Economic Impacts of CO2-Enhanced Oil Recovery for Scotland: Final report

Harsh Pershad, Emrah Durusut, Crerar Alan, David Black, Eric James Mackay, Peter Olden

    Research output: Book/ReportCommissioned report


    Recognising that the combination of Carbon Capture and Storage (CCS) with CO2-Enhanced Oil Recovery (EOR) could bring positive impacts to the Scottish economy, Scottish Enterprise commissioned a team led by Element Energy and including Heriot Watt University and Dundas Consultants to examine the issues related to CO2-EOR and quantify the economic impacts in Scotland.

    Nineteen oilfields in the UK Continental Shelf (UKCS) may be technically attractive ‘anchor’ projects for CO2-EOR. These have a combined potential incremental oil recovery of 2.5 billion barrels of oil, associated with storage in the region ca. 0.8 Gt CO2. The uncertainty in these figures is at least +/- 50%. A cluster of large CO2-EOR projects could contribute ca. 15% of UKCS oil production in 2030. Scenario modelling suggests that the highest rates of EOR deployment in the UKCS would bring £2.7 billion in Gross Value Added (GVA) to the Scottish economy, relative to a scenario where the oilfields are decommissioned. Supply chain opportunities for Scottish businesses would result in 5,300 person-years of employment (new or maintained) for projects initiated by the early 2030s. Effective engagement of the Scottish supply chain with UKCS CO2-EOR projects could double these GVA and employment figures. Domestic experience can then be leveraged to other potential CO2-EOR markets in other sectors of the North Sea and internationally.

    Financial modelling reveals that for several fields CO2-EOR projects yield a positive Net Present Value (NPV) at current oil prices. Therefore EOR could be a driver towards the key outcome for the UK Government’s CCS commercialization programme to make power generation with CCS cost competitive with other large low carbon power generation technologies in the 2020s. The financial modelling identifies that the principal beneficiaries of a CO2-EOR cluster in the North Sea would be the Governments of the UK, Norway and Denmark, as a result of the high taxes applied to the offshore industry. These tax receipts could in principle be offset against public subsidies for CCS, i.e. CO2-EOR could be an enabler of CCS, although tax returns are highly sensitive to oil prices, reservoir performance, and number and choice of projects.

    The commercial case for conventional oil companies to invest in CO2-EOR is fragile. Since the collapse of the original BP DF1 Miller proposal, no UKCS oil operator has indicated strong, clear commitments to developing CO2-EOR. This study has found numerous barriers and deeply-held scepticism as to the early commercial uptake of CO2-EOR in the North Sea from a wide range of public and private stakeholders. CO2-EOR has never before been carried out in the North Sea. Oil companies will factor in a range of uncertainties and first-of-a-kind risks.

    Some stakeholders believe that commercial CO2-EOR projects would only follow on the back of successful CCS demonstration, if oil prices remain high and if there is a reliable CO2 supply directed towards a suitable oilfield. A wait-and-see approach to CO2-EOR in the UKCS could however lead to missed opportunities for the UKCS, as most of the UK’s relevant oilfields are predicted to be decommissioned by the 2030s.

    There are two proposals including CO2-EOR in the North Sea in the EU’s New Entrant Reserve (NER300) programme for CCS demonstration. One of these (2Co Energy) has submitted a proposal for the use of CO2-EOR in the UKCS in DECC’s CCS commercialization.

    Even if an initial North Sea CO2-EOR project is demonstrated in the 2010s, multiple barriers could jeopardise commercial viability of subsequent projects. These include weak incentives and uncertainties around CO2 storage liabilities, oil price, oil recovery levels, infrastructure requirements and costs, CO2 supply, CO2 storage capacity, and future regulation. High oil price is a positive driver of CO2-EOR, but even at high oil prices, alternative investment opportunities may provide lower complexity and better risk-reward profiles for energy companies.

    The uptake of CO2-EOR in the 2020s in the North Sea will depend on many factors, including the levels of sustained policy support for CCS, oil prices, and stakeholder support. Since some of these drivers are outside of Scottish Enterprise’s control, a flexible strategy designed to influence key stakeholders is appropriate. The full report details five actions that Scottish Enterprise could take if it wishes to support CO2-EOR. These are summarised below.
    1. Support a “Champion” that can advocate a coherent view of CO2-EOR requirements and opportunities to policymakers and other stakeholders.
    2. Sponsor meetings, workshops and personnel exchanges to facilitate knowledge sharing between UKCS oilfield owners, engineers, policymakers, regulators and participants in ongoing CO2 injection projects worldwide.
    3. Leverage existing connections with the oil and gas supply chains to raise awareness of the supply chain opportunities for CO2-EOR projects. This could include encouraging suppliers to participate in engineering studies for CO2-EOR and/or providing funding for oil and gas industry suppliers to attend CCS networking events.
    4. Support preparatory work for CO2-EOR cluster development through a Task Force focussed on the needs of the relevant oil companies.
    5. Facilitate continued co-operation, stability and consistency between the Scottish and UK Governments across the full suite of energy and climate policies relevant to CO2-EOR deployment, especially in the event of constitutional change.
    If adopted, these recommendations will maximise the CO2-EOR opportunity, and position Scottish businesses to take full advantage of the economic benefits of CO2-EOR.
    Original languageEnglish
    Place of PublicationGlasgow
    PublisherScottish Enterprise
    Number of pages102
    Publication statusPublished - Nov 2012


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