CO2 Supply Options for EOR Projects in Wyoming 14 October 2016 SPE - - PowerPoint PPT Presentation

▶
co2 supply options for eor projects in wyoming
SMART_READER_LITE
LIVE PREVIEW

CO2 Supply Options for EOR Projects in Wyoming 14 October 2016 SPE - - PowerPoint PPT Presentation

Mar 08, 2024 115 likes •450 views

CO2 Supply Options for EOR Projects in Wyoming 14 October 2016 SPE Presentation in Casper, WY Presenter: Scott Hornafius, President, Elk Petroleum Inc. How does CO 2 EOR work? Transport Secure CO 2 Inject into CO 2 EOR answers the question

slide-1
SLIDE 1

CO2 Supply Options for EOR Projects in Wyoming

14 October 2016 SPE Presentation in Casper, WY Presenter: Scott Hornafius, President, Elk Petroleum Inc.

slide-2
SLIDE 2

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

How does CO2 EOR work?

  • CO2 EOR answers the question “How do I

profitably get more out of what I already own?”

  • Proven production engineering technique
  • Most commonly-used form of EOR
  • Over 130 projects delivered in North America

with 90%+ success rate

  • Most efficient EOR approach recovering highest

percentage of remaining oil

  • Accounts for ~60% of US EOR production
  • CO2 sourced from natural accumulations and

man-made sources

  • Effectively “recycles” the entire oil field – wells,

facilities & pipelines

  • Only stand-alone profitable form of carbon

capture & storage – no subsidies required Secure CO2 supply Transport via pipeline

  • r truck

Inject into

  • il field

1

Elk Petroleum – Canary Networks Roadshow Presentation – Aug 30-31, 2016 (www.elkpet.com)

slide-3
SLIDE 3

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

CO2 EOR – Big Business in US, Big Business in Rocky Mountains

  • Wyoming contains one of largest proven developed

CO2 reserves - 10 TCF - in US with resource potential of 100 TCF

  • Over 500 target CO2 EOR projects identified in

Wyoming alone

  • Market conditions also generating significant CO2

EOR production project acquisition opportunities

  • Regulatory environment also conducive to supporting

CO2 EOR – Open for business

  • Plenty of scope for both organic and acquisition

growth

  • Additional CO2-EOR projects will require low cost

CO2 in current oil price environment

2

2630 2425 542 431 191 46 29

Cumulative Oil Production (MMBO)

Basin Name Total CO2 EOR Candidate Reservoirs Powder River 289 Bighorn 105 Wind River 45 Greater Green River 49 Overthrust Belt 12 Laramie 11 Denver-Cheyene 6

Source: SPE-122921-MS-Estimates of Potential CO2 Demand for CO2 EOR in Wyoming Basins

Over 500 target projects in Wyoming alone!

Northern Rockies

Elk Petroleum – Canary Networks Roadshow Presentation – Aug 30-31, 2016 (www.elkpet.com)

slide-4
SLIDE 4

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Northern Rockies CO2 EOR Fairway

3

Elk Petroleum – Canary Networks Roadshow Presentation – Aug 30-31, 2016 (www.elkpet.com)

slide-5
SLIDE 5

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Grieve CO2 EOR Project – A Field-level View

CO2 & Water Injection Facility CO2 Metering Station Substation Pipeline Facilities

4

Elk Petroleum – Good Oil Conference Presentation – Sept 13-14, 2016 (www.elkpet.com)

slide-6
SLIDE 6

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

New Grieve unit/joint venture terms

  • Agreement: completion of new agreement 5 August 2016
  • Ownership: Elk 49%, Denbury Resources 51% (operator)
  • Funding: Elk to fund US$55m remaining capital works to first production
  • Construction: Denbury to complete construction under a fixed price/fixed time US$55m construction

contract with liquidated damages applicable, Denbury to fund any cost overruns 100%

  • Independent project engineer: to monitor construction progress and release escrow funds
  • CO2: Denbury to supply and cover full cost of CO2 up to first production (75% of total project CO2

requirements

  • Elk enhanced production sweep: 75% first 1 million bbl, 65% second million bbl
  • Balance sheet: Following completion Elk owns 49% of Grieve unit surface facilities and infrastructure

(construction cost US$120m)

  • Production: Production expected to commence end of CY2017

Previous joint venture terms (now redundant)

  • Ownership: ELK 35%, DNR 65%
  • Funding: parties funding their working interest share of construction work
  • Joint venture: stalled and in dispute due to construction delays by Denbury

5

Grieve Restructure Overview

Elk Petroleum – Canary Networks Roadshow Presentation – Aug 30-31, 2016 (www.elkpet.com)

slide-7
SLIDE 7

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Completed US$58 million in senior debt funding

  • Benefit Street Partners (BSP) providing US$58 million conventional term loan oil field

development financing

  • BSP is credit unit of Providence Capital – a recognized global asset management firm
  • Full amount available at financial close

Elk has completed A$31m entitlement offer & shortfall placement

  • 1 New share for every Elk share held @ A$0.075 per New Elk Share
  • Shares outstanding following completion of entitlement offer & placement = ~820 million
  • Total raising = A$30.8m (including shares issued for advisors success fees)

Debt and Equity funds to be used to fully fund completion of Grieve Project

  • Direct Grieve Project & Grieve Oil Pipeline capital costs needed to complete field development
  • Equity raising and bank financing transaction costs
  • Project oil price hedging through purchased oil price put options
  • Corporate working capital

6

Grieve Project – Fully Funded

Elk Petroleum – Good Oil Conference Presentation – Sept 13-14, 2016 (www.elkpet.com)

slide-8
SLIDE 8

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Total Production Per Year(1) VSO 2P (kbbl) 1,033 1,153 1,053 991 927 875 842 761 705 645 599 556 512 469 430 395 329 VSO 3P (kbbl) 1,353 1,514 1,387 1,309 1,228 1,163 1,123 1,018 945 867 808 752 694 639 587 541 451

(1) Gross production, pre-royalties and JV production sweep (Source: VSO 2016)

Grieve 2P and 3P Production Forecast by Production Year (Gross)(1)

Grieve Project – Life of Field Production Profiles

7

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Average Oil Production (bbl/d) Production Year VSO 2P - 12.3MMbbl VSO 3P - 16.4MMbbl Total CO2 Purchased and Recycled (BCF) Profile CO2 Purchased CO2 Recycled VSO 2P (12.3 MMbbl) 82.0 335.4 VSO 3P (16.4 MMbbl) 74.3 316.2

Elk Petroleum – Canary Networks Roadshow Presentation – Aug 30-31, 2016 (www.elkpet.com)

slide-9
SLIDE 9

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

8

Grieve Production – Elk Net Share (Post Royalties)

2P & 3P Production (Net to Elk, Post Royalties)

633 804 591 694 424 558 398 526 373 494

100 200 300 400 500 600 700 800 900 2P 3P 2P 3P 2P 3P 2P 3P 2P 3P 1 2 3 4 5 kbbls Production Year

49% WI Additional Sweep To Elk

Elk’s net share of production is estimated to be between 2.4 and 3.1 MMbbls over the first 5 years from first oil

Elk Petroleum – Good Oil Conference Presentation – Sept 13-14, 2016 (www.elkpet.com)

slide-10
SLIDE 10

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

9

Project Economics: Production Cost & Margin

17 18 20 21 22 24 21 22 24 23 27 30 34 38 41 36 38 45 10 20 30 40 50 60 70 80 40 45 50 55 60 65 Futures Curve Goldman Sachs Bloomberg Consensus Production Cost & Margin (US$/bbl) Oil Price (US$/bbl)

Production Costs Margin

Average Production Costs (Including Royalties)(1) of First 5 Years (US$/bbl, Real)

Production margins remain robust, even in low oil price conditions

(3) (2)

(1) Includes all Elk’s share of the Grieve Oil Pipeline cash flows (2) Bloomberg (26 May 2016) (3) Goldman Sachs Global Investment Research (13 May 16)

(2)

Elk Petroleum – Good Oil Conference Presentation – Sept 13-14, 2016 (www.elkpet.com)

slide-11
SLIDE 11

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Grieve Re-Pressurization Profile

10

Elk Petroleum – ASX Announcement – April 8, 2016 (www.elkpet.com)

slide-12
SLIDE 12

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Grieve Project – Driving to Completion - New Works Already Underway

  • JV restructure & BSP debt financing closed 5

August 2016

  • Elk has already commenced crude oil pipeline

repairs to return it to service

  • Pipeline repairs anticipated to be completed

by end of Q3 2016

  • Connection of Grieve Oil Pipeline to Spectra

Oil terminal next phase of pipeline works

11

Elk Petroleum – Canary Networks Roadshow Presentation – Aug 30-31, 2016 (www.elkpet.com)

slide-13
SLIDE 13

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

12

CO2 EOR Infrastructure – Northern Rockies – Current & Proposed

Elk Petroleum – Canary Networks Roadshow Presentation – Aug 30-31, 2016 (www.elkpet.com)

slide-14
SLIDE 14

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Wyoming Gas Plant CO2 Sales Volumes

13

Wyoming Oil & Gas Conservation Commission (wogcc.state.wy.us)

Wyoming Gas Plant CO2 Sales Volumes

slide-15
SLIDE 15

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Corn Ethanol Carbon Products

14

Scott Hornafius Presentation – Nebraska Ethanol Board – Emerging Issues Forum – April 28-29, 2016 (www.ethanol.Nebraska.gov)

slide-16
SLIDE 16

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Corn Production by County

15

USDA, 2013

slide-17
SLIDE 17

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

CO2 Sources for CO2-EOR

16

slide-18
SLIDE 18

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Corn Ethanol Fermentation CO2 Emissions

17

Hornafius & Hornafius - International Journal of Greenhouse Gas Control, v.37 p. 492 (2015)

slide-19
SLIDE 19

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Sequestration Ratio for Bio-CO2-EOR

18

Hornafius & Hornafius - International Journal of Greenhouse Gas Control, v.37 p. 492 (2015)

slide-20
SLIDE 20

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

CO2-EOR Response at Salt Creek, WY

19

Hornafius & Hornafius - International Journal of Greenhouse Gas Control, v.37 p. 492 (2015)

slide-21
SLIDE 21

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

CO2-EOR Response at Beaver Creek, WY

20

Hornafius & Hornafius - International Journal of Greenhouse Gas Control, v.37 p. 492 (2015)

slide-22
SLIDE 22

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Cumulative CO2 Utilization Efficiency

21

Hornafius & Hornafius - International Journal of Greenhouse Gas Control, v.37 p. 492 (2015)

slide-23
SLIDE 23

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Sequestration Ratio and Carbon Credits

22

Hornafius & Hornafius - International Journal of Greenhouse Gas Control, v.37 p. 492 (2015)

slide-24
SLIDE 24

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Corn Ethanol Plant CO2 Emissions

Source: Elk ASX Release 29 January 2015 – Grieve Reserve Update 23

Elk Quarterly Report – March 2014 (www.elkpet.com)

slide-25
SLIDE 25

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Proposed CO2 Pipeline with Ethanol Plants

Source: Elk ASX Release 29 January 2015 – Grieve Reserve Update 24

Scott Hornafius Presentation – Nebraska Ethanol Board – Emerging Issues Forum – April 28-29, 2016 (www.ethanol.Nebraska.gov)

slide-26
SLIDE 26

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Wyoming Pipeline Corridor Initiative

25

(www.wyopipeline.com/projects/wpci)

slide-27
SLIDE 27

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

California’s Low Carbon Fuel Standard

26

  • California LCFS market mandates a 10% reduction in the Carbon Intensity (CI) of

transportation fuels by 2020

  • Legislation enacted in September 2016 requires a 40% reduction below 1990

levels by 2030

  • To receive credits, the fuel must be below the target CI, which is decreasing

through time

  • Carbon Capture and Storage of corn ethanol fermentation emissions reduces CI
  • f ethanol (so increases credits)
  • California Air Resources Board (CARB) started a rule making process for CCS

and CCS credits will be available in 2018

Goal: Reduce carbon intensity of transportation fuels by 10% by 2020

slide-28
SLIDE 28

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

California LCFS Credit Prices ($/Ton)

27

Scott Hornafius Presentation – Nebraska Ethanol Board – Emerging Issues Forum – April 28-29, 2016 (www.ethanol.Nebraska.gov)

slide-29
SLIDE 29

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

California LCFS Cash Flows for CCS

28

Scott Hornafius Presentation – Nebraska Ethanol Board – Emerging Issues Forum – April 28-29, 2016 (www.ethanol.Nebraska.gov)

slide-30
SLIDE 30

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Ethanol Incremental Economics with LCFS Credits for CCS

29

Base Case Assumptions

500 MMCFD of CO2 delivered to Wyoming for EOR 2,853 MT/CO2 per million gallons of ethanol 85% capture $25 million CAPEX for capture facilities for 100 MGA plant Ethanol producer pays to ship CO2 to Wyoming Ethanol with CCS has CI of 60 LCFS Credit Price = $100/metric ton

Base Case Returns

10 year IRR = 32% 10 year NPV @ 10% = $25 million

Scott Hornafius Presentation – Nebraska Ethanol Board – Emerging Issues Forum – April 28-29, 2016 (www.ethanol.Nebraska.gov)

slide-31
SLIDE 31

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Ethanol Net Profit ($/gallon) with LCFS and CCS Credits

30

  • 0.40
  • 0.20

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60

Profit/gallon Profit/gallon +LCFS Profit/gallon +LCFS+CCS

Scott Hornafius Presentation – Nebraska Ethanol Board – Emerging Issues Forum – April 28-29, 2016 (www.ethanol.Nebraska.gov)

slide-32
SLIDE 32

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Carbon Value Chain

31

Scott Hornafius Presentation – Nebraska Ethanol Board – Emerging Issues Forum – April 28-29, 2016 (www.ethanol.Nebraska.gov)

slide-33
SLIDE 33

Canary Networks-Investor Roadshow Presentation – 30-31 August 2016

Conclusions

32

Carbon Negative Oil can be produced by CO2-EOR if the CO2 is sourced from corn ethanol fermentation emissions (Bio-CO2-EOR) The California LCFS carbon market is trading at over $100 per ton of CO2 emissions avoided, creating the incentive for Bio-CO2-EOR A CO2 pipeline from Iowa thru Nebraska to Colorado and Wyoming could be financed with the California LCFS carbon credits Potential delivery of 500 MMCFD of corn ethanol CO2 to Wyoming oil fields starting in 2018