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Estimating market conditions for potential entry of new sources of anthropogenic CO2 for EOR in the Permian Basin

November 30, 2019

This study attempts to determine feasible carbon dioxide (CO2) price thresholds for entry of new sources of anthropogenic (man-made) CO2 for utilization in enhanced oil recovery (EOR) in the Permian Basin. Much of the discussion about carbon capture, utilization, and storage (CCUS) has focused on the high costs of carbon capture as the major barrier to entry of new anthropogenic sources of CO2 for EOR. In addition, a recent study by Edwards and Celia (2018) suggests that the lack of a CO2 transportation network to efficiently transport CO2 from ethanol plants in the Midwest to EOR sites in the Permian Basin could be a prohibitive barrier to commercial-scale entry (without some Government assistance to help finance the construction of new CO2 pipelines), despite the costs of carbon capture from ethanol plants being relatively low. Thus, entry of additional sources of anthropogenic CO2 for use in EOR in the Permian Basin could be primarily by major carbon emitters that are located closest to the existing CO2 pipeline network that currently transports mostly natural CO2 (extracted from geologic reservoirs) to EOR sites. Data from the U.S. Environmental Protection Agency (EPA)’s Greenhouse Gas Reporting Program (GHGRP) (U.S. Environmental Protection Agency, 2019) suggest that numerous major CO2 emitters are located within 50 km of the existing pipeline network that provides CO2 for EOR in the Permian Basin. The costs for connecting these potential sources of CO2 to the existing transportation infrastructure could be very low. Of these potential sources of anthropogenic CO2, the leading emitters are coal-fired electricity generation plants, and the sources with next-largest emissions are natural gas-fired power plants. However, the CO2 concentrations in the emission streams of these types of power plants is typically far lower than that for ethanol plants and some other industrial facilities (including natural gas processing plants), which causes the estimated capture costs (using currently available technologies) to be far higher, in general. In addition, the potential cost (per metric ton of CO2 supplied) of adding these new sources of anthropogenic CO2 for EOR in the Permian basin could be greater than expanding production of existing suppliers and developing new sources of natural CO2. On the other hand, their proximity to the existing pipeline network could allow them to be viable sources of anthropogenic CO2 for EOR in the Permian Basin, and the relative competitiveness of these sources with the existing use of natural CO2 could be further enhanced if they qualify for the recently revised 45Q tax credit (Heitkamp, 2017). The results of this study provide some estimates of the potential gaps in the costs of CO2 supply from these distinct sources, and the potential implications of the results for the market conditions that could be necessary to overcome those gaps are discussed.