CCS-EOR was a focus of energy and decarbonisation discussions a decade ago, however, in recent years momentum around the practice has declined.

The loss of popularity around the practice may be attributed to the argument that CCS-EOR empowers incremental global hydrocarbon production and keeps the world reliant on fossil fuels.

Although there has been some debate around its future, Wood Mackenzie CCUS experts believe that CCS-EOR still has a potentially meaningful role to play in the energy transition.

Drawing insight from our recent three-part report series, ‘Enhanced oil recovery with captured CO2’, we take a deeper look into CCS-EOR and the future of carbon capture technologies.

CO2-EOR and the global oil supply-demand mix

Global oil demand has proven rather inelastic with respect to price in recent decades. Until recently, CO2 EOR production has existed because the economics of producing oil with CO2 has been attractive enough, compared with other sources, in the global supply mix.

A common argument is that CO2-EOR further increases global oil production. The crude will then be transported, refined and, most critically, combusted. All this runs contrary to global efforts to shift away from fossil fuels.

In ‘Part I: Impact on global emissions and oil supply’ of our ‘Enhanced oil recovery with captured CO2’ series, Wood Mackenzie experts look at the broader picture around the purpose of capturing CO2 and its impact on fossil fuel production. Wood Mackenzie experts highlight that the world will still need 30 million barrels per day of global oil supply by 2050 in its most aggressive Net zero by 2050 scenario. Even this greatly diminished demand will require new sources of supply.

Should governments subsidise CCS-EOR less than storage (and utilisation)?

As global governments target a decarbonised economy, we focus not on whether CCS-EOR (Carbon Capture and Storage with Enhanced Oil Recovery) should be subsidised, given that each nation has different decarbonisation goals. Instead, we consider how its subsidies should compare to those for CCS-Storage and CCU (Carbon Capture and Utilisation). Wood Mackenzie experts have not encountered proposals suggesting that CCS-EOR should receive higher subsidies than CCS-Storage and CCU.

• Arguments for subsidising CCS-EOR at a lower rate than CCS-Storage and CCU (taken from ‘Part II: CCS-EOR subsidisation’ of the Enhanced oil recovery with captured CO2’ series) might include:

  Lack of need: CCS-EOR has existed for decades (at least in the US) and should be able to stand on its own without subsidy. CCS-Storage and CCU are more nascent and require a bigger boost to reach a commercial scale and move down the cost curve.

• Attributional emissions accounting favours CCS-Storage: CCS-EOR emits more because it produces oil that will be combusted, whereas dedicated storage does not produce hydrocarbons.
• Overarching efforts are needed to eliminate fossil fuels: Subsidising CCS-EOR is a subsidy for increasing the production and combustion fossil fuels. The International Energy Agency’s Net Zero by 2050 analysis requires “No new oil and gas fields approved for development” beyond 2021. The United Nations Climate Change Conference (COP28) in 2023 and other policy and government pronouncements, explicitly call for a massive reduction or even nearly full elimination of fossil fuels.

Each of these points however have counterarguments that focus on a consequential, rather than attributional, understanding of global decarbonisation, which is further detailed in the series.

CCS-EOR strategy: what is to come?

In ‘Part III: Producer commercial strategies’ of the series, Wood Mackenzie experts discuss if CCS-EOR is a viable growth and decarbonisation strategy for producers. The report states that like other decarbonisation initiatives, growing CCS-EOR to “a meaningful scale” requires some level of certainty in either future subsidisation schemes or carbon.

The future of CCS-EOR is complex. Wood Mackenzie has revealed that CCS-EOR could offer a pragmatic solution for the energy transition that could yield a lower carbon footprint than traditional oil and gas operations.
Source: Wood Mackenzie