rough guide to grieve

I just corrected one of the tables. I pasted the wrong one.
Rough as Guts Guide to Grieve

The oil field at Grieve in Wyoming was first discovered in 1954. 30 MBBL have been recovered since this discovery. This is only 35% of the estimated oil reserve. Elk acquired this field in 2005 and there has been low rate production of 20 BOPD.

At Grieve there are two main targets, the Upper Sands and the Muddy Field from which the historic oil was produced from.




Upper Sands

In 2006 independent reservoir engineers calculated a potential reservoir of 51.4 million barrels but drilling in 2007 was unsuccessful and testing has been inconclusive even though nearby fields produce from upper sands.

A new well location has been selected and is scheduled to be drilled in 2008.

Muddy Reservoir

There have been two studies at Grieve looking at CO2 recovery.

Enhanced Oil Recovery
From Wikipedia
Gas injection is the most commonly used EOR technique. Here, Carbon dioxide (CO2), is injected into the reservoir whereupon it expands and thereby pushes additional oil to a production wellbore, and moreover dissolves in the oil to lower its viscosity and improves the flow rate of the oil. In these applications, more than half and up to two-thirds of the injected CO2 returns with the produced oil and is usually re-injected into the reservoir to minimize operating costs. The remainder is trapped in the oil reservoir by various means.

Economic costs and benefits
Adding oil recovery methods adds to the cost of oil — in the case of CO2 typically between 0.5-8.0 US$ per tonne of CO2. The increased extraction of oil on the other hand, is an economic benefit with the revenue depending on prevailing oil prices. Onshore EOR has paid in the range of a net 10-16 US$ per tonne of CO2 injected for oil prices of 15-20 US$/barrel. Prevailing prices depend on many factors but can determine the economic suitability of any procedure, with more procedures and more expensive procedures being economically viable at higher prices. Example: With oil prices at around 90 US$/barrel, the economic benefit is about 70 US$ per tonne CO2.

Enhanced Oil Recovery Institute.

EORI came up with several figures for recoverable oil. The maximum was 23MBO based on 110mmcfd of CO2 being injected. They estimated 19.8MBO could be recovered if only 50mmcfd was injected. The report indicated that a production rate of 8,000 - 12,000 barrels of oil per day (BOPD) is achievable once the field is re-pressurised which is expected to take at least 2 ¼ years.


Ryder-Scott

This engineering group had a more detailed study with a well by well appraisal in comparison to the EORI study that had a whole of field approach.

NITEC, who were subcontracted by Ryder, came up with 18.9MBO based on a maximum of 50mmcfd of CO2 being available. These results were very close to those found in the EORI study. 1P expected when full scale CO2 flooding has been implemented and production responses received.

The market appeared to be disappointed because too much emphasis was placed on the "maximum" of 23MBO from the EORI.

So why 1P and not 2P or 3P

It really comes back to the present US legislation which is 30 years old and requires a flow test to the surface to be the only “conclusive formation test”. Since a flow test cannot be done in this field, Ryder Scott had no choice but to make it 3P. There is much discussion in the US about the need for this. See: http://www.ryderscott.com/download/308nsltr.pdf




Net Present Value

One of the ways analysts try to find a value for a company that will be producing in the future is to use the Net Present Value. Don’t worry about the formula because Ryder Scott has done all the hard work for us. They calculated, using very conservative figures, that ELK’s NPV = $320 million. Therefore if Grieve was for sale now from the conservative Ryder Scott report the starting point would be $320 million. But of course the buyer wants to make money out of the deal so they wouldn’t want to pay anywhere near that price unless there was a guaranteed oil price rise.

If you divide that by the number of shareholders we get a figure of $5.15 per share with the price of oil set at $85/barrel. But what if the price of oil is $130/barrel.”

From the table below you can see the effect of this oil price change on share price. Grieve is now worth $9.79 per share if the cost of recovery is $35/barrel.



If only things were this simple. Of course we don’t know what the price of oil will be during the production phase. The other minor problem is that ELK doesn’t have the cash to develop the project by itself. So what can ELK do?

It could make a large placement thus lowering the share price. Or it could have a joint venture with another company so that they come up with the cash.

What happens to the share price if the Joint Venture deal comes off with ELK saying you can have half the field if you pay for the production.



Depending on the price of oil the buyer may want to have more of Grieve than 50% or want ELK to help pay for the cost of production. That’s because if they have to pay all the costs and get only half the production they may be paying $70 to get $85 worth of production. This does not take into account the possible receipts from carbon sequestration where the company may get a benefit from burying the Carbon Dioxide.


The other risk of course is that they need a CO2 supply.

Who Supplies CO2
A CO2 pipeline is very close to the Grieve project and it amy possibly be used depending on its capacity and where the CO2 source.

This from Macrae12:

“The El Paso Pipeline Group, DKRW Advanced Fuels, ExxonMobil and Kinder Morgan CO2 Company could all conceivably be in the picture.

The Lost Soldier and Wertz fields where an additional 62 million barrels (10% of the original oil in place) was recovered through CO2 nearby plus Anadarko Petroleum started other CO2 floods in 2003 at the Patrick Draw Field in the Green River Basin and at Salt Creek Field in the Powder River Basin relatively near ELK.

Once you look at the map of CO2 suppliers and potential ones in Wyoming and identify pipelines that carry CO2, wells that have tested high percentages of CO2, gas plants which process CO2-rich gas, and Wyomings coal-fired power plants and their four oil refineries, I get quite excited about ELK actually pulling this off in the future.

Onto sequestration, pilot projects are also underway with Merit Energy at Baroil and ExxonMobil in southwestern Wyoming. The greenhouse *credits* may well be a tangible.


The Governor of Wyoming is also very supportive of the use of CO2 in enhanced oil recovery.

There has also been a lot of pressure on the CO2 producers to stop venting the CO2 to the atmosphere and to put in the necessary equipment so that the CO2 can be put to good use.