Michael E. MooreExecutive Director

NACCSA

VP Energy Commodities and Advisory ServicesFearnOil Inc. a division of Astrup-Fearnleys

RECS 2015June 8, 2015 Birmingham, Alabama

RECS 2015: “CCUS and the Energy Commodity

Landscape”

If there is a will there is a way…

Topics

• Carbon

• CO2-EOR

• International Oil Markets

• Coal Markets

• CO2 Supply

• Shipping

Carbon

Significant Carbon Events

• November 7th 2013'Unburnable' carbon fuels investment concerns-Investors group with €7.3tn of assets asks energy giants about their exposure and response to the risk of falling demand for oil and coal. http://www.theguardian.com/sustainable-business/unburnable-carbon-investment-agenda

• June 12th 2013 Obama Quietly Raises 'Carbon Price' as Costs to Climate Increase. The increase of the so-called social cost of carbon, to $38 a metric ton in 2015 from $23.80, adjusts the calculation the government uses to weigh costs and benefits of proposed regulations. The figure is meant to approximate losses from global warming such as flood damage and diminished crops. http://www.bloomberg.com/news/2013-06-12/tougher-regulations-seen-from-obama-change-in-carbon-cost.html

Norway Confirms $900bn Sovereign Wealth Fund's Major Coal Divestment

May 27th, 2015 • The decision to divest Norway’s $945m fund from coal assets was made on 27 May, when an agreement

between political parties was reached. It was formally passed by a parliamentary vote on Friday. SveinFlaatten, of the governing Conservative party, said coal investments were both a global warming risk and financial risk. A global deal to cut carbon emissions at a crunch UN summit in December could leave some fossil fuel reserves unburnable and worthless.

• Norway’s parliament has formally endorsed the move to sell off coal investments from its $900bn sovereign wealth fund, the world’s biggest.

• It is the largest fossil fuel divestment yet, affecting 122 companies across the world, and marking a new success for the fast-growing and UN-backed climate change campaign.

• A new analysis said the fund would sell off over $8bn (£5bn) of coal-related investments as a result.• The biggest single sell-off from Norway’s fund will be the UK utility SSE, in which the fund holds $956m of

shares. The fund is also set to sell its $49m stake in Drax, which runs the UK’s biggest coal-fired power station.

• Other major energy companies identified in the analysis by German and Norwegian NGOs are Germany’s E.ON ($685m) and RWE ($320m) and the Danish company Dong ($30m), which is often associated with wind energy but has a significant coal business.

• Sweden’s Vattenfall and Italy’s Enel are also set to be affected by the coal ban as are 35 groups in the US, including Duke Energy ($434m). A dozen coal-related companies on China are set to lose their Norwegian investment, as are eight in Japan and five in Australia.

• http://www.theguardian.com/environment/2015/jun/05/norways-pension-fund-to-divest-8bn-from-coal-a-new-analysis-shows

Six Oil and Gas Majors Call for Carbon Pricing June 1, 2015

• Major oil and gas companies BG Group plc, BP plc, Eni S.p.A., Royal Dutch Shell plc, Statoil ASA and Total SA, today announced their call to governments around the world and to the United Nations Framework Convention on Climate Change (UNFCCC) to introduce carbon pricing systems and create clear, stable, ambitious policy frameworks that could eventually connect national systems. These would reduce uncertainty and encourage the most cost effective ways of reducing carbon emissions widely.

• The six companies set out their position in a joint letter from their chief executives to the UNFCCC Executive Secretary and the President of the COP21. This comes ahead of the UNFCCC’s COP21 climate meetings in Paris this December.

• With this unprecedented joint initiative, the companies recognise both the importance of the climate challenge and the importance of energy to human life and well-being.

• http://www.statoil.com/en/NewsAndMedia/News/2015/Pages/01Jun_carbon.aspx

International Carbon Markets

http://newclimateeconomy.report/economics-of-change

ISO-CCS Standards for Geologic Storage under Development

• International Organization for Standardization (ISO) Technical Committee TC-265

• Title: Carbon dioxide capture, transportation, and geological storage-includes CO2-EOR

• Acceptance of Z-741 by Standards Council of Canada and American National Standards Institute (ANSI) is “seed document” for TC-265

• 26 countries participating and NGOs

International Standards Organization - 31000, 17024, 14064, 14065

International Performance Assessment Centre for Geologic Storage of CO2 – Seed document

Canadian Standards Association - ISO Secretariat, standards developer

Bi-national agreement between USA & Canada

US Carbon Markets and CCUS/CO2-EORProtocol Framework and Storage Protocols

• PEW/C2ES CCS Protocols-released 2012

• ACR CCS CO2-EOR Offsets released April 2015

www.c2es.org/docUploads/CCS-framework.pdf

http://americancarbonregistry.org/carbon-accounting/standards-methodologies/carbon-capture-and-storage-in-oil-and-gas-reservoirs/acr-ccs-methodology-v1-0-final.pdf

China’s NDRC and CO2-EOR/CCUS

CO2-EOR

US CO2 EOR

http://cornerstonemag.net/wp-content/uploads/2014/01/Kuuskra-Figure-1.jpg

Study Done 2009-Pre ROZ and Pre CO2-EOR in Shale…

14

Size of the CO2-EOR Prize

• Note: Current work is going on to quantify the areas NOT below oilfield – but rather in the fairways-or “greenfields”.

• A study out Dec 2014 covers only four counties in Texas—estimates are +100 billion bbls of OOIP additional oil not in previous studies of the ROZ.

Chart Source: Kuuskraa 4-2014 GOTIA Presentation16

ROZ Resources

http://www.ogj.com/articles/print/volume-112/issue-11/drilling-production/permian-basin-production-proves-roz-viability.html

http://www.sciencedirect.com/science/article/pii/S1876610214026393

NETL-Sponsored Study Confirms Vast Energy Resource in Residual Oil Zones. Carbon Dioxide Enhanced Oil Recovery Produces Previously Untapped Oil. Release Date: February 24, 2015 http://www.netl.doe.gov/newsroom/news-releases/news-details?id=9ffca53a-99b3-4887-9ccc-5a05664f79a5

Residual Oil Zone (“ROZ”) Four Counties >100 billion Bbls Oil in Place

• DOE sponsored four county assessment indicates that over 100 billion barrels of oil in-place in the ROZ “Fairway”.

• “Greenfield” ROZ pilot underway.

• Work is required to establish its recoverability, economic feasibility and CO2 requirements. (Four county study released in December)

• Follow on study of additional 10 counties initiated.

• The catch-CO2 is needed to produce the oil.

Next Frontier for CO2-EOR -- Shale Oil/Bakken---and Globally?

Source: EERC presentations 2014

EERC’s Bakken CO2 Storage and Enhanced Recovery Program

http://www.undeerc.org/bakken/Bakken-CO2-EOR-Storage-Program.aspx

• Research facility at University of North Dakota.

• The Bakken CO2 Enhanced Oil Recovery and Storage Program driven by Jim Sorensen, EERC Senior Research Manager and John Harju, EERC Associate Director for Research.

Bakken CO2 Storage and Enhanced Recovery Program

• Phase I of the Bakken CO2 Enhanced Oil Recovery and Storage Program began in 2012 and was completed in 2014. The first phase used reservoir characterization and laboratory analytical data (e.g., core analyses, well logs, oil analyses, etc.) coupled with state-of-the-art modeling to examine the viability of using CO2 for EOR in the Bakken. Key results include the following:

• CO2 extraction studies indicate that CO2 can remove over 90% of hydrocarbons from Bakken reservoir rocks and over 60% from Bakken shales in small-scale experiments.

• In the Bakken, CO2 flow will be dominated by fracture flow—not significantly through the rock matrix. Fracture-dominated CO2 flow could essentially eliminate the displacement mechanisms responsible for increased recovery in conventional reservoirs.

• Understanding the natural fracture network is essential because fractures will play a dominant role in CO2 flow through the Bakken.

• Link to Phase I report: http://www.undeerc.org/bakken/PDFs/JAS-Subtask%201.10%20Revised-Jun14.pdf

Evaluation of the EOR Potential in Shale Oil Reservoirs By CO2 Miscible Displacement Applied in Modified Zipper

Fractured Horizontal Wellshttp://www.aiche.org/academy/videos/conference-presentations/evaluation-eor-potential-shale-

oil-reservoirs-co2-miscible-displacement-applied-modified-zipper

• Paper given at AIChE on November 17, 2014

• Tao Wan, Xingbang Meng and James Sheng, Bob L. Herd Department of Petroleum Engineering, Texas Tech University, Lubbock, TX

• Modified zipper frac technique is developed in a manner different from zipper frac in which the fractures are stimulated in a staggered pattern.

• The benefit of the modified zipper frac is that it will improve the contact area with the reservoir and increase the effective stimulated volume.

US Shale Plays - Unconventional Oil &Gas

Map of Basins with assessed Shale Oil and Shale Gas Formations, as of May 2013

Source: Technically Re coverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States EIA June 13th 2013

24

International Oil Markets

• OPEC

• Saudi Arabia

• Iraq

• Canada

• Russia

• Iran

• USA

OPEC

• OPEC was formed in 1960 with five founding members Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. By the end of 1971 six other nations had joined the group: Qatar, Indonesia, Libya, United Arab Emirates, Algeria and Nigeria. These nations had experienced a decline in the real value of their product since foundation of the Organization of Petroleum Exporting Countries.

• From 1982 to 1985 OPEC attempted to set production quotas low enough to stabilize prices. These attempts met with repeated failure as various members of OPEC would produce beyond their quotas. During most of this period Saudi Arabia acted as the swing producer cutting its production to stem the free falling prices. In August of 1985, the Saudis tired of this roll. They linked their oil prices to the spot market for crude and by early 1986 increased production from 2 MMBPD to 5 MMBPD. Crude oil prices plummeted below $10 per barrel by mid year.

• http://www.wtrg.com/prices.html

Saudi Arabia

http://marketrealist.com/2015/04/saudi-crude-oil-production-will-continue-peak-april-2015/

Iraq

https://marketrealist.imgix.net/uploads/2015/05/iraq2.png?w=660&fit=max&auto=format

Canada• Canada’s crude oil exports reached record high in

January• 04/29/2015 By OGJ editors• Canada’s crude oil exports set a monthly record with

an average of 3.11 million b/d in January, the country’s National Energy Board reported.

• The total was 12.8% higher than a year earlier and 80% higher than January 2010.

• Volumes exported to the Gulf Coast “increased significantly” in 2014, in part due to commissioning of several pipeline projects. NEB said the Gulf Coast holds significant long-term potential as a market for western Canadian crude oil, particularly heavy grades.

• http://www.ogj.com/articles/2015/04/canada-s-crude-oil-exports-reached-record-high-in-january.html?cmpid=EnlDailyApril302015

Russia

• Russia's oil production hits record 10.7m bpd• MOSCOW, May 4th 2015• http://www.tradearabia.com/news/INTNEWS_281130.html• Russian oil and gas condensate production, among the world's largest, remained

at a post-Soviet record level of 10.71 million barrels per day (bpd) in April, underpinned by a recent recovery in oil prices, Energy Ministry data showed.

Global oil prices jumped 21 per cent in April to over $66 a barrel due to slowing drilling activity and increasing political tensions in the Middle East, having collapsed from a peak of $115 per barrel in June last year, reported the Gulf Daily News, our sister publication.

The price slump has significantly hurt the Russian economy, which relies on oil and natural gas for around half the federal budget revenues. Russia's GDP contracted by 3.4 per cent in March year on year.

Russian production of oil and gas condensate, a type of ultra-light oil, stood at 43.830m tonnes in April.

Iran

http://www.eia.gov/todayinenergy/detail.cfm?id=14111

USEIA May 6, 2015 9,369,000 b/d

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

Rigs vs. Oil PricesMay 5th, 2015

http://www.wsj.com/articles/oil-prices-rise-ahead-of-inventory-data-1430818316

Major Shale (Gas/Oil) Basin Wells Rapid Declining Production Curve

US Crude Oil in Storage

Oil Shipping Choke Points

http://www.eia.gov/countries/regions-topics.cfm?fips=wotc&trk=p3

Coal Markets

US Coal ResourcesSource: http://pubs.usgs.gov/of/1996/of96-092/Comp/main.gif

Impacts on US Coal

http://www.carbontracker.org/wp-content/uploads/2015/03/US-Coal-Crash-infographic-sourcelogo.pdf

Impact on US Coal Companies

http://www.carbontracker.org/wp-content/uploads/2015/03/US-Coal-Crash-infographic-sourcelogo.pdf

Incremental Coal Demand to 2019

• http://www.iea.org/newsroomandevents/speeches/141215_MTCMR2014_Presentation.pdf

Where US Coal Goeshttp://democrats.naturalresources.house.gov/sites/democrats.natural

resources.house.gov/files/documents/Our_Pain_Their_Gain1.pdf

Value of Coal is Enormous

CO2

Above picture source: The CURC-EPRI Tech Roadmap pg. 24 43

CO2 Utilization

Source: www.netl.doe.gov/research/coal/carbon-storage/research-and-development/co2-utilization

CO2 Supply

Natural Geologic CO2• The production of carbon dioxide (CO2) from subsurface sources in the United

States has grown from 0.6 Tcf per year in 2000 to 1.1 Tcf per year in 2013. • Approximately 97 percent of the CO2 is used for enhanced oil recovery (EOR). • In response to continued and growing demand in this sector, production has

recently been initiated at Doe Canyon and, with the exception of Sheep Mountain which is in decline, all established CO2 production operations are undergoing drilling programs or expansions of gas processing facilities to increase the rate of production.

• Production from subsurface sources of CO2 is forecast to reach 1.5 Tcf/yr by 2018. (Murrell, 2013)

• Twenty-one CO2 fields in the contiguous states contain an estimated 311 Tcf of CO2 gas-initially-in-place (GIIP).

• Of that, 168 Tcf (54 percent) is estimated to be accessible and technically recoverable.

• The estimated economically recoverable resource (ERR) is 96.4 Tcf, based on a CO2 price of 1.06 $/mcf ($20/tonne) at the field gate.

• Cumulative production to date is 18.9 Tcf, leaving 77.5 Tcf remaining or net ERR. • The Big Piney-LaBarge field in Wyoming contains an estimated net ERR of 52 Tcf, 67

percent of the total for the United States. • The remaining ERR in reservoirs that feed into the Permian Basin and Gulf Coast is

on the order of 10-20 years of supply. • The technically recoverable resource (TRR) in the Permian Basin and Gulf Coast is

on the order of 30 years of supply.

Natural CO2 Locations

Global CCS/CCUS ActivityFrom presentation given by Neil Wildgust at GCCSI/NDRC 4/16/15 Beijing

Mississippi Power Kemper IGCC Projecthttp://www.mississippipower.com/kemper/docs/Q4_2013KemperProgressReport.pdf

• 582-megawatt integrated gasification combined-cycle (IGCC) power plant in Kemper County monetizing lignite

• Nearly complete-largest commercial scale CCUS power project in the US

• CO2 going to for EOR and utilization• Power block is operational and running delivering power to

the grid http://mississippipowernews.com/2014/09/15/un-climate-official-calls-kemper-hope-for-future/

NRG/Petra Nova WA Parish Carbon Capture Utilization Project

• Company/Alliance: Petra Nova Holdings: a 50/50 partnership between NRG Energy and JX Nippon Oil & Gas Exploration Corp.

• Location: Unit 8, W.A. Parish plant, Thompsons, 60KM from Houston, Texas, USA

• Feedstock: Coal• Size: 250 MW slip stream from 610 MW unit. • Capture: 1.4 Mt of CO2 captured annually (90%

capture)• Capture Technology: Post-combustion: KM-

CDR amine scrubbing CO2 developed by MHI and KEPCO

• CO2 Fate: 82 mile pipeline for onshore EOR in the West Ranch Oil Field in Jackson County, Texas

• Timing: Project is scheduled to start at the end of 2016

• http://sequestration.mit.edu/tools/projects/wa_parish.html

www.nrg.com/sustainability/strategy/enhance-generation/carbon-capture/wa-parish-ccs-project/

Air Products Texas Carbon Capture Demonstration Project

• Port Arthur Fact Sheet: Carbon Dioxide Capture and Storage Project

• Company/Alliance: Air Products and Chemicals, Denbury Onshore LLC, University of Texas Bureau of Economic Geology and Valero Energy Corporation

• Location: Port Arthur, Texas, US• Start Date: January 2013• End Date: September 2015• Size: 1 Mt/yr • Capture Type: Post-combustion (90%

capture) using vacuum swing adsorption technology

• CO2 Source: Existing steam-methane reformers

• Storage: EOR in West Hasting's and Oyster Bayou oil fields, Texas

• https://sequestration.mit.edu/tools/projects/port_arthur.html

Summit’s Texas Clean Energy Project• Company/Alliance: Summit Power

Group Inc, Siemens, Fluor, Linde, R.W. Beck, Blue Source and Texas Bureau of Economic Geology –Chinese Partners TBA

• Location: Penwell, Ector County, Texas, USA

• Feedstock: Coal • Size: 400 MW Gross, 245 MW

Commercial output ( 2-3 Mt/yr captured)

• Capture Technology: Pre-Combustion: Siemens IGCC technology and Linde Rectisol acid-gas capture technology (90% CO2 capture)

• CO2 Fate: EOR in the Permian Basin • Start: Construction should start late

2015• http://sequestration.mit.edu/tools/p

rojects/tcep.html• http://www.texascleanenergyproject.

com/project/

North Dakota Vision “EPIC”:Lignite Gasification, Power Generation

and CO2-EOR- in Shale and Conventional

CO2 Shipping• The Costs of CO2 Transport ZEP

http://www.zeroemissionsplatform.eu/library/publication/167-zep-cost-report-transport.html

• Anthony Veder CO2 shipping. http://www.anthonyveder.com/activities/new-business/co2-shipping/

• AP Moeller/Maersk CO2 shipping. http://www.maersktankers.com/Activities/Pages/CO2%20Shipping.aspx

• Yara CO2 Business Unit. http://www.yara.com/media/news_archive/Yara_co2_ships.aspx

• GCCSI CO2 Liquid tanker study Vopak. http://cdn.globalccsinstitute.com/sites/default/files/publications/25491/co2-liquid-logistics-shipping-concept.pdf

• GCCSI Chiyoda Preliminary Feasibility Study on CO2Carrier for Ship. http://www.globalccsinstitute.com/publications/preliminary-feasibility-study-co2-carrier-ship-based-ccs

• Lloyds Feasibility of Danish CCS Scheme Comprised of Capture at Power Plans, Ship Transport and CO2-EOR. Supports using modified chilled LPG carriers and modified ethane carriers for CO2 in supercritcal for long haul shipping. http://www.dendanskemaritimefond.dk/public/dokumenter/2010/2010-71/Report%20-%20Feasibility%20of%20Danish%20CCS%20Scheme%20Comprised%20of%20Capture%20at%20Power%20Plants%20Ship%20Transport%20and%20CO2%20EOR.pdf

www.powerplantccs.com/ccs/tra/tra_ship_cost.html

Shipping Impactors

Chinese Backed “Nicaragua Interoceanic Grand Canal”

Dec 22, 2014 Groundbreaking

• http://www.washingtonpost.com/blogs/worldviews/wp/2014/12/23/why-the-chinese-backed-nicaragua-canal-may-be-a-disaster/?Post+generic=%3Ftid%3Dsm_twitter_washingtonpost

Panama Canal Expansion ~2016

http://micanaldepanama.com/expansion/http://micanaldepanama.com/expansion/faq/#prettyPhoto

Arctic Sea Routes

• The Artic Institute http://www.thearcticinstitute.org/2012/10/the-future-of-arctic-shipping.html• NSR Information Office: http://www.arctic-lio.com/

Navajo Free Trade Zone Rail Hub

• http://www.navajo-nsn.gov/Archived_Webpages_News_Releases/2013/aug13_combined.pdf

Election Results 2014

http://media.cq.com/elections/2014/?SD

Questions & Thank You!Michael E. Moore

• VP Energy Commodities and Advisory Services

• FearnOil Inc. (a division of Astrup-Fearnleys)

• www.fearnleys.com

• Executive Director

• North American Carbon Capture Storage Association

• www.naccsa.org

• mmoore@fearnoil.com Tel: 281-759-0245

63

Bakken CO2 Storage and Enhanced Recovery Program

• Phase I: Some key questions that remain after the Phase I work include the following:

• How far into the matrix can CO2 penetrate Bakken (Lower and Middle) rocks at larger scales? What is the time frame of that penetration? Does CO2 affect matrix porosity and permeability?

• Is it possible to identify natural microfractures in the Lower Bakken shale?

• How would CO2-based EOR and related pressure changes affect reservoir permeability?

• How much injected CO2 can be recycled, and how much is permanently stored in the formation?

• Phase II-The objective of Phase II is to refine the techniques and approaches developed under Phase I and apply them to the design and implementation of an injection test in the field.

• For more information on the Bakken CO2 Enhanced Oil Recovery and Storage Program please contact Jim Sorensen, EERC Senior Research Manager, or John Harju, EERC Associate Director for Research.

Natural CO2

• DOE study exercised the cash flow model to estimate the sensitivity of the results to the assumed price of CO2.

• Decreasing the price 25 percent to 0.8 $/Mscf (15 $/mtCO2) causes a 73 percent reduction in net ERR, from 77.5 Tcf to 21 Tcf.

• Increasing the CO2 price 25 percent to 1.32 $/Mscf (25 $/mtCO2) increases the ERR 35 percent to 105 Tcf.

Potential Areas

Natural CO2• Twenty-six leads in five geographic areas are estimated to contain 63 Tcf of

risked CO2 initially in place and 42 Tcf of risked technically recoverable CO2resource (TRR).

• Thirty-four Tcf of the risked TRR is contained in two areas: the San Juan basin in northwest New Mexico and the Val Verde basin in southwest Texas, both of which are near pipeline infrastructure that feeds the Permian Basin, a center of CO2 use for enhanced oil recovery (EOR).

• From the Volume 1 Report on discovered CO2 reservoirs, the aggregate TRR of fields feeding the Permian Basin is 43 TCF.

• Cumulative production is 13 TCF leaving 30 TCF of remaining TRR. Therefor the undiscovered fields at San Juan and Val Verde have the potential to double the subsurface CO2 TRR available in the Permian Basin region.

• The aggregate estimates of GIIP and TRR should not be considered comprehensive within the lower 48 states. The number of areas examined was limited by the project budget and particular areas for study were selected where there was available data to support an analysis.

• At the same time, the results indicate that there are likely undiscovered CO2 reservoirs in the United States of a magnitude that could contribute materially to CO2 supply for EOR

Natural CO2• Twenty-one CO2 fields in the contiguous states contain an estimated 311 Tcf of CO2

gas-initially-in-place (GIIP). • Of that, 168 Tcf (54 percent) is estimated to be accessible and technically

recoverable. • The estimated economically recoverable resource (ERR) is 96.4 Tcf, based on a CO2

price of 1.06 $/mcf ($20/tonne) at the field gate.• Cumulative production to date is 18.9 Tcf, leaving 77.5 Tcf remaining or net ERR. • The Big Piney-LaBarge field in Wyoming contains an estimated net ERR of 52 Tcf, 67

percent of the total for the United States. • The remaining ERR in reservoirs that feed into the Permian Basin and Gulf Coast is

on the order of 10-20 years of supply. • The technically recoverable resource (TRR) in the Permian Basin and Gulf Coast is

on the order of 30 years of supply. • The ERR at LaBarge contains an estimated 260 Bcf of helium, while the ERR at St

Johns/Springerville may contain 25 Bcf of helium.• The assumed selling price for CO2 is 1.06 $/Mcf ($20/tonne) at pipeline purity and

pressure at the field gate. • If nitrogen in the produced gas is above 4 percent we assume it must be separated

out, which represents a significant expense. • We assume that hydrogen sulfide (H2S), methane and light hydrocarbons can be

separated and sold. • If helium is present at a concentration above 0.3 vol% (Big Piney LaBarge and St.

Johns) we assume it can be captured and sold. We use 125 $/Mscf as the long-term price for helium.

Discovered and Undiscovered