growth (Production) 6 CO2 EOR PRODUCTION - kbopd 350 300 250 200 150 100 50 WW, U.S., & PB CO2 EOR PRODUCTION 1986-2014 Worldwide U.S. Permian Basin 0 1986 1988 1990 1992 1994 2000 2002 2004 2006 2008 2010 2012 2014 * Ref: O&GJ Biennial EOR Editions & UTPB Petr Industry Alliance YEAR
7 History of CO 2 EOR Project Growth* 160 140 GROWTH OF U.S. and PERMIAN BASIN CO2 EOR PROJECTS 1986-2014 U.S. Projects Permian Basin Projects 120 NO. OF PROJECTS 100 80 60 40 20 0 Growth but CO 2 Supply Limitations, Stifled the Permian Basin s Growth 1986 1988 1990 1992 1994 2000 2002 2004 2006 2008 2010 2012 2014 * Oil & Gas Journal EOR Edition & Petr Industry Alliance - 2014 Ref: Biennial OGJ EOR Surveys and UTPB/PIA YEAR
8 Worldwide and PB Project Growth*) 160 140 GROWTH OF WW and PB CO2 EOR PROJECTS 1986-2014 Worldw ide Projects Permian Basin Projects 120 100 80 60 40 20 0 1986 1988 1990 1992 1994 2000 2002 2004 2006 2008 2010 NO. OF PROJECTS 2012 2014 * Oil & Gas Journal EOR Edition & Petr Industry Alliance - 2014 YEAR
..and Growth Even with Languishing Oil Pricing 9 NO. OF PROJECTS 80 60 40 20 0 GROWTH OF PERMIAN BASIN & WORLDWIDE CO2 PROJECTS 1984 1988-2000 - 2004 WW Projects PB Projects Average Growth > 2 Projects/Yr 1988 1990 1992 1994 2000 YEAR Melzer Consulting - 8/04 WTI Posted Oil Prices - 1988-2000 OIL PRICES IN $/bbl $40 $30 $20 $10 $0 1988 1989 1990 1991 1992 1993 1994 1995 1997 1999 2000 Average Price = $18.80 (U.S.) YEAR Conclusion: CO 2 EOR Technology had Matured
10 Oil Prices Do Affect CO 2 Flood Starts The History of Newly Implemented Floods (PB) 8 PERMIAN BASIN CO2 EOR PROJECT STARTS 80 YEARLY PROJECT STARTS 7 6 5 4 3 2 1 Project Starts 0 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 2000 2002 2004 2006 2008 2010 2012 2014 Cum Project Starts (Rt Scale) s 70 60 50 40 30 20 10 CUM PROJECT STARTS 0 YEAR
11 THE PHASES OF CO 2 ENHANCED OIL RECOVERY* Demonstration/Observational Phase I Commercial Deployment Phase 1st Oil Price Crash II III IV Maturation/ Renewed Deployment V 2nd Oil Price Crash VI CO 2 Supply-Constrained Expansion? 8 PERMIAN BASIN CO2 EOR PROJECT STARTS 80 7 Project Starts 70 YEARLY PROJECT STARTS 6 5 4 3 2 1 0 The Start: North Cross and SACROC Cum Project Starts (Rt Scale) s 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 2000 2002 2004 2006 2008 2010 2012 2014 60 50 40 30 20 10 0 CUM PROJECT STARTS Major CO2 Pipelines Built YEAR * as Benchmarked to the Permian Basin Region of the SW U.S.
12 A New Day This Time Around?
Apr-84 Apr-85 Apr-86 Apr-87 Apr-88 Apr-89 Apr-90 Apr-91 Apr-92 Apr-93 Apr-94 WTI ($/bbl) 13 First, About Oil Supply in General, What is the Same? Oversupply of Oil When Compared to Demand Drop in Oil Price is Dramatic (about 45-50%) ~ Same as 1986 Crash We Might Look at the 1986 Crash as the Best Analogue? $50.00 $45.00 WTI Crude Prices Energy Information Agency Data WTI EIA $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 Mo-Yr
But What is Different? Oil Supply and Oil Demand 14 Excess WW Production Capacity Today is Very Limited (~2 Million bbls/day) In 1986, Just before Crash, it was in excess of 9 Million bbls/day Much of the Incremental Oil Creating the Surplus in Supply Will Decline Rapidly Maybe Early to Tell Yet but Demand Elasticity (to Oil Price) was Greater in the Past
15 What is Different? CO 2 EOR in Particular The World Places a Higher Value on Clean Energy than in the Past Can CO 2 EOR Play a Role in the Clean Energy Transformation? We Entered the Current Oil Price Bust Short of CO 2 for EOR
What is Different? CO 2 Supply and Demand in the PB INCREMENTAL CO2 SUPPLY AND DEMAND IN THE PERMIAN BASIN 3.00 CO2 Volumes in bcfpd Crossover 16 2.50 2.00 1.50 1.00 Excess Supply Demand Supply Shortfall New Territory 0.50 0.00 1997 1999 2000 2001 2002 2003 2004 2005 Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 Melzer Consulting - 4/15
17 Chaos often breeds life, when order breeds habit Henry Adams We should be breeding a lot of new life at $45/bbl