Upstream Fiscal Regime Incentives for Captured CO 2 -EOR
- PDF / 2,394,758 Bytes
- 21 Pages / 595.224 x 790.955 pts Page_size
- 79 Downloads / 172 Views
Upstream Fiscal Regime Incentives for Captured CO2 -EOR Akil Zaimi1 Received: 16 April 2019 / Accepted: 8 September 2020 © Springer Nature Switzerland AG 2020
Abstract Several preliminary scoping studies have identified a significant potential for captured CO2 for enhanced oil recovery (EOR) projects outside North America. In countries where severe upstream fiscal terms can constitute an obstacle for such projects when they are profitable before tax, incentives should be considered. We compare several incentive schemes by running simulations on a realistic CO2 -EOR project inspired by the Denver unit of the Wasson US field. The economic approach is based on incremental net present values (NPV). This requires dual simulations of a base case and a CO2 -EOR case because the calculus is not linear and cannot be run on a single incremental costs and production case. The design of the incentive package is challenging for the host country. The incentive package should sufficiently improve the company NPV without reducing the State NPV in most situations that are likely to occur. By looking at both oil company and host country incremental NPV, we show that improvements in cost deductions, through accelerated capital expenses depreciation and uplift, are better suited for the host country than tax rate reductions. We also explore an upstream tax recycling scheme for financing CO2 purchase costs. Keywords Oil production · CO2 capture · Enhanced recovery
1 Introduction Injecting captured anthropogenic CO2 for enhanced oil recovery (EOR) in suitable producing oil fields combines two proven technologies to yield the dual benefits of storing anthropogenic CO2 and extracting oil that cannot be produced by secondary recovery means. For example, studies have shown that anthropogenic captured and recycled CO2 for EOR (CCO2 -EOR) permanently stores over 95% of the purchased CO2 utilized in the process while allowing to recover an additional 5 to 25% of the underground original oil in place (OOIP), which is in the high end of this interval, an excellent oil production performance. According to the Global CCS Institute, most CCO2 -EOR operations take place in North America. Preliminary worldwide physical scoping studies conclude that there could be much more carbon capture through EOR projects in several global regions. However, from
Akil Zaimi
[email protected] 1
3 rue Pestalozzi, 75005 Paris, France
an oil investor perspective, such projects may not look as financially attractive as conventional oil projects due to higher costs per additional barrel produced and to the technical complexities of coordinating the EOR project with the CO2 capture and transportation project. Moreover, when holding interest in the oil field, an international oil company (IOC) may perceive CCO2 -EOR projects as not reaching the profitability threshold under upstream fiscal regimes designed for conventional oil projects. In this paper, “fiscal regime” refers to a set of laws and regulations that administrate the economic benefits derived from oil a
Data Loading...
