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Carbon Dioxide Injection keeps companies going through shale-oil drilling downturn

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Carbon dioxide injection is a type of enhanced oil recovery (EOR) technique that forces carbon dioxide into conventional wells, driving more oil to the surface. This technique extends the production life of oilfields, and according to the energy consulting firm Advanced Resources International, it contributes an estimated 450,000 barrels per day in the United States.

The carbon dioxide comes from different sources: some from natural underground reservoirs and some from power plants that burn coal. Injecting the carbon dioxide into wells imparts a second important benefit, reducing carbon emissions into the atmosphere.

Occidental Petroleum Corp and Hess Corp are two companies that used carbon dioxide injection through the latest oil production downturn. Both companies have carbon dioxide injection facilities on the Permian Basin: Hobbs, New Mexico for Occidental and Seminole, Texas for Hess.

While many shale producing towns, like Williston, North Dakota, were economically decimated by the production downturn, the towns of Hobbs and Seminole were able to avoid the massive lay-offs because of the steady and cheap production of oil from carbon dioxide injected wells.

Occidental was able to keep its two hundred-person workforce from joining the tens of thousands of workers laid off during the oil-price slump. And if that wasn’t enough, the company actually invested $250 million to expand operations during this time period. According to Hobbs Chamber of Commerce board member and Vice-President of Lea County State Bank Joshua Grassham, “Oxy’s investment in the carbon project was a huge economic boost to our area.”

Carbon dioxide injection can extend the life of conventional wells by decades but has yet to be tried on shale deposits. However, some firms are toying with the idea of using the technique in shale drilling. According to the Department of Energy, EOR can boost oil production to 30-60 percent of the oil in a reservoir, compared to the 10 percent of a reservoir that traditional drilling produces.

Right now there is a tax credit for companies that use carbon dioxide injection, which helps the companies get through downturns. In a bipartisan-supported measure being voted on this summer, Congress looks to triple the current tax credit. This could expand the use of the technique across the country, increasing oil production in older wells while also increasing the demand for carbon dioxide stores, which could help the coal industry reduce its carbon emissions.

The current tax credit was started in 2008, and according to the Internal Revenue Service, companies that use EOR techniques have collected at least $350 million in credits since then.

So far, President Trump’s administration hasn’t said whether it does or does not support the tax credit increase. However, the president does want to revitalize the coal industry, so anything that can help coal plants reduce emissions would be a boon to that industry.

Occidental and Hess aren’t the only companies using carbon dioxide injection. Big producers like Exxon Mobil Corp and Chevron Corp also use EOR techniques on some of their wells. If the tax credit increase is passed this summer, look for more companies to jump on the bandwagon of carbon dioxide injection.

Article written by HEI contributor Raymond Arrasmith.

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