US embassy cable - 05CALGARY622

UNCLAS SECTION 01 OF 02 CALGARY 000622 
 
SIPDIS 
 
STATE FOR WHA/CAN, EB/ESC/ISC, EB/EPPD 
 
USDOE FOR IA (DEVITO, PUMPHREY, DEUTSCH) 
 
E.O. 12958: N/A 
TAGS: ENRG, EPET, ETRD, PGOV, CA, Petrolium 
SUBJECT: WEYBURN C02 PROJECT A WIN/WIN FOR PRODUCERS AND 
ENVIRONMENTALISTS 
 
1. Summary:  During an October visit to Regina, CG and Econ 
Assistant toured the Weyburn C02 Monitoring and Storage Project 
in southern Saskatchewan.  The technology, introduced in 2000 by 
Calgary-based EnCana and the Petroleum Technology Research 
Centre in Regina, injects C02 into depleted oil reservoirs to 
revive and increase production.  The technology, which reduces 
greenhouse gas emissions in the process, is gaining attention as 
demonstrated by Apache Canada, which is preparing to open a 
similar plant in southern Saskatchewan later this month.  The 
project represents a win/win for both producers and 
environmentalists.  Of the 35 billion barrels of oil deposits in 
Saskatchewan, only about 15% is recoverable through conventional 
means.  Enhanced oil recovery through C02 injection should 
increase this rate substantially.  Environmentally, enough C02 
will be stored to offset emissions produced by one third of all 
the vehicles in Saskatchewan and all the homes in Regina.  End 
summary. 
 
2. CG and Econ Assistant toured the Weyburn C02 Monitoring and 
Storage Project on October 12 as part of an official visit to 
the province of Saskatchewan.  The C$1.1 billion project, more 
commonly known as the carbon sequestration project, is located 
approximately 75 miles south of Regina.  Using technology that 
involves injecting and storing carbon dioxide (C02) underground 
into depleted oil and gas reservoirs (more than 50 years old) in 
order to revive production, the project was first launched in 
2000 by the Petroleum Technology Research Centre (PTRC) in 
Regina, and Calgary-based EnCana Corporation, North America's 
largest independent natural gas producer and gas storage 
operator.  While EnCana owns 62% of the project, it is also 
funded by fifteen sponsors including Natural Resources Canada, 
the U.S. Department of Energy, Alberta Energy Research, the 
European Commission and ten industrial sponsors in Canada, the 
U.S. and Japan and has the support of the International Energy 
Agency (IEA) Greenhouse Gas R&D. 
 
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Weyburn Field Suited to C02 Flooding 
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3. Dave Craigen, Maintenance Coordinator for the EnCana Oil and 
Gas Partnership, provided a briefing of the Weyburn Unit, which 
he noted is located on a 180-square kilometer (70 square mile) 
oil field discovered in 1954, and part of the large Williston 
sedimentary basin, which straddles Canada and the U.S.  Craigen 
said Phase 1A of the 20-year, C02 enhanced oil recovery (EOR) 
scheme began in September 2000 and noted that the Weyburn field, 
which contains approximately 1.4 billion barrels of oil, is an 
ideal candidate for C02 flooding for a variety of reasons, among 
them being the fact that the reservoir is continuous and the 
geological sequences promote gravity segregation.  In addition, 
the Weyburn crude swells with the addition of C02 and has a 
large viscosity reduction factor, and reduced spacing created by 
the existence of horizontal wells will make the C02 process 
efficient. 
 
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One Plant's By-Product is Another Plant's Fuel - North Dakota 
Serves EnCana 
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4. Craigen explained that the project receives its C02 supply 
from a coal gasification plant in North Dakota.  In 1997, EnCana 
and its partners signed a 20-year carbon dioxide supply 
agreement with Dakota Gasification Company (DGC) to acquire 
approximately 105 million cubic feet of C02 per day.  DGC is a 
wholly owned subsidiary of Basin Electric and Power Co-Operative 
of Bismarck, North Dakota and owns and operates the Great Plains 
Synfuels Plant located in Beulah, North Dakota.  That plant 
produces 160 million cubic feet of natural gas from coal 
gasification, of which C02 is a byproduct.  The C02, 
approximately 95% pure, is transported in dense phase from 
Beulah to Weyburn via a 323-kilometer pipeline, owned and 
operated by DGC.  The 105 million cubic feet of the 240 million 
cubic feet of C02 available daily, which was previously vented 
into the atmosphere, is now injected into the Weyburn reservoir. 
 A total of approximately 20 million tonnes of C02 will be 
injected into the reservoir over the 20-year life of the 
project.  Craigen stated that the cost to acquire the 105 
million cubic feet of C02 from DGC is approximately $30 million 
per year.  He expects C02 volumes/injections to increase by some 
30 million cubic feet to 130 million cubic feet per day in 2006. 
 
5. By improving overall recovery of oil in the area from 30% 
achieved with conventional water flood or water injection since 
production at the Weyburn field began in the mid-1950's, to some 
46% with a C02 flood, an incremental 130 million barrels of oil 
will be produced over the life of the project.  Craigen stated 
that, since the first C02 injection in 2000, production in Phase 
1A had increased by 5000 barrels of oil per day compared to the 
baseline waterflood projection.  It is anticipated production 
will reach 30,000 barrels of oil per day by 2008 compared to 
10,000 barrels of oil per day if the C02 flood had not 
proceeded.  Craigen, who said tests show that the C02 will 
remain safely underground for thousands of years, said the 
application of C02 storage technology would have the same effect 
as removing some three million cars from the road - or eliminate 
between one third and one half of global emissions from the 
atmosphere over the next 100 years.  Saskatchewan Premier 
Calvert has stated that, on an annual basis, the project traps 
the amount of C02 produced by one third of all the vehicles in 
Saskatchewan. 
 
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Apache Canada C02 Project "Taps Into" DGC Supplies 
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6. Craigen noted that Apache Canada (based in Calgary) plans to 
officially open in October its own C02 project at Midale, also 
located in southern Saskatchewan.  Apache's project, which will 
be built in phases from 2005 to 2010 at a cost of some C$95 
million, will be Canada's second largest C02 project.  Craigen 
noted that Apache will tap into the same DGC pipeline currently 
serving the Weyburn facility, and would average 25-26 million 
cubic feet per day of C02.  Craigen did not necessarily 
characterize Apache's facility as competition, given that it 
will be a smaller plant and there appears to be plenty of C02 
for both projects.  (The Midale field was discovered by Shell 
Canada in 1953 and originally contained 515 million barrels of 
oil in place.  Up to the end of 2004, about 130 million barrels 
had been recovered, both through primary production and 
waterflood.  The planned C02 flood will still leave some 60% of 
the original oil in the ground, but technology improvements in 
the coming decades are expected to reduce that number.  Over the 
40-year life of the Midale project, the volume of emissions that 
would have gone into the atmosphere will be reduced by 8.75 
million tonnes.)  The Apache project is expected to enable 
recovery of an additional 45 million barrels of oil from the 
Midale field and 8.75 million tonnes of C02 stored, which 
represents on a daily basis enough C02 sequestration to offset 
all the emissions from all of the houses in Regina that same day. 
 
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Comment 
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7. The Weyburn project appears to be a win/win for both 
producers and environmentalists - if the technology proves to be 
efficient over the long run.  While Craigen, who stated that the 
technology would result in the same effect as removing millions 
of cars from the road, said it is too soon to tell whether 
injecting C02 into the ground will be as cost effective as 
backers of the project would like it to be.  Craigen emphasized 
that production continues to be closely monitored.  An important 
issue that is certain to be addressed and negotiated in the 
future is who will be awarded emissions credits for their good 
deeds - DGC for transporting C02 away from their plant, or 
EnCana for injecting it into the ground "for thousands of 
years". 
 
 
 
AHMED