co2 situation

The negotiations for CO2 seem to be taking forever! This can be very frustrating at times and really tests our patience but it gives us plenty of time to think about things.

Here are my thoughts on the current CO2 situation.

There are really only 2 available sources of CO2 close to Grieve at the moment. They are Exxon at Shute and ConocoPhillips at Madden. Other supplies such as from power stations or coal gasification look promising but are probably years away.

At last year’s AGM the Chairman said they were in negotiations with 2 suppliers. One was Conoco and the other was confidential but I bet it was Exxon.

We know that the Wyoming Govt has been putting pressure on Exxon and Conoco to stop venting their CO2.

In April Conoco was given only a 6 month permit to vent their 50mmcfd of CO2. They essentially have to be selling the CO2 by the end of that 6 months or at least have made progress towards selling it. Conoco have recently said that they are now in the process of marketing their CO2.

How many projects are there that are ready to accept CO2 within that timeframe and are in close proximity to Madden? I only know of one and that is Grieve. It is about 45 miles from Madden and on a recent presentation by the Wyoming Pipeline Authority there was a diagram of a future CO2 network showing a pipeline from Madden to Grieve. That at least shows that someone in the business in Wyoming thinks it is a good fit.

The price of CO2 is increasingly being linked to the price of oil and Grieve oil would command a high price because of its quality. Also, being the closest field to Madden the pipeline costs for Conoco would minimised. These are all advantages that I’m sure would be tempting for Conoco.

Exxon has recently been ordered to sell all it’s CO2 on an interruptible supply basis. If I was ELK and had a secure supply from Conoco for 50mmcfd I think it would be attractive to get a contract from Exxon for additional supplies even if they were interruptible. I’m sure the price would be lower because of the fact that they are not on a regular basis, and if ELK has the option to pump more CO2 it’s all the better for recovery of oil.

I think that ELK is a frontrunner for Conoco’s CO2. Maybe Merit wants it too but they would probably go for Exxon’s interruptible supply because it would be cheaper and they are in the later stages of injection at Lost Soldier so they would be re-cylcing a lot anyway. Besides, Exxon doesn’t need to supply Rancher until 2010 at the earliest so Merit is not in any great hurry to get new supplies.

Conoco has about 4 months left on it’s permit to vent so some news must be coming very soon about who they will/have contracted their CO2. Let’s hope it is ELK!

Good luck to all.