Work towards the pipeline meant to kick-start carbon dioxide-based enhanced oil recovery (EOR) in Alberta is continuing while the planned upgrader/refinery that will be the pipeline’s main CO2 supplier awaits construction approval from its owners.

The 50/50 owners of the planned Redwater upgrader/refinery — North West Upgrading Inc. and Canadian Natural Resources Limited — expect to make a final investment decision by year’s end, according to a spokesman for the partnership.

Meanwhile, Enhance Energy Inc., which was chosen by the Alberta government to build the pipeline and related CO2 capture facilities, is continuing preliminary work. Besides spurring EOR in central Alberta’s mature oilfields, the Alberta Carbon Trunk Line will divert CO2 from the atmosphere as part of the province’s greenhouse gas emissions reduction strategy.

Privately held Enhance plans to build a 240-kilometre, 16-inch-diameter pipeline capable of shipping 40,000 tonnes of CO2 a day. The initial volume of about 5,000 tonnes of CO2 a day will come from the proposed upgrader/refinery and an Agrium Inc. fertilizer plant, both northeast of Edmonton. The proposed pipeline will initially ship CO2 to a mature light-oil property at Clive in central Alberta which Enhance owns jointly with Fairborne Energy Ltd.

Enhance and the Alberta government hope more oil producers will sign up to take CO2 once the pipeline is built, resulting in other EOR projects being announced.

About 800 to 1,600 tonnes a day of CO2 is to come from Agrium. Enhance is depending on the planned upgrader/refinery to supply the rest of the pipeline’s initial 5,000 tonnes a day.

Speaking at a Petroleum Technology Alliance Canada (PTAC) CO2 conference this week, Enhance president Susan Cole said detailed engineering for the Agrium carbon capture facility has been done. All of the major mechanical equipment has been procured and the on-site tie-in to Agrium plant completed.

“We have purchased all the major mechanical equipment for the site; it has already started showing up. So we’ve made quite a bit of progress on the Agrium capture facility,” she said.

“We decided to build that adjacent to the site. We were originally going to build it inside the Agrium facility, but it just made more sense to move it just to the edge. That project should be starting construction next year.”

The Agrium capture facility will include dehydration equipment because the CO2 is wet. Otherwise the Agrium stream is a highly pure form of CO2 needed for EOR. (Most industrial facilities — such as coal-fired power plants — emit a highly diluted CO2 stream which is too costly to purify.)

Enhance is currently doing detailed engineering for the CO2 capture facility at the upgrader/refinery and “we should be moving into procurement next year,” Cole said.

As for the pipeline itself, surveying and the construction plans should be complete by the end of this year and specifications for the pipe have been finalized.

“And the next step … is to just purchase the pipe and that doesn’t take a very long time,” she added. “So we would be looking at construction for the pipeline probably in 2014.”

The models for the Enhance project are the CO2-based EOR project that has operated at Weyburn in southern Saskatchewan for more than a decade and Alberta Gas Trunk Line.

The Alberta Gas Trunk Line was a natural gas pipeline system initiated by the Alberta government in the 1950s. In the early decades of Alberta’s oilpatch natural gas was seen mostly as a hindrance to oil production and about a tcf of gas was flared before the province’s Energy Resources Conservation Board was created to conserve the resource.

In a move that helped spur the development of Alberta’s natural gas industry, the government facilitated the creation of the Alberta Gas Trunk Line to get the gas to market. That initial trunk line grew into today’s massive province-wide natural gas pipeline system that is owned and operated by the private sector.

The thinking behind Enhance’s Alberta Carbon Trunk Line is similar. Today roughly 70 per cent of Alberta’s light oil reserves are left in the ground after primary and secondary production end. Studies have indicated more than a billion bbls of additional light oil could be recovered from Alberta’s mature fields by injecting CO2.

However, despite a flurry of government-funded pilots last decade, CO2-based EOR has stalled in Alberta. Lack of an affordable supply of CO2 has been blamed for the failure of large-scale EOR projects to materialize in Alberta.

Another factor that has been cited is the greatly improved ability to drill long horizontal wells with multiple fracture stimulations per wellbore. This technology, which some producers have called EOR, has reversed the long decline in Alberta’s light oil production. For most producers, drilling wells is more attractive than capital-intensive CO2-based EOR projects which have long payback periods.

However, the development of multi-frac horizontal wells certainly hasn’t frozen the growth of CO2-based EOR in the United States, which has more than 110 such projects. — some of which get their CO2 from industrial sources.

In fact, mid-size oil producer Denbury Resources Inc. actually sold its Bakken tight-oil assets in North Dakota and Montana to Exxon Mobil Corporation for US$1.6 billion and an exchange of interests in some other fields. Denbury said it wanted to focus on its core business of CO2-based EOR (DOB, Sept. 20, 2012).

U.S. oil production from CO2-based EOR has mushroomed to 350,000 bbls a day from well below 50,000 bbls a day in 1986, Cole said.

But there is also a success story closer to home.

Canada’s biggest CO2-based EOR effort — Saskatchewan’s Weyburn project — is currently producing about 27,000 bbls a day of light oil (about 16,000 bbls a day net to the operator, Cenovus Energy Inc.), according to Cenovus.

In the years when Weyburn was being planned and developed in the 1990s, West Texas Intermediate crude was barely US$20 a bbl compared to the current price of roughly US$90.

Over its life the project is expected to recover 155 million bbls of oil beyond what has been produced on primary production and waterflooding, according to Enhance. Weyburn will also dispose of 45 million tonnes of CO2, which means it is also currently the world’s largest carbon capture and storage project.

Cole, who managed development of the Weyburn project when she worked at PanCanadian Petroleum Limited (a predecessor of Cenovus), sees Weyburn as a template for Alberta.

“What we’re doing today with the Alberta Carbon Trunk Line is pretty much the same thing,” she said.

Weyburn also started with injection of about 5,000 tonnes of CO2 a day and it also built a pipeline to an industrial emitter. A 300-kilometre pipeline delivers CO2 to Weyburn (and also to a smaller EOR project at nearby Midale) from a coal gasification project in North Dakota.

To spur CO2-based tertiary recovery in Alberta, the government committed $495 million — spread over several years — to Enhance for the proposed pipeline and CO2 capture facilities. Cole said the pipeline itself is expected to cost about $250 million, but the price tag for the whole project — including operating costs and the CO2 capture facilities — is about $1.5 billion.

By Pat Roche, The Daily Oil Bulletin