After 70 years in action, production at the formerly bounteous Beaver Creek oil field, 12 miles south of Riverton, had fallen to a mere 17 barrels a day. Its output was expected to decline by around 9% a year on a steady track to retirement.
But that’s not how it played out.
Operators in 2008 began injecting carbon dioxide into the Beaver Creek oil reservoirs and transformed the field from the underground up.
Within a year, production surged to 7,000 barrels per day and has since yielded an extra 15.3 million barrels — that’s 15.3 million barrels that otherwise would still be sitting hundreds of feet below ground.
It’s a testament to the power of enhanced oil recovery (EOR), a set of techniques in which latent reserves are pressured to the surface using CO2 and other cocktail injections, expanding the lifespan of legacy fields.
In the last 20 years, EOR has resulted in an additional 67 million barrels and $558 million state tax revenue in Wyoming, according to analysis from the State Budget Office.
“You can see why there’s a lot of interest in EOR,” said Lon Whitman, director of the Enhanced Oil Recovery Institute (EORI), a state-backed institution chartered in 2004 to advance EOR.
The Beaver Creek example has captured the attention of the industry, who are quickly ramping up EOR initiatives with the aim to replicate that success.
Geologists estimate the state’s latent oil could top 2 billion barrels. But hurdles stand in the way of developing it, not least the exorbitant expense of getting an EOR project off the ground, starting with the cost of the CO2 itself, almost all of which comes from a single source.
Where Does CO2 Come From?
Shute Creek gas plant near LaBarge in southwest Wyoming is the largest carbon capture facility in the world.
Discovered in 1963, the LaBarge fields remained undeveloped for more than 20 years due to
technical challenges related to the composition of their “sour” gas, which was 65% CO2 and only 21% methane, as gas refinement was too expensive for the fields to be considered economical, according to analysis from the Institute for Energy Economics and Financial Analysis.
Wagering on a growing market for CO2 in EOR, investors in the 1980’s dumped hundreds of millions into processing facilities and in 1986 began selling gas, helium, and CO2, which was shuttled via pipeline to EOR operations around Wyoming.
Today, the facility provides roughly 350 million cubic feet of CO2 daily to seven separate oil developments in Wyoming, and one in Colorado, Whitman told Cowboy State Daily.
The price of CO2 follows a general industry standard loosely pegged to the price of oil on the West Texas Intermediate trading hub, largely because west Texas’ Permian Basin is both the origin and epicenter of CO2 EOR in the U.S.
Operators can expect to pay about 2% of the price of a barrel of WTI crude per 1,000 cubic feet of CO2, which can add up quickly.
For instance, the Salt Creek field outside Casper at its peak was purchasing 200 million cubic feet per day, according to Whitman. At the current WTI rate of around $61 per barrel, the daily expense of 200 million cubic feet would run $244,000.
That cost is offset by the federal Q45 tax credit, which pays suppliers/developers $60 per ton of carbon dioxide stored in the EOR process — a subsidy that was recently sweetened by the Wyoming State Legislature with a bill that pays an additional $10 per ton used in oil production.
Yet the expense of CO2 pales in comparison to the high cost of EOR infrastructure and technology.
$400 Million Just To Get Started?
Denver-based TR Operating is currently pursuing an EOR project on a three-field cluster near Gillette, and the capital outlay to get started on just one of those fields is almost $400 million, including $40 million for the construction of a pipeline spur.
“That's always a question we get: Why aren't we seeing more and more and more of this EOR? Well, you just saw the numbers. These EOR projects are expensive,” said Whitman.
In addition to big outlays, EOR’s return on investment follows a longer timeline than other developments, like horizontal shale drilling, which are similarly capital-intensive but have quicker returns on investment, making them more attractive to investors.
The aim of Whitman and the EORI is to draw investment to aging fields by showing that despite a protracted timeline, EOR can still promise a sizable payback.
“We’re going where we know there's oil, and you're going to use techniques to get more oil out,” he said.
The state, too, is seeing returns.
EORI is currently allocated $4.7 million per biennium budget, which is spent largely on project planning, geologic mapping and technical services. From the institute’s inception in 2004 through June 2024, incremental production from collaborative EOR projects resulted in an additional 67 million barrels of oil and $558 million in state revenue from severance and ad-valorem taxes, according to analysis from EORI and the State Budget Office.
Next Generation Oil Recovery
A new generation of enhanced recovery techniques may eliminate the need for pipelines, and some may not require CO2 at all.
Texas-based ATR Partners is underway on an “enriched air” oil recovery project in the Powder River Basin, in partnership with EORI and the Wyoming Energy Authority.
The project will deploy an “in-situ combustion” technique that works by shooting concentrated oxygen and nitrogen gasses into oil reservoirs, where it then produces CO2 in a chemical thermal reaction and pushes resting reserves to the surface. The project is expected to yield around 4.8 million barrels from its two initial pilot wells.
Nearby, X Oil Development is in the late stages of a project that will use Natural Gas Liquids (NGLs) as an injectable for EOR. The unique advantage is that the NGLs maintain their composition, meaning they can be transported via tanker from one site to the next, re-used and even resold in the natural gas market afterward.
“We're excited to see how this works. Because for areas where we don't have pipelines, we're always looking for other options to go in and get this stranded oil out.”
Zakary Sonntag can be reached at zakary@cowboystatedaily.com.
