Carbon capture advancement could boost EOR projects

By Mella McEwen, MRT.com/Midland Reporter-Telegram February 6, 2021

Carbon capture and utilization has, in recent years, been moving beyond its use in enhanced oil recovery projects.

There is a growing focus on carbon capture and storage as well as carbon capture, utilization and storage. And that is expected to pay dividends for the environment.

“Carbon capture is the key to climate change mitigation,” said Jesse Arenivas, president, Kinder Morgan CO2.

Arenivas told the Reporter-Telegram by telephone he is cautiously optimistic the Biden Administration, with its focus on climate change, will make advancing carbon capture, utilization and storage a priority and will help craft policies to facilitate infrastructure expansion.

“We need financial support and regulatory support” to make that a reality, he added.

The new president’s moratorium on drilling permits and oil and gas leasing on federal lands will hinder development, he acknowledged, especially in states like New Mexico with a significant amount of federal lands.

“On the flip side, that will curtail supplies and drive up prices, which will ultimately help enhanced oil recovery,” he said.

The Internal Revenue Services; recent publication of rules for the 45Q tax credit incentivizing carbon capture projects will aid in the development of future projects, he said Those EOR projects are characterized by heavy upfront investment and longer processing times until production begins, he said. He believes the 45Q tax credit should be expanded to help CO2 pipeline and EOR expansion.

Arenivas explained that most major emissions sources are far away from oil and gas producing regions – the Midwest for example – and infrastructure would be needed to not only capture those emissions but carry them to regions where they can be stored or utilized.

That would offer business opportunities for his company, which has decades of experience with pipelines moving not only crude but natural gas and carbon dioxide as well as EOR projects.

The Permian Basin would also greatly benefit, given the number of EOR projects already established and its existing infrastructure.

Kinder Morgan alone has running room, he said. Its Cortez Pipeline brings naturally occurring CO2 to its Permian Basin operations, estimating the amount at 700,000 to 800,000 cubic feet a day. That could be expanded to about a billion cubic feet without additional financial investment.

There had been a slowdown in enhanced oil recovery as companies shifted their investments and technology to the shale revolution instead. But the rise of carbon capture, utilization and storage and carbon capture and storage is reversing that trend.

Stronger oil prices approaching $55 have been helpful, he said, but an oil price north of $60 is required to help fund further expansion of the carbon infrastructure.