Storing CO2 through Enhanced Oil Recovery

© OECD/IEA 2016

Storing CO2 through Enhanced Oil Recovery

International Energy Agency Webinar

14 January 2016

© OECD/IEA 2016

Storing CO2 through EOR – EOR+

IEA Insights Paper released early in November 2015

Objectives: Estimate the global technical

potential and distribution Explore economics of storage cases Consider the emissions reduction

potential Options to overcome barriers to

EOR+ Analysis by the IEA and partners

Rystad Energy and StrategicFit

2IEA EOR+ Webinar, 14 January 2016

© OECD/IEA 2016

Webinar Agenda

1 Introduction and motivation Kamel Ben Naceur (IEA)

2 Basis for the EOR+ assessment and key results Sean McCoy(IEA)

3 Technical potential for EOR+ Nils-Henrik Bjurstrøm (RystadEnergy)

4 Illustrative project-level economics Chris Jones (StrategicFit)

5 Emissions reduction potential and policy barriers to EOR+

Sean McCoy (IEA)

6 Comments and perspectives on EOR+ Per Ivar Karstad (Statoil)Steven Carpenter (UW-EORI)

7 Moderated Q&A Juho Lipponen (IEA)


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Introduction and motivations

Kamel BEN NACEURDirector, Sustainability, Technology & OutlooksInternational Energy Agency


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The IEA at a glance

Inter-governmental body founded in 1974; currently 29 Member Countries

Provides policy advice and energy securitycoordination

Covers whole energy policy spectrum across all major energy technologies

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Key publications: World Energy Outlook, Energy Technology Perspectives, Technology Roadmaps

Enlarging the IEA via association with major emerging economies

IEA EOR+ Webinar, 14 January 2016

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Energy technology collaboration

IEA’s Energy Technology Network includes 39 Energy Technology Collaboration Programs

Independent organisationsproviding technology input to IEA analysis


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CCS is an essential part of a low-carbon portfolio of technologies

Increased ambition of the Paris agreement requireslarger removals by carbon sinks

IEAGHG was established in 1991; IEA ramped-up CCS activity around 2000 and formed a dedicated CCS unit in 2010

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CCS accounts for 13%of cumulative

emissions reductions in IEA 2DS scenario against business as

usual. Source: IEA ETP-2015


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Storage through CO2-EOR (“EOR+”) is growing in importance CCS has struggled to expand and meet expectations,

often for economic reasons

Hence the tendency to look for ways to utilise captured CO2 to offset capture costs

EOR is by far the largest single use of CO2 today, but typically injected CO2 is not monitored and verified for storage

IEA has therefore analysed a “change of paradigm”: how CO2 storage and enhanced oil recovery could be co-exploited “EOR+”


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Basis for the EOR+ assessment and key results

Sean MCCOYEnergy AnalystInternational Energy Agency


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Storing CO2 through EOR

CO2-flood Enhanced Oil Recovery (CO2-EOR) is widely practiced in the United States and results in permanent storage of CO2

CO2-EOR is attractive because:Operators have over 30-years of commercial experience with

EOR It can slow declining oil production Regulations surrounding EOR are generally clear The infrastructure built today for EOR could compliment

development of saline aquifer sequestration in future (e.g. CO2pipelines)

IEA EOR+ Webinar, 14 January 2016 10

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Injected CO2 drives oil production, is produced alongside the oil and recycled

Image: Global CCS Institute


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CO2-EOR drives increased oil production from the Weyburn Unit

Around 30,000 bbl/day total production, over 20,000 bbl/day due to CO2-EOR

Figure: Cenovus Energy/Malcolm Wilson, PTRC


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Use of CO2-EOR has been growing steadily


Data: Kuuskra & Wallace,2014

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Shifting from conventional EOR to EOR+1. Site characterisation to collect information on overlying

cap-rock and geological formations, as well as abandoned wellbores, and assessment of the risk of CO2 leakage of from the reservoir.

2. Measurement of venting and fugitive emissions from surface processing equipment.

3. Monitoring and enhanced field surveillance aimed at identifying and, if necessary, estimating leakage rates from the site and assessing whether the reservoir behaves as anticipated.

4. Well abandonment processes that increase confidence in long-term containment of injected CO2, in particular to ensure they withstand the corrosive effects of CO2-water mixtures.


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And, it (should) go without saying...

CO2 produced for the sole purpose of using it in CO2-EOR (e.g., produced from natural accumulations) can not, in

general, deliver a climate benefit

and

Captured CO2 must be a relatively low-value byproduct of power generation or industrial production (e.g. fertilizer,

hydrogen, cement, iron & steel)


© OECD/IEA 2016

Report considers of three EOR+ operational models

Scenario Incremental recovery

% OOIP

Utilisation

tCO2/bbl (mscf/bbl)Conventional EOR+ 6.5 0.3 (5.7)

Advanced EOR+ 13 0.6 (11.4)

Maximum Storage EOR+ 13 0.9 (17.1)

All projects undertake the four storage-focused activities

CO2 is assumed to be captured from anthropogenic sources for the purpose of avoiding emissions.


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Large technical potential for storage

Around half of the storage required in the 2DS could come from Conventional EOR+… and more than twice the needed capacity

through Advanced EOR+


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Potential for incremental production is equally large

Technical potential for large incremental oil production under Advanced and Maximum Storage EOR+… large proportion of oil

demand under the 2DS


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The NPV of Advanced EOR+ comes out ahead under all ETP scenarios

As a result of both increased storage and production, and despite added costs, Advanced EOR+ has the highest NPV under all ETP

scenarios19IEA EOR+ Webinar, 14 January 2016

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EOR+ can deliver emissions reductions, but will need supportive policyEmissions

Emissions from fossil fuel combustion can be offset by higher CO2-utilization, i.e., Advanced EOR+

Even Conventional EOR+ can bring a climate benefit through displacement

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Policy Expanding the use of EOR –

regardless of the “+” Encouraging adoption of

practices to “store” CO2consistent with the requirements of the climate change mitigation objectives

Utilizing more CO2 as part of the EOR extraction process.


© OECD/IEA 2016

Technical potential for EOR+

Nils-Henrik BJURSTRØMSenior Project Manager, Consulting Services and Head of exploration analysisRystad Energy


The chart outlines the processthat identifies candidate fields forCO2 storage during CO2-EOR+and calculates CO2 storagepotential.The starting point is all discoveredoil and gas fields in the world.Relevant data for all fields that areeither abandoned, currentlyproducing or expected to startproduction before 2025, aremoved into an excel book wherethe screening takes place.The candidates for CO2-EOR+are the fields that match thescreening criteria (see details onthe following pages andappendix). Additional productionpotential and CO2 storagepotential are then calculated perfield. The calculated data isimported back into UCube andmade available for further analysisthrough the Cube browser userinterface. Data on the largestfields in terms of storage potentialper USGS province is exported toexcel for further analysis.

Overview of screening methodology

All UCube Assets

All UCube Fields

Discovery has been made

Medium-term commercial fields

- Abandoned fields- Producing fields- Production start before

2025~12000 assets

Fields with CO2-EOR potential

Apply screening criteria

~4600 assets

Storage potentialper field

Apply storage potential calculation

Additional UCube value items

Ucu

beR

ysta

d En

ergy

Ups

trea

m D

atab

ase

Exce

l

UCube

Excel tables with top 10 fields per producing USGS province

Right diagram illustrates thecalculation of scores for miscibleand immiscible flooding..The Minimum Miscibility Pressure(MMP) is calculated from crudeAPI and reservoir temperature.The asset is suitable for miscibleCO2 flooding if the reservoirpressure is larger than the MMP.The final score is the product ofthe individual scores for the threeadditional criteria.The initial gas/oil criterium is usedto ensure that the candidate fieldsdo not have gas cap or significantvolumes of associated gas.The criterium for remaining oilsaturation comes from literaturestudy, and the criterium foreffective mobility/viscosity comesfrom physical considerations.

The effective mobility screeningcriteria is based on the Paul andLake model of mobility ratio ofmiscible flooding being a productof effective mobility, heterogeneityfactor and gravity factor***. Noinformation about gravity orheterogeneity is available, so theeffective permeability ratio will beused as a proxy for mobility ratio.

Screening process

MMP

APITemperature

Miscible flooding criteria

Initial gas/oil ratio < 10%Remaining oil saturation > 30%Effective mobility < 5

Immiscible flooding criteria

Initial gas/oil ratio < 1 %Remaining oil saturation > 50%Viscosity < 10

Confidence score Miscible flooding

Confidence score Immiscible

flooding

Right table summarizes theparameters used to calculate theadditional production and CO2storage potential for the four CO2-EOR practices discussed in theintroduction chapter.

Additional production is calculatedas a percentage of original oil inplace (OOIP), and CO2 storage iscalculated as additionalproduction times storage capacityper additional barrel.

The storage capacity is assumedto be proportional to CO2 densityat reservoir conditions.Right scatterplot shows calculatedCO2 density per candidate fieldfor CO2-EOR.

The extra investments in themaximum storage practices are inthis study assumed to have effecton storage only. A large part ofthe extra investments will likelytake place after productioncessation.

More details about the storagecapacity calculations are given inthe appendix.

CO2 storage capacity = (Additional production) x (CO2 sequestered per additional barrel)

Conventional EOR+

AdvancedEOR+

Maximum storageEOR+

Immiscible

Additional production(% of OOIP)

6,5 % 13% 13% 13%

CO2 storage capacityat 1500 m(Tonne per additional bbl)

0,3 0,6 0,9 0,65

Right char show global CO2storage potential split byonshore/offshore.

In total, 71% of potential belongsto onshore fields.

114 Gt out of the 390 Gt totalstorage capacity is in offshorefields.

70% of storage potential belongs to onshore fields

CO2 storage potential split by onshore/offshore Gigatonnes

1458

87114

276

49

196

29418

71 390

Conventional EOR+ Maximumstorage

Immiscible Missing data Total

OnshoreOffshore

71%

Right bar chart shows CO2storage potential per geographicalregion by CO2-EOR practices.

Middle East and Russia represent58% of the global potential whileNorth Africa and Central Asiaaccounts for 11% and 6% ofglobal potential, respectively.

Central Asia has higher fraction offields with potential for immiscibleflooding than other regions.

More than half of CO2 storage potential is in Middle East and Russia

CO2 storage potential per geographical regionGigatonnes

0 50 100 150

Middle East

Russia

North Africa

Central Asia

South America

West Africa

North America

Western Europe

East Asia

South East Asia

Eastern Europe

South Asia

Australia

Conventional EOR+Advanced EOR+Maximum Storage EOR+Immiscible

76 % of potential

Middle East; 37%

Russia; 21%North

Africa; 11%

Central Asia; 7%

Other; 24%

Global storage potential map

High confidence scoreMedium confidence score

Key

© OECD/IEA 2016

Illustrative project-level economics

Chris JONESSenior ConsultantStrategicFit


Copyright © 2016 by StrategicFit. All rights reserved. 29

• We tested the different EOR practices against IEA oil and CO2 price scenarios for a hypothetical CO2 EOR project- a 1bnbbl STOIIP onshore oil field

• The projects were identical apart from the EOR+ operational model

This work was carried out in 2014/5 with the IEA to test the economics of different EOR practices

Method Increase in Oil Recovery (%OOIP)

CO2 storage rate– T/bbl

Conventional EOR+ 6.5 0.3Advanced EOR+ 13 0.6

Max Storage 13 0.9


CO2

We costed 5 core functional activities to examine the different EOR practices

Oil/Gas/Water SeparationCO2 in

Well stream – Oil, water, gas CO2

Export Oil

Gas, CO2, water

CO2/Gas separation and clean up

Recycled CO2 re-injected

Export Gas

Reservoir

CO2 Injection

CO2 Recycling compression

Produced water

Long term Monitoring

Storing CO2 through Enhanced Oil Recovery: Figure 2


• Phase 1• CO2 begins to be injected and incremental oil production is ramping up

• Phase 2 • Plateau production before CO2 breakthrough

• Phase 3• Exponential decline of the incremental oil production

We considered three phases of incremental oil production after CO2 is first injected

Incremental Oil

Production

Phase 1 Phase 2 Phase 3

Incremental Oil Production


• Phase 1• New patterns are being brought online; CO2 injection increases

• Phase 2• First breakthrough occurs, earlier for Conventional EOR+ than Advanced

EOR+/Max Storage• Phase 3

• CO2 is produced with the oil and is recycled at all wells

The CO2 required for EOR is initially purchased but gradually recycled volumes dominate

Incremental Production

Phase 1 Phase 2 Phase 3

CO2 utilisation compared to Oil production

Annual CO2 Injected

Annual Purchased CO2- Advanced EOR+/MaxStorageAnnual Purchase CO2 -Conventional EOR+

Incremental Oil Production

Recycled CO2


• We considered “CO2 supply price” from the perspective of an EOR operator

• We used the global averages of IEA 2DS,4DS and 6DS scenarios for CO2 emission penalties and a $40/T cost for capturing to calculate a supply cost-i.e. what an EOR operator would have to pay (or receive) for CO2

How CO2 prices evolve will have a major impact either as a revenue stream or as a cost

• In 4DS and 6DS the cost of capture is greater than any emission penalty, the CO2would be sold to an EOR operator (as is typical today)- it is a cost

• In the 2DS the emissions penalty is greater than the cost of capture so an EOR operator would be paid to verifiably store the CO2 – it is a revenue

Average CO2 Supply prices under three scenarios



• In a 2DS, Max Storage & Advanced EOR+ gain revenues by storing extra CO2

• In 4DS & 6DS Max Storage looks worse due to additional CO2 purchasing costs

• All scenarios have oil prices greater than $90/bbl, rising to $150/bbl in 6DS

The EOR Plus strategy appears optimal for each of the future scenarios

NPV of illustrative CO2-EOR project for different ETP scenarios and EOR practices



• Increased oil revenues of Advanced EOR+ outweigh additional costs compared to Conventional EOR+

• Extra CO2 revenues in Max Storage can’t overcome the cost increase as there is no further incremental oil

What drives the difference between different practices in a 2DS world?

PV Waterfall for a 2DS Global Scenario



What would Carbon and Oil prices have to be to make each strategy best?

Illustrative oil and CO2 price impact on choice of EOR practice



• Dramatic CO2 price changes are needed to influence the best EOR practice –oil price is a much stronger driver

• Especially in the low price environment there are therefore many stumbling blocks for operators

If it looks good then why isn’t it happening?

CO2 EOR requires a huge capital investment but there

is uncertainty about incremental recovery

EOR operator challenge Stumbling blocksIOCs are hugely cutting capital expenditure. Risky, EOR work

cannot compete and is dropped. Will NOCs lead?

Where do we get CO2? There is rarely a stable supply and it is not a tradable commodity

Government support is needed for carbon capture but is fickle e.g. UK CCS

project cancellation.

How can we deliver projects reliably and at low cost?

Without projects the industry doesn’t get technology, supply chain & infrastructure talent/ experience to get costs down

© OECD/IEA 2016

Emissions reduction potential and policy barriers to EOR+

Sean MCCOYEnergy AnalystInternational Energy Agency


© OECD/IEA 2016

The net emissions impact of CO2-EOR is contentious

CO2-EOR is “no more a climate solution than drilling in ultra-deepwater, hydro-fracking, or drilling in the Arctic Ocean.” –

Greenpeace

Multiple studies have looked at the emissions impact of CO2-EOR operations, e.g.:

Aycaguer et al., 2001; Khoo & Tan, 2006; Suebsiri et al., 2006; Jaramillo et al., 2009; Falitnson & Guner, 2011; Wong et al., 2013;

Cooney et al., 2015 On first inspection, studies seem to reach different conclusions;

however, they make very different choices of boundaries, approaches and assumptions

They have been based on limited data from real operations


© OECD/IEA 2016

Important observations from past life-cycle assessment research1. Emissions depend on boundaries:

a) Including combustion emissions from oil makes business-as-usual (BAU) CO2-EOR a net emitter

b) Changes to design and operation of BAU CO2-EOR could decrease the CO2 footprint

2. If energy-related emissions that would otherwise be produced from a functionally equivalent system are displaced, CO2-EOR reduces emissions

3. Emissions reduction efficiency is a function of energy displacement and CO2 utilization

a) Displacement of CO2-intensive power and oil results in a larger emissions reduction than would otherwise occur


© OECD/IEA 2016

The boundaries used to assess emissions from CO2-EOR matter

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CO2-EOR Operations

Crude Oil Transport Petroleum Refining

Petroleum Product Transport and Use

Fuel or Feedstock Supply Chain

Production Processwith CO2 Capture

CO2 Transport

Product Transport and Use

The emissions, to what they can be allocated, and the way in which they are allocated depends heavily on the boundaries (Skone, 2013)


© OECD/IEA 2016

Regardless of boundaries, storing more CO2per barrel is beneficial for emissions

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CO2-EOR Operations



-0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40

Conventional+

Advanced+

Maximum

Net Emissions (tCO2/bbl)

Petroleum Product Displacement*


© OECD/IEA 2016

Widespread EOR+ will impact the price and demand for oil

1. How much production is displaced by CO2-EOR?

2. How much additional production results from CO2-EOR?

3. What is the resulting net impact on emissions?43IEA EOR+ Webinar, 14 January 2016

© OECD/IEA 2016

Under the IEA 6DS scenario, about 20% of production would be additional

More costly production is displaced: this is often, but not always, more carbon intensive (Gordon et al., 2015)

Hence, we assume a “like-for-like” displacement.


© OECD/IEA 2016

With displacement, even Conventional EOR+ can deliver a benefit

45

CO2-EOR Operations



Petroleum Product Displacement*

-0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40

Conventional+

Advanced+

Maximum

Net Emissions (tCO2/bbl)*Conventional crude of about 470 kgCO2/bbl (Gordon et al., 2015); 80% displacement.


© OECD/IEA 2016

Three main challenges for EOR+

1. Expanding the use of EOR – regardless of the “+” 2. Encouraging adoption of practices to “store” CO2

consistent with the requirements of the climate change mitigation objectives

3. Utilizing more CO2 as part of the EOR extraction process.

Important to note that there are other, more challenging legal issues that exist in the US


© OECD/IEA 2016

Expanding the use of CO2-EOR

Problem: CO2-EOR projects may be relatively unattractive from a financial perspective because:

1. CO2-EOR requires a large capital investment late in the life of a field – particularly for offshore projects.

2. The increased recovery from CO2-EOR is captured over a long period of time and, thus, its NPV is diminished.

3. Each application of CO2-EOR is unique and requires costly field pilot tests to optimise.

Solution: Changes to fiscal regime, provision of tax credits


© OECD/IEA 2016

Ensuring effective storage through CO2-EOR

Problem: Little incentive to undertake the additional activities and reporting that make EOR+

Solution: Regulatory requirements for the “+” activates whenever emissions are being avoided and:

1. Developing the appropriate regulations for EOR+

2. Providing support to test, de-risk, and build experience with needed technologies

3. Resolve legal barriers that limit storage through CO2-EOR (e.g., preference for oil production over CO2-storage)


© OECD/IEA 2016

Using more CO2 per barrel

Problem: Emissions reduction benefits are maximized when more CO2 is used per barrel of oil recovered.

Solution: Let the market do the work:

1. Declining supply costs of CO2 or increasing prices of oil – ceteris paribus – should lead to increased consumption of CO2 by an EOR operator.

2. Pricing of CO2 emissions or comparable regulatory interventions should expand the supply of CO2 and drive down prices.


© OECD/IEA 2016

Comments and perspectives on EOR+

Per Ivar KARSTADManager, CO2 Storage and EOR Research and TechnologyStatoil


© OECD/IEA 2016

Comments and perspectives on EOR+

Steven CARPENTERDirector, Enhanced Oil Recovery InstituteSchool Of Energy ResourcesUniversity of Wyoming


www.uwyo.edu/eori/52

U. S. Oil Recovery and CO2 Storage From "Next Generation" CO2-EOR Technology*


Non-scientific CO2-EOR Issues

EOR Potential in Wyoming (and US)…

…hampered by migratory bird protection and permitting on State and Federal lands


Enhanced Oil Recovery Institute:

Steven Carpenter, Director [email protected]+1-513-460-0360 (cell)

Casper, WY2435 King BoulevardSuite 140Casper, WY 82604307-315-6442

Laramie, WYDepartment 40681000 E. University Ave.Laramie, WY 82071307-766-2791

Thank you!

© OECD/IEA 2016

Three take-away points from today’s webinar

1. Storing CO2 through EOR, that is EOR+, makes economic sense

2. There is substantial global technical potential for storing CO2 through EOR+, and to increase recovery from aging oil fields

3. Advanced EOR+ can result in emissions reductions even when considering combustion of oil – and displacement effects can further increase this benefit.


© OECD/IEA 2016

Questions & Answers

Thank-you!

Download the report at:

http://tinyurl.com/IEA-EOR-Report


© OECD/IEA 2013

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Enhanced Oil Recovery Projects: A Life Cycle Assessment Approach." Energy & Fuels 15(2): 303-308.

Azzolina, N. A., D. V. Nakles, C. D. Gorecki, W. D. Peck, S. C. Ayash, L. S. Melzer and S. Chatterjee (2015). "CO2 storage associated with CO2 enhanced oil recovery: A statistical analysis of historical operations." International Journal of Greenhouse Gas Control 37(0): 384-397.

Cooney, G., J. Littlefield, J. Marriott and T. J. Skone (2015). "Evaluating the Climate Benefits of CO2-Enhanced Oil Recovery Using Life Cycle Analysis." Environmental Science & Technology 49(12): 7491-7500.

Faltinson, J. E. and B. Gunter (2011). "Net CO2 Stored in North American EOR Projects." Journal of Canadian Petroleum Technology 50(7): pp. 55-60.

Gordon, D., A. Brandt, J. Bergerson and J. Koomey (2015). Know Your Oil: Creating a Global Oil-Climate Index. Washington, DC, Carnegie Endowment for International Peace.

Jaramillo, P., W. M. Griffin and S. T. McCoy (2009). "Life Cycle Inventory of CO2 in an Enhanced Oil Recovery System." Environmental Science and Technology 43(21): 8027-8032.

Khoo, H. H. and R. B. H. Tan (2006). "Life Cycle Investigation of CO2 Recovery and Sequestration." Environmental Science and Technology 40(12): 4016-4024.

Kuuskraa, V. and M. Wallace (2014). "CO2-EOR set for growth as new CO2 supplies emerge." Oil & Gas Journal 112(4).

Skone, T. (2013). “The Challenge of Co-Product Management for Large-Scale Energy Systems: Power, Fuel and CO2.” Presentation to LCA XIII, Orlando, FL. 2 October 2013.

Suebsiri, J., M. Wilson and P. Tontiwachwuthikul (2006). "Life-Cycle Analysis of CO2 EOR on EOR and Geological Storage through Economic Optimization and Sensitivity Analysis Using the Weyburn Unit as a Case Study." 45(8): 2483-2488.

Wong, R., A. Goehner and M. McCulloch (2013). Net Greenhouse Gas Impact of Storing CO2through Enhanced Oil Recovery (EOR) Calgary, AB, Pembina Institute.
