In recent years, carbon capture and storage for enhanced oil recovery (CCS-EOR) has seen a decline in favour of dedicated sequestration (CCS-Storage).
However, a new series of reports from Wood Mackenzie suggests that CCS-EOR could play a crucial role in reducing emissions and supporting the energy transition.
Peter Findlay, Director of CCUS Economics at Wood Mackenzie, acknowledges the criticisms of CCS-EOR, which include concerns about its potential to perpetuate global hydrocarbon production and exacerbate climate change.
Despite these concerns, Findlay argues that CCS-EOR could be a viable option for new oil supply development, even in aggressive decarbonisation scenarios.
“CCS-EOR is not necessarily more likely than any other competing supply sources to increase global oil demand,” he stated.
Wood Mackenzie’s analysis indicates that global oil supply will need to reach 30 million barrels per day by 2050 in the most aggressive Net Zero by 2050 scenario.
The reports suggest that CCS-EOR can displace nearly all the volumes it produces from the global market without materially affecting global oil demand and emissions.
Findlay also highlights that CCS-EOR can deliver lower net emissions due to its relatively low incremental emissions and lighter oil production.
However, he notes that in some cases, CCS-Storage may have a lower net impact on global emissions, depending on the project specifics, geology, and market conditions.
The reports emphasise the importance of subsidies in the economic viability of CCS-EOR.
They argue that subsidising CCS-EOR less than CCS-Storage or Carbon Capture and Utilisation (CCU) could result in less global CO2 capture and overall decarbonisation.
“Lower subsidisation for EOR exists currently in Canada and the US,” Findlay noted.
“By subsidising CCS-EOR less, governments are indirectly subsidising other higher-emitting sources of oil supply, which can weaken a country’s energy security.”
For firms aiming to maximise shareholder returns, decarbonise portfolios, and maintain supply amid geopolitical tensions, CCS-EOR could offer a pragmatic solution.
According to Wood Mackenzie, CCS-EOR becomes an effective energy transition strategy when the CO2 used in operations is sourced from industrial point sources or direct air capture (DAC).
This approach allows producers to adjust production between EOR and non-EOR wells based on market conditions.
Findlay pointed out that some operators, like Denbury and Occidental Petroleum, are exploring ways to integrate the capture benefit into the product value chain to create net-zero oil.
“Maximising CO2 injection into depleted reservoirs and storing more CO2 than the lifecycle emissions of the produced oil and gas are crucial steps,” he said.
However, he cautioned that net-zero oil is not yet economically viable without increased market demand.
The report concludes that scaling CCS-EOR will require certainty in future subsidy schemes or carbon pricing to incentivise decarbonisation.
An imposed carbon price could favour CCS-EOR production, spurring its growth compared to other options.
This analysis by Wood Mackenzie underscores the potential of CCS-EOR in the energy transition, highlighting the need for balanced subsidies and strategic implementation to maximise its benefits.