In Sam Hopkins' article yesterday on clean coal, Sam briefly mentioned a technique for extracting so called "stranded" oil from older oil fields called enhanced oil recovery.

Today I thought I'd piggy back on that article and tell you a little more about this incredible technology.

Enhanced Oil Recovery

Drilling for oil isn't as simple as drilling a hole in the ground and waiting for the oil to surge like "old faithful".

A gushing oil field is formed if the oil deposit occurs along with natural gas. Deep in the ground, highly pressurized gas will sometimes rocket oil to the surface.

Gushers, like the one in Jed Clampett's back yard, do exist but they are the few that lay on the spectacular side of oil field technology.

Most of time, oil must be pumped out of the reservoir. Additionally, once the oil reservoir is about half empty, it becomes very expensive to extract and not profitable for companies to produce. So once this happens, many times a company will simply abandon a half full oil reservoir.

On average, almost two-thirds of the original oil discovered in the U.S remains in the ground after conventional recovery operations. This oil represents about 200 billion barrels. Obviously, oil companies are interested in techniques to extract this oil. And that's where enhanced oil recovery comes in.

Oil Field Production Phases

The production of crude in U.S. oil reservoirs can include up to three distinct phases: primary, secondary, and tertiary recovery.

Primary Recovery
During primary recovery, the natural pressure of the reservoir, combined with pumping equipment, brings oil to the surface.

Primary recovery is the easiest and cheapest way to extract oil from the ground. But this method of production typically produces only about 10 percent of a reservoir's original oil in place reserve.

Secondary Recovery
In the secondary recovery phase, water or gas is injected to displace oil, making it much easier to drive it to a production wellbore.

This technique generally results in the recovery of 20 to 40 percent of the original oil in place.

Tertiary Recovery
When companies talk about enhanced oil recovery, they're really referring to the tertiary recovery phase.

Tertiary recovery involves injecting other gases, such as carbon dioxide, to stimulate the flow of the oil and to produce remaining fluids that were not extracted during primary or secondary recovery phases.

Enhanced Oil Recovery Operations

Now, when it comes to enhanced oil recovery operations, there are three major types: thermal recovery, chemical injection, and gas injection.

Thermal recovery
Thermal recovery involves the introduction of heat to thin out the heavy viscous oil and improve its ability to flow through the reservoir.

Chemical injection
Chemical injection involves using long-chained molecules called polymers to increase the effectiveness of water-floods.

Agents which allow oil to mix with water are used sometimes to help lower the surface tension that often prevents oil droplets from moving through a reservoir.

Gas injection
Gas injection uses gases such as natural gas, nitrogen, or carbon dioxide that expand in a reservoir to push additional oil to a production wellbore.

Each of these techniques has been held back by its relatively high cost and, in some cases, by the unpredictability of its effectiveness.

But record oil and gas prices will drive the demand for cheaper technologies that will allow these techniques to be put in mainstream use.

Clean Coal and Enhanced Oil Recovery

The gas injection using carbon dioxide is currently attracting the most new market interest.

Gas injection using CO2 was first tried in 1972 in Scurry County, Texas, and has been successfully used throughout the Permian Basin of West Texas and eastern New Mexico. The technique is now being pursued in nine states across the country.

Until recently, most of the CO2 used for enhanced oil recovery has come from naturally-occurring reservoirs. But new technologies are being developed to produce carbon dioxide from industrial applications, such as natural gas processing, fertilizer, ethanol, and hydrogen plants in locations where naturally occurring reservoirs are not available.

The Dakota Gasification Company's plant in Beulah, North Dakota is producing CO2 and delivering it via a new 204-mile pipeline to the Weyburn oil field in Saskatchewan, Canada.

Encana (NYSE:ECA TSX:ECA), the field's operator, is injecting the CO2 to extend the field's productive life. The company expects to add another 25 years to the life of the reserve and as much as 130 million barrels of oil that might otherwise have been abandoned.

Carbon dioxide, as byproduct new technologies, such as clean coal technology, is also being harvested and used in enhanced oil recovery.

For clean coal companies, it's a win-win situation. Clean coal operators will need to do something with the massive amounts of CO2 produced by their plants. Due to environmental concerns, they can't simply release it into the atmosphere. But they can store the CO2 and sell it to oil companies looking to employ enhanced oil recovery.

Enhanced Oil Recovery Potential

A series of technical reports was released by the Department of Energy Office of Fossil Energy in February that highlighted the significant potential for enhanced oil recovery technologies.

The reports showed that enhanced oil recovery will significantly contribute to the development of the large volume of remaining undeveloped domestic oil resources in the United States.

Ten basin-oriented assessments estimated that 89 billion barrels of additional oil from currently stranded oil resources in ten U.S. regions could be technically recoverable by applying the gas-injection enhanced oil recovery technique using carbon dioxide.

Experts claim that they can increase this potential with further advances in the technology. Some are even claiming that next generation CO2 technology advances have the potential to increase domestic oil recovery efficiency from about one-third to over 60 percent.

Massive volumes of technically recoverable domestic oil resources remain undeveloped and are yet to be discovered in the United States.

We talk about peak oil being the end of cheap, easy oil. But by using enhanced oil recovery techniques, we will be able to at least delay the end of economical oil as we know it.

The editors of Energy and Capital will be keeping our eyes and ears open for an enhanced oil recovery play for you.


- Luke Burgess