As crude prices rise, CO2 capture gains momentum

Monday, Aug 09, 2010

Capturing pollution from European power plants and using it to force oil from underground reservoirs may turn a profit for the first time as crude prices rise toward $100 a barrel.

Gathering carbon dioxide and pumping it into deposits to extract more crude for so-called enhanced oil recovery became too costly for companies after Brent crude fell 73 percent between its record high in July 2008 and December that year, according to Thomas Greenwood, an analyst at Bloomberg New Energy Finance. The 115 percent rebound since then may make it profitable even without government subsidies that are designed to curb the emissions, he said.

E.ON AG, Germany's biggest utility, and Sweden's Vattenfall AB are among companies seeking about $5.7 billion in European Union subsidies for carbon capture and storage. Regulators want to introduce the technology to help curb the greenhouse gases blamed for global warming.

"Projects are not far from becoming profitable," Greenwood said from London. "If carbon-dioxide-based enhanced oil recovery were to take off in the North Sea it would be a major boost to carbon capture and storage in Europe."

North Sea Brent crude, used to price two-thirds of the world's oil, will rise to $88 a barrel next year and $92 in 2012, according to the median of 23 analyst forecasts compiled by Bloomberg. It has advanced 10 percent in the past year.

Enhanced oil recovery involves pumping carbon dioxide into underground reservoirs to extract more crude than would otherwise be obtained through natural pressure. The process has the advantage of extending the lifespan of an oilfield while permanently burying the pollutant.

"Initial projects all have to be around enhanced oil recovery," said Lewis Gillies, chief executive officer of 2Co Energy Ltd., a London-based company studying the development of carbon-capture projects. "Given the current financial environment, it actually makes sense for quite a number of these projects to have the same carbon-dioxide solution."

Five power stations in Yorkshire, northern England, could pipe carbon dioxide into a single North Sea field, according to Gillies. 2Co has already hired investment banks to consult with oil producers on the best storage locations, he said.

Source: All Energy News