Denbury Resources spent a lot of money for the old oil fields North of Houston in Conroe — $420 million for a field that produces just 2,500 barrels per day.
But Forbes notes the Dallas company’s speciality is making the most of old fields by injecting CO2 into them. A branch of the “Green Pipeline” the company is building to bring naturally occurring CO2 to other parts of Texas will reach up to Conroe too.
How does that math work out?
Building the carbon dioxide pipeline to Conroe and installing new equipment will require an estimated $1 billion over five years. Add that to the purchase price and Denbury will have sunk roughly $12 per barrel in capital costs (assuming it can get those 125 million barrels out).
But Denbury thinks it’s well worth it.
Operating costs at Denbury’s conventional oil fields average $32 per barrel of recovered oil. Yet at its fields with carbon dioxide floods, those costs drop to $23 per barrel (including $7 per barrel in carbon dioxide costs, $6 for power and fuel, $3 for labor, $1.50 for chemicals). The big difference? The wells in Conroe and other old fields have already been drilled.
The Green Pipeline is also going to be within shouting distance of Houston’s Ship Channel refineries. If/when carbon capture technology becomes wide-spread there Denbury would be well-positioned to take the CO2 for its projects, storing more CO2 than it takes to produce new oil, essentially creating “carbon neutral oil.”