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Chuck Norman cnorman@tiorco

Enhanced Oil Recovery (EOR) Resultados y Tendencias en el Mundo May 21, 2008. Chuck Norman cnorman@tiorco.com. TI O RCO Inc. Agenda. Oil Supply/Demand and Distribution of Oil Reserves Oil Recovery Mechanisms and EOR Targets Types of EOR Technologies and EOR Candidates

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Chuck Norman cnorman@tiorco

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  1. Enhanced Oil Recovery (EOR) Resultados y Tendencias en el Mundo May 21, 2008 Chuck Norman cnorman@tiorco.com TIORCO Inc.

  2. Agenda • Oil Supply/Demand and Distribution of Oil Reserves • Oil Recovery Mechanisms and EOR Targets • Types of EOR Technologies and EOR Candidates • Worldwide EOR Production • Average EOR Recovery Factors • EOR Economics • Reasons for EOR Failures • Conclusions

  3. Situacion Actual, Mayo 2008 • Aspo, la Association for The Study of Peak Oil, radicada en Europa, con un surcursal en Bs. As. • “La crisis es peor de lo que imaginamos. No existen posibilidades de incrementar la produccion mundial por encima de los 85 millones de barriles por dia.” • Kajel Aleklett, de ASPO • “Se calcula que cerca de 50 regiones, entre las que figura EE.UU, el Mar del Norte y hasta Argentina, ya alcanzaron la cima y, por lo tanto, produciran cada vez menos petroleo. Clarin, May 4, 2008

  4. EOR and Price Expectations • 2002: la International Energy Agency (IEA) y el Dept. of Energy (DOE) de EE.UU proyectan el precio del barril entre US$22 y US$27 en 2020. • 2009 Forecasts • Lehman Brothers: us$80 • Goldman Sachs: us$200

  5. Oil Consumption and Industrialization Oil Consumption Increases Fastest During Early Industrialization 35 30 25 U.S. 20 Per Capita (Bbls / Year 15 Japan South Korea 10 5 India China 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

  6. Chinese Oil Imports 3,000 50 Net Crude Imports 45 2,500 NYMEX WTI 40 2,000 35 30 1,500 kb/d US$/bbl 25 1,000 20 15 500 10 0 5 -500 0 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05

  7. U.S. Petroleum Production and Imports 12 Domestic Petroleum Production 10 8 Petroleum (MM BBLS/Day) 6 4 Imported Petroleum 2 0 ‘48 ‘53 ‘58 ‘63 ‘68 ‘73 ‘78 ‘83 ‘88 ‘93 ‘98 Year

  8. Argentina Monthly Oil Rate vs Time William Cobb (2006) 1,000 BO

  9. Regional Distribution of Global Oil Reserves North Sea 14B Bbls - 1% Others 112B Bbls - 10% North America 62B Bbls - 4% Middle East 734B Bbls - 64% West Africa 46B Bbls - 4% North Africa 60B Bbls - 5% South America 62B Bbls - 5% FSU 78B Bbls - 7%

  10. Oil Recovery Mechanisms CONVENTIONAL RECOVERY PRIMARY RECOVERY Natural Flow Artificial Lift (Pump, Gas Lift, etc.) SECONDARY RECOVERY Waterflood Pressure Maintenance (Water, Gas Reinjection) EOR TERTIARY RECOVERY Thermal Solvent Chemical Other Adapted from the Oil & Gas Journal, Apr 23, 1990

  11. Expected Oil Recovery Efficiencies OOIP (%) • PRIMARY METHODS • Liquid and Rock Expansion • Solution Gas Drive • Gas Cap Expansion • Gravity Drainage • Water Influx • SECONDARY METHODS • Gas Reinjection • Waterflooding • Up to 5 • 20 • 30 • 40 • 60 • Up to 70 Sandrea, Oil & Gas Journal (Nov 2007)

  12. EOR Targets: % OOIP LIGHT OILS HEAVY OILS TAR SANDS Primary 5% OIP Primary 25% OIP Secondary 5% OIP EOR Target 45% OIP EOR Target 100% OIP Secondary 30% OIP EOR Target 90% OIP Assumes Soi – 85% PV and Sw = 15% PV Thomas, Oil & Gas Science and Technology (2008)

  13. EOR Targets, 2005 Cumulative Production 183 Billion Barrels Discovered Unrecoverable by Current Technology 377 Billion Barrels (45% already abandoned) Target for EOR Technologies Target for Advanced Exploration Technology Proven Reserves 22 Billion Barrels Undiscovered Recoverable by Current Technology 30 Billion Barrels Undiscovered Unrecoverable by Current Technology 37 Billion Barrels US Department of Energy (2005)

  14. EOR Targets, 2007 Jackson, JPT (2007)

  15. Definition of EOR • Oil Recovery by Injection of Fluids not normally present in the reservoir • Excludes waterflooding

  16. Thermal EOR Methods THERMAL Hot Water Steam In-Situ Elec. Heat Hi Press. Air Inj. Steam Flood Conductive Heating CSS SAGD Forward Reverse VAPEX Dry Frac Non-Frac VAPEX + Steam Wet SAGP W / Additives THAI CAPRI

  17. Non-Thermal EOR Methods NON-THERMAL Imm. Gas Drives Other Chemical Miscible Slug Process Polymer CO2 MEOR Enriched Gas Drive Surfactant Flue Gas FOAM Vaporizing Gas Drive Alkaline Inert Gas CO2 Miscible Micellar N2 Miscible ASP Alcohol Emulsion

  18. EOR vs. Depth EOR Method Depth (feet) 2,000 4,000 6,000 8,000 10,000 Hydrocarbon Miscible Deep enough for required pressure Nitrogen and Flue Gas Deep enough for required pressure CO2 Miscible Deep enough for required pressure Surfactant Polymer Limited by temperature Polymer Limited by temperature Alkaline Fireflood Deep enough for required pressure Steam Drive Good Possible Fair Difficult Not Feasible Dr. Larry Lake, Oilfield Review (Jan. 1992)

  19. Oil Resources by Depth TOTAL 12.8 Trillion Barrels DEEP 21% 2.7 Trillion Bbls (>10,000 Ft) INTERMEDIATE 45% 5.7 Trillion Bbls (3,500 – 10,000 Ft) SHALLOW 34% 4.4 Trillion Bbls (<3,500 Ft) Sandrea, Oil & Gas Journal (Nov 2007)

  20. Distribution of Global Oil Reserves by Depth Remaining Reserves (1P), 2006 Conventional Non-Conventional Billion Bbls of Oil % Billion Bbls of Oil % Shallow (<3,500 ft) Intermediate (3,500 – 10,000 ft) Deep (>10,000 ft) 163 663 321 1,147 14 58 28 100 293 -- -- 293 100 -- -- 100 HIS, Credit Suisse

  21. EOR vs. Viscosity EOR Method Oil Viscosity (centipoise at reservoir conditions) 1.0 100 10,000 1,000,000 Hydrocarbon Miscible Nitrogen and Flue Gas CO2 Miscible Surfactant Polymer Polymer Alkaline Fireflood Steam Drive Good Possible Fair Difficult Not Feasible Dr. Larry Lake, Oilfield Review (Jan. 1992)

  22. Gravity Distribution of World’s Oil TOTAL 12.8 Trillion Barrels LIGHT 22% 2.8 Trillion Bbls (>35° gravity) MEDIUM 44% 5.6 Trillion Bbls (26-35° gravity) HEAVY 1% 1.4 Trillion Bbls (<26° gravity) EXTRAHEAVY 23% 3.0 Trillion Bbls (<10° gravity) Sandrea, Oil & Gas Journal (Nov. 2007)

  23. EOR vs. Permeability EOR Method Permeability (md) 10 100 1,000 100,000 Hydrocarbon Miscible Not critical if uniform Nitrogen and Flue Gas Not critical if uniform CO2 Miscible High enough for good injection Surfactant Polymer Polymer Alkaline Fireflood Steam Drive Good Possible Fair Difficult Not Feasible Dr. Larry Lake, Oilfield Review (Jan. 1992)

  24. Chemical EOR Processes Typical Ultimate Recovery (%OOIP) Typical Agent Utilization Process Polymer 5 1 lb polymer / Incremental bbl Micellar / Polymer 15 10-25 lb surfactant / Incremental bbl Alkaline / Polymer 5 35-45 lb surfactant / Incremental bbl

  25. Gas (Miscible and Immiscible) Typical Ultimate Recovery (%OOIP) Agent Utilization Process Miscible 10 - 15 10 MCF / Incremental bbl Immiscible 5 - 10 10 MCF / Incremental bbl

  26. Thermal Recovery Processes Typical Ultimate Recovery (%OOIP) Agent Utilization Process Steam (drive and soak) 50 - 65 0.5 bbl / Net Incremental bbl Combustion 10 - 15 10 MCF air / Incremental bbl

  27. EE.UU EOR Production, 2000 800 Nitrogen Injection HC Gas Injection 600 Flue Gas Injection CO2 Injection Production (M BBLS/Day) 400 Thermal 200 Chemical 0 1984 1986 1988 1990 1992 1994 1996 1998 2000 Year Moritis, Oil & Gas Journal (2000)

  28. EE.UU EOR Production, 2008 800 TOTAL 600 Thermal 400 Production (M B/D) Gas 200 Chemical 0 1986 1990 1994 1998 2002 2006 Thomas, Oil & Gas Science and Technology (2008)

  29. Est. Worldwide EOR Production, 1990(M Barrels / Day) SOURCE: Oil & Gas Journal (1990) * Mainly Indonesia ** Mainly Algeria and Libya

  30. Est. Worldwide EOR Production, 2007 Other 17,800 B/D 22% Canada 325,500 B/D 14% Indonesia 220,000 B/D 10% Venezuela 365,600 B/D 16% China 166,900 B/D 7% USA 649,300 B/D 30% Mexico 500,000 B/D 22% Percentages are those of total EOR production of 2.5 MM B/D Thomas (2008)

  31. Canada EOR, 2006 1 2 4 3 3 21 2 Acid Gas CO2 Combustion Hydrocarbon (Natural Gas) Steam Nitrogen 10 1 Oil & Gas Journal (April 2006)

  32. EE.UU EOR, 2006 Alaska 11 3 5 3 3 1 9 1 1 1 39 2 5 1 6 1 2 50 1 14 Steam Water Combustion CO2 Gas 1 2 Oil & Gas Journal (April 2006)

  33. Central and South America EOR, 2006 1 8 5 38 3 2 CO2 Hydrocarbon Steam Nitrogen Oil & Gas Journal (April 2006)

  34. Rest of World EOR, 2006 1 CO2 Combustion Steam Microbial Polymer 1 17 2 19 1 5 2 Oil & Gas Journal (April 2006)

  35. Summary of Active EOR Projects, 2006 Number of Projects Production (Bbls/Day) Depth (Feet) API Gravity ( ° ) Type Steam CO2 HC Gases Combustion Polymer Nitrogen 119 94 38 21 20 5 76 – 220,000 100 – 35,000 10 – 80,000 100 – 8,100 53 – 4,900 1,000 – 500,000 350 – 5,740 1,900 – 10,900 4,040 – 14,500 1,640 – 9,500 1,063 – 4,626 4,600 – 15,400 8 – 26 19 – 43 15 – 45 18 – 38 21 – 34 16 - 51 OGJ Worldwide EOR Survey, 2006

  36. Major EOR Projects and Production 700 Total Thermal Gas Chemical 500 300 Production (M B/D) 100 0 USA Mexico Canada Venezuela Indonesia China Thomas, Oil & Gas Science and Technology (2008)

  37. Comparison of EOR Techniques 60 50 Surfactant 40 Incremental Oil Cost ($/BBL) 30 CO2 Injection 20 Thermal Polymer 10 MEOR Waterflood 0 0 10 20 30 40 50 60 70 80 Total Recovery (% OOIP) Simandoux et al. IFT Journal (1990)

  38. 2006 Global EOR Average Costs 15 13 11 9 US $ / Barrel 7 5 3 1 Exploration & Development Acquisitions Capex Deep Water Capex Heavy Oil Capex EOR Sandrea, Oil & Gas Journal (Nov. 2007)

  39. Reasons for EOR Failures • Low Oil Prices • oil price instability • Insufficient description of Reservoir Geology • Underestimated Reservoir Heterogeneity • Inadequate understanding of EOR mechanism • Bad Candidate Selection • Unavailability of Chemicals in large quantities • Insufficient Budget (lack of commitment) • Heavy reliance on lab experiments • And too much reliance on simulation • Poor post treatment evaluation Comments in white from S.M. Farouq Ali (2007)

  40. Drive Water Water Miscible Zone Add’l Oil Recovery CO2 CO2 Oil Bank Ideal Enhanced Oil Recovery (EOR) Produced Fluids(oi, gas, water) Separation and Storage Facilities Production Well Carbon Dioxide Injection Well Water Injection Pump

  41. Real World EOR Produced Fluids(oi, gas, water) Separation and Storage Facilities Production Well Carbon Dioxide Injection Well Water Injection Pump

  42. R. Braun, E. Debons, Texaco (1989)

  43. How to Convert EOR to IRR (TIR) • Consider reservoir heterogeneity • Predicting results is difficult • The more you inject, the more you get • Single well pilots usually not successful • Detailed Evaluation is essential • EOR is not a panacea, but will play an increasingly important role in the future • 70% of current oil production from mature fields

  44. Enhanced Oil Recovery (EOR) Resultados y Tendencias en el Mundo May 21, 2008 Chuck Norman cnorman@tiorco.com TIORCO Inc.

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