In recent years, the focus has shifted from carbon capture and storage for enhanced oil recovery (CCS-EOR) towards dedicated sequestration (CCS-Storage).
However, new reports from Wood Mackenzie indicate that CCS-EOR could still play a vital role in reducing emissions and supporting the energy transition.
Role of CCS-EOR in Emission Reduction
Peter Findlay, Director of CCUS Economics at Wood Mackenzie, acknowledges the criticisms of CCS-EOR, such as concerns about its potential to perpetuate global hydrocarbon production and exacerbate climate change.
Despite these criticisms, Findlay argues that CCS-EOR could be a viable option for developing new oil supplies, even within aggressive decarbonization scenarios.
He states, “CCS-EOR is not necessarily more likely than any other competing supply sources to increase global oil demand.”
Global Oil Supply Projections
According to Wood Mackenzie’s analysis, 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 significantly affecting global oil demand and emissions.
Net Emissions and Production Benefits
Findlay 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 project specifics, geology, and market conditions.
Importance of Subsidies
The reports emphasize the importance of subsidies for the economic viability of CCS-EOR. They argue that subsidizing CCS-EOR less than CCS-Storage or Carbon Capture and Utilization (CCU) could lead to less global CO2 capture and overall decarbonization.
Findlay notes, “Lower subsidization for EOR exists currently in Canada and the US. By subsidizing CCS-EOR less, governments are indirectly subsidizing other higher-emitting sources of oil supply, which can weaken a country’s energy security.”
Strategic Implementation and Market Adaptation
For companies aiming to maximize shareholder returns, decarbonize 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.
Net-Zero Oil and Future Viability
Findlay pointed out that some operators, such as Denbury and Occidental Petroleum, are exploring ways to integrate the capture benefit into the product value chain to create net-zero oil.
“Maximizing 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.
Conclusion
The report concludes that scaling CCS-EOR will require certainty in future subsidy schemes or carbon pricing to incentivize decarbonization.
An imposed carbon price could favor 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 maximize its benefits.