On March 7, 2000, Occidental Petroleum entered into an agreement to acquire control of Altura Energy, Ltd., a partnership created in 1997 by BP Amoco and Shell Oil to jointly manage their Permian Basin assets in West Texas and eastern New Mexico. The transaction was valued at $3.6 billion. At the time Altura (now named Occidental Permian, Ltd.) was the leading producer of oil in the Permian Basin. Approximately 50% of those assets consisted of fifteen CO2 flood projects and immediately catapulted Occidental to the forefront of CO2 Enhanced Oil Recovery (CO2 EOR). And over the next 17 years, Occidental has continued to expand its CO2 EOR portfolio to the point where it now consists of thirty-six projects including the recent acquisition of a controlling interest in Hess Corporation’s Seminole San Andres Unit.
As a shareholder of Occidental, I have long-wondered what exactly are the CO2 assets Occidental mentions in its presentations and what role do they play in Occidental’s overall production profile. To that end, I needed to take a close look at each project in order to gain a basic understanding of these assets.
Unfortunately, Occidental does not provide a convenient running list of its CO2 projects but rather lumps them together with its 70 waterflood projects under an umbrella titled “Permian EOR.” However, through a little digging I was able to identify and study all of Occidental’s CO2 projects. The overarching question I had was: do these assets contribute meaningfully to OXY’s production profile, and if so, how? To help answer this question, this article will examine the legacy of the Altura acquisition, the current state of Occidental’s CO2 EOR operations, the recent Seminole Unit acquisition from Hess Corporation and Occidental’s new West Sundown Unit CO2 project.
But first a little review of the basics of CO2 EOR.
Basics of CO2 Tertiary Enhance Oil Recovery
Although there are many different methods of tertiary EOR, the injection of CO2 into an oil reservoir followed by injection of water is the most common method used in light oil reservoirs. In this method, the injected CO2 dissolves in the oil (i.e., becomes “miscible”) and swells it. This literally makes the oil more “slippery” allowing it to move away from the rock pores where it has been trapped. I liken the process to spraying each oil molecule with WD40. The CO2 injection is followed by injection of water to push the oil to a production well. The entire process is called water…