isramart : Texas firm harnesses carbon dioxide to extract oil from abandoned fields

isramart news:
At a time when many companies are focused on minimizing production of carbon dioxide, a major culprit in global warming, Denbury Resources is all about producing more of it.

The Plano, Texas, company extracts carbon dioxide from a giant underground deposit in Mississippi and uses the gas to draw more oil from abandoned fields. Denbury also sells the CO2 to companies that create carbonated beverages, make dry ice, load fire extinguishers and freeze pieces of chicken.

In trapping and using carbon dioxide that might otherwise be released into the atmosphere, Denbury has become a poster child of sorts for business groups that believe Louisiana should combine aggressive drilling for oil and gas with technologies that capture the carbon released by refineries and major consumers of fossil fuels.

Looking ahead to the day when its naturally occurring carbon dioxide supply at the Jackson Dome is exhausted, Denbury is building a 320-mile carbon dioxide pipeline — the so-called green pipeline — across Louisiana so it can buy more of the gas from the state’s ubiquitous refineries, chemical plants, utilities and future gasification projects.

Bob Cornelius, senior vice president of operations at Denbury, admits he gets some funny reactions when he tells people that he sees value in carbon dioxide. While it may seem perverse, he said it is a good business to be in at a time when the cost of fuel is at a premium and companies are looking for ways to sequester their carbon dioxide emissions.

“We can do a lot of good things at once: We can help the environment, produce more oil and gas, produce more jobs and more energy security,” he said.

While much of the national discussion about mitigating climate change centers on moving away from fossil fuels and toward greener sources of power like wind and the sun, business and political groups in oil-producing states like Louisiana are looking to make the most out of fossil fuels and to mine regional expertise in pipeline construction and geologic exploration.

U.S. Rep. Steve Scalise, R-Jefferson, touts an alternative to the omnibus climate change bill, the American Energy Act of 2009, which promotes more renewable energy sources while fully developing the domestic oil and gas industry to reduce dependence on foreign oil. Greater New Orleans Inc. is meanwhile pushing a package of bills in the Legislature to create new incentives for extracting more oil from depleted fields by using carbon dioxide, as Denbury hopes to do.

The approach sets up something of a culture clash between those pushing green power sources and those who want cleaner fossil fuels that come with stronger government requirements to trap toxins and greenhouse gases.

“We would really like to see us moving away from fossil fuels and not have a need for enhanced oil recovery. Why are we still drilling for oil and doing enhanced oil recovery when we have other, cleaner options like wind and solar?” said Jordan Macha, an organizer with the Sierra Club. “The need for CO2 just shouldn’t even be an issue right now.”

But economic development groups around the state say the need for more fossil fuels is real, and Louisiana is uniquely suited to prosper from drilling while addressing climate change concerns.

Andrea St. Paul Bland, senior vice president of business development at Greater New Orleans Inc., said the state has one-eighth of the world’s supply of petroleum coke and is believed to have 10 million barrels of stranded oil, much of it in south Louisiana. She said companies can inject carbon dioxide underground to coax oil out of stubborn fields, a process that helps the state make money from production while trapping a potent greenhouse gas in wells.

“It’s such a wonderful opportunity for Louisiana,” Bland said. “We think it’s proper stewardship of our assets to fully produce what we have domestically.”

“Louisiana has a vast carbon solution in our stranded oil fields,” she said.

Denbury’s pipeline is central to GNO Inc.’s vision of an energy future for Louisiana built on carbon capture and enhanced oil recovery.

Denbury now mines carbon dioxide from the Jackson Dome, a reservoir deposited by an ancient volcano thousands of feet underground. Denbury bought the dome in 1999 from Shell Oil, which had hoped to find natural gas inside, and the company uses the carbon dioxide to bubble oil from fields that others have abandoned.

Denbury already has a pipeline that transports carbon dioxide from Jackson, Miss., to Donaldsonville. This year, it started expanding the pipeline across Louisiana, the nation’s second-largest industrial producer of carbon dioxide. The company plans to buy man-made carbon dioxide and inject it into oil fields it owns in Texas.

gasification plants, fertilizer plants or other ventures that would produce large quantities of carbon dioxide. It has become an investor in one of them, the proposed $1.6 billion Faustina Hydrogen Products plant near Donaldsonville, which is expected to produce ammonia, methanol, synthetic natural gas and carbon dioxide.

If it eventually becomes affordable for Louisiana’s existing chemical plants and refineries to retrofit their stacks with carbon-capture technology, Denbury would like to take their carbon dioxide, too.

“We put it across Louisiana because there are so many possible emitters,” Cornelius said.

The venture is not without risk. It is not certain that several proposed gasification plants, which break down a refinery byproduct called petroleum coke into synthetic natural gas, syngas and carbon dioxide, will actually get built in Louisiana. Those plants would supply carbon dioxide to Denbury’s pipeline.

In addition, it could be expensive for existing plants to install technology to capture carbon dioxide.

“There are several technologies that exist, that are available and would work, but the question is, at what cost?” said Mike McDaniel, a former head of the Louisiana Department of Environmental Quality who works on carbon-capture issues at the Louisiana State University Center for Energy Studies. “They’re mostly in pilot and demonstration-scale projects.”

The viability of the Denbury pipeline could rise and fall with energy prices, which have been extremely volatile in the past year. Rising oil prices create demand for carbon dioxide to extract oil from difficult sites. Low natural gas prices, on the other hand, could dampen demand for synthetic natural gas and syngas, both of which Denbury hopes will become future suppliers of carbon dioxide.

“The economics, in a high-price environment, have always been challenging. They get even more challenging in a low-price environment,” said David Dismukes, an energy economist and the assistant director of the LSU Energy Center. “Gasification projects are kind of in the same boat as the nuclear projects: They require a leap of faith and a big capital investment up front. Who wants to take that risk?”

“But if you don’t do it now, when are you going to do it?” Dismukes added.

Eric Smith, associate director of the Tulane Energy Institute, said long-term demand for oil and gas would ensure the viability of the Denbury pipeline. He noted the company hasn’t had trouble raising money for its project.

Smith had questions about how the pipeline would operate. Carbon dioxide pipelines are expensive because they have to withstand high pressures, and companies that want to send their carbon dioxide into the green pipeline won’t be able to use existing pipelines for the job.

Smith also wondered about Denbury’s vision of national network of carbon dioxide pipelines that would connect with its own main pipeline as well as the oil fields of Louisiana and Texas. Because of the expense that building additional pipelines would pose, Smith conjectured that Midwestern coal plants might be more likely to transport their carbon dioxide to the closest place where it can be stored.

But in a rapidly changing energy landscape, Smith said Denbury would be a company to watch.

“If this works — and so far it’s worked like a charm — Denbury has gone from being a little player to being a trailblazer in the market,” Smith said.