PanCanadian Petroleum Ltd. has begun a $1.1-billion enhanced oil-recovery operation that is the world’s first to reduce greenhouse gas emissions by taking one country’s carbon dioxide and disposing of it in another.
The Calgary petroleum company is injecting carbon dioxide (CO2), shipped by pipeline 325 kilometres from the U.S., into a 46-year-old deep underground oil reservoir near Weyburn in southern Saskatchewan.
PanCanadian’s project will help shape international government policy at global climate-change negotiations in The Hague, Netherlands, in November, say company officials and non-governmental groups.
The project entails “having the CO2 cross over the two countries,” says Whitney Rockley, PanCanadian’s senior business developer of new ventures. “It’s really setting a precedent, not just within Canada and the U.S., but internationally.”
The project is ground-breaking in testing whether CO2 can be permanently stored or “sequestered” underground to reduce emissions that contribute to global warming, says Robert Hornung, climate-change program director for the Pembina Institute. It is an Alberta-based non-governmental environmental policy development and watchdog organization.
Canada agreed three years ago at climate change negotiations in Kyoto, Japan, to reduce greenhouse gas emissions by six per cent below 1990 levels by 2008-2012. One way of doing this under the Kyoto Protocol is through “Joint Implementation” projects by two or more countries.
Key items for negotiation in November are what projects will qualify, and how countries will divide the credits for reducing greenhouse gas emissions, Hornung said. Canada is certain to refer to PanCanadian’s Weyburn project in arguing the country’s position, he said.
Some countries want joint implementation restricted to projects that involve only renewable energy or energy efficiency. But “Canada is very clearly arguing for no limits” on the projects that qualify and, therefore, provide emission reductions to participating countries, Hornung said.
PanCanadian has asked both the Canadian and U.S. governments to have the Weyburn CO2 oil-recovery project officially registered as a Joint Implementation project under the Kyoto agreement.
“We need decisions that Canada and the U.S. will both recognize this project and let emission reductions leave the U.S. and be applied against Canada’s national inventory (of greenhouse gases),” Rockley says.
PanCanadian and the U.S. company supplying the CO2, Dakota Gassification Co., have signed a contract to share the emission reduction credits under the Kyoto provision, says Susan Hancock, PanCanadian’s manager of the Weyburn project.
The project will also help set policy in Canada on whether companies should be given credit for taking early action to reduce greenhouse gases, in advance of the 2008-2012 timetable set out under the Kyoto agreement.
Rockley said “it’s imperative” that federal policy give credit for early action, because companies making investments in reducing emissions are taking a financial risk.
By injecting CO2 into the aging Weyburn field, PanCanadian expects to produce about 120 million barrels of incremental oil during the 25-year life of the project.
The operation also will permanently store in the oil reservoir approximately 14 million net tonnes of CO2 that would otherwise be emitted to the atmosphere. That equates to removing about 212,000 cars, or 40 per cent of the vehicles in Saskatchewan, from the road for 15 years, PanCanadian says.
It will cost PanCanadian about $700 million for the CO2 gas and about $400 million in capital expenses during the project’s lifetime. It’s the largest capital expenditure in PanCanadian’s history, says company spokesman Alan Boras.
Dakota Gassification is shipping waste CO2 produced by its Great Plains coal gassification plant in Beulah, N.D., via a 325-km pipeline north to Weyburn, Sask. Gassification produces natural gas from coal.
The Weyburn field held about 1.4 billion barrels of oil when discovered in 1954. It has produced about 350 million barrels of oil since then but is in rapid decline. Since 1964, the field has been flooded with water, a process known as secondary recovery, to maintain reservoir pressure and force more oil into well bores.
CO2 flooding, referred to as tertiary recovery because it uses another liquid or chemical, “actually searches out the oil that has not been recovered using the water flood mechanism,” says project manager Hancock.
PanCanadian is now injecting about 50 million cubic feet a day of CO2, but will ramp up to 95 million cubic feet a day by next year when oil production is expected to begin.
Studies have shown “quite a few reservoirs in Alberta are also good candidates,” she adds.
PanCanadian’s project is forecast to create a peak of 1,400 direct and indirect jobs by 2010.
