 Co-optimization of enhanced oil recovery and carbon sequestrationAndrew Leach, Charles Mason and Veld, Klaas van ‘t Resource and Energy Economics, 2011, vol. 33, issue 4, 893-912 Abstract: In this paper, we present an economic analysis of CO2-enhanced oil recovery (EOR). This technique entails injection of CO2 into mature oil fields in a manner that reduces the oil's viscosity, thereby enhancing the rate of extraction. As part of this process, significant quantities of CO2 remain sequestered in the reservoir. If CO2 emissions are regulated, oil producers using EOR should therefore be able to earn revenues from sequestration as well as from oil production. We develop a theoretical framework that analyzes the dynamic co-optimization of oil extraction and CO2 sequestration, through the producer's choice of the fraction of CO2 in the injection stream at each moment. We find that the optimal fraction of CO2 is likely to decline monotonically over time, and reach zero before the optimal termination time. Numerical simulations, based on an ongoing EOR project in Wyoming, confirm this result. We also find that cumulative sequestration is less responsive to the carbon tax than to the oil price. Only at very high taxes does a tradeoff between revenues from oil output and sequestration arise. Keywords: Enhanced oil recovery; Carbon sequestration; Climate change (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:33:y:2011:i:4:p:893-912 DOI: 10.1016/j.reseneeco.2010.11.002 Access Statistics for this article Resource and Energy Economics is currently edited by J. F. Shogren and S. Smulders More articles in Resource and Energy Economics from Elsevier |
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