Economic feasibility of carbon storage for further use in enhanced hydrocarbon recovery

Abstract

Carbon Capture, Utilisation, and Storage (CCUS) projects face significant economic feasibility challenges, often influenced by fluctuations in carbon allowance prices and the financial credits associated with removing atmospheric carbon. Another factor contributing to setbacks in the technology is the uncertainty surrounding carbon’s future path. While most studies have concentrated on the technical aspects of CCUS, this research shifts focus toward economic evaluations, specifically investigating the feasibility and potential for value creation through storing CO₂ in a saline aquifer as a buffer to recycling CO2 being used for EOR in a neighbouring hydrocarbon field. This interdisciplinary work offers information on CCUS technology and insights into the relationship between CCUS and project valuation economics. The core aim of the research is to address both technical and economic perspectives, avoiding the overly technical or overly financial reports and publications typically found in the literature. The significance of this research lies in its potential to inform and contribute to academic, industry, and policy discussions on CCUS economics and technology, thereby advancing the field of sustainable energy. The study models the economic value of such projects by analysing carbon allowance prices in commodity markets. It uses a two-factor stochastic model to forecast future spot prices, applying the framework from referenced sources and the Sum-of-Discounted-Prices technique. This generates low, expected, and high carbon price forecasts for economic evaluation. The research simulates hydrocarbon production and optimisation in the Pembina Cardium field, focusing on water and CO2 injection rates and cycles. It also assesses whether buffer storage offers economic benefits over sourcing CO2 externally, examines CO2 recoverability, and identifies optimal well architecture, production strategies, and injection constraints. Furthermore, the study employed an integrated techno-economic model to evaluate decision options, incorporating commodity prices, simulation results, penalties, taxes, royalties, discount rates, and other relevant factors, thereby facilitating a transparent analysis and valuation of investments. It also incorporated decision tree analysis and Monte Carlo Simulation for better decision-making. Finally, the research demonstrates that deploying vertical wells in layered formations or reservoirs with low vertical permeability for carbon buffer storage in saline aquifers yields higher carbon recovery and minimises associated water production. The valuation analyses reveal that integrating buffer carbon storage substantially boosts hydrocarbon production from depleting reservoirs and improves overall project valuation regardless of the prevailing carbon emission regulatory regime. This dual benefit not only facilitates effective CO₂ sequestration but also contributes to more efficient and sustainable production processes. As a result, it addresses key dimensions of the energy trilemma by lowering production costs, enhancing hydrocarbon recovery, and reducing carbon emissions, providing practical insights for sustainable energy development.