Business Fundamentals Group and CWC Associates jointly prepared a workshop on “Making EOR a Reality”. The Workshop was held in London on December 2, 2003.

Workshop presenters included Roger Hite, Principal, Business Fundamentals Group, Jeff Spath, President, Data and Consulting services, Schlumberger, Mike Austell, Commercial Director, CO2 Norway, and Willem Schulte, Manager Enhanced Recover and Water Management, Shell International E&P.

The results of the workshop follow:

Making EOR a Reality December 2, 2003 The participants came from around the world – Algeria, Argentina, Croatia, Denmark, England, Hungary, Malaysia, the Netherlands, the United States and Venezuela. In spite of the diverse background there was remarkable consensus on EOR issues.

At the conclusion of the workshop, the participants were asked to give their thoughts on two important questions, listed below.

To develop their answers, a brainstorming process was used. Ideas were gathered from around the room and recorded on flip charts. All ideas were considered fair – no discussion and no criticism was allowed. Once all the ideas were gathered, they were lumped together into common themes. For both questions ix common themes emerged. Once the themes were agreed to, each participant was asked to vote on the top two factors (or themes) which he felt gave the best answer to the question. In this way, the sense of the participants as a group was quickly gauged.

In answer to the first question - “What limits the application of EOR today?” - we gathered the following ideas:

• Lack of long term strategic thinking
• Huge initial investment with long payback period
• A mindset that does not include EOR
• Resources and technology to make the projects work
• Thinking too short term
• Top management attitude and support
• A successful track record - Is EOR good enough?
• The image of EOR

• Competition from new exploration
• Lack of long term risk sharing
• Data quality and data management
• R/P is still good enough for conventional oil
• Economics and the price of oil
• Short term economic planning
• Disaster mentality - we remember the low oil prices of 1998, rather than the higher ones of 1999-2003
• Lack of EOR culture and long term strategy

• Shortage of EOR champions
• Emphasis on cost reduction to the exclusion of projects which add reserves / revenue
• Small profits without tax holiday
• High price of gas
• Oil price volatility
• Small benefit in terms of reserves and profits
• Price of CO2
• Competition with other projects

• Current success of new technology (IOR) to increase reserves
• Lack of existing (CO2) infrastructure
• Large projects present an entry barrier
• Up-front investment
• Lack of government support / strategic view
• Acceptance of EOR as a best practice
• Governments have short term views
• Availability of adequate human resources

After collecting everyone’s ideas, we collectively lumped them into six common themes:

1. Economics
   • Oil prices
   • High cost of CO2
   • Large initial investment
   • Large projects present an entry barrier
2. Lack of Strategic Planning
• Long term strategic planning
3. Mentality or Culture
• A mindset that does not include EOR
• Top management attitude and support
• Lack of government support and strategic view
• Concern about the return of low oil prices
• Acceptance of EOR as a best practice
4. Competitive Alternatives
• Continued exploration
• Success of IOR
5. Uncertainty / Risk
• Oil price volatility
• Shortage of successful examples
6. Focus on Cost Reduction
• Focus on cost reduction to the exclusion of projects which add reserves / revenue

The results of the voting are shown on the graph below:

The group was somewhat divided on the key factors, but economics and strategic planning came out at the top. Dealing with cultural attitudes and competing with attractive alternatives was also recognized as important.

The second question was, “What should be done to improve the outlook for EOR applications?” In answer to this question, we gathered the following ideas:

• Joint technology development
• Change tax laws
• Education and training
• Each country should develop a master plan for its natural resources, including EOR
• Develop a long term strategic view shared by government and industry
• Develop partnerships between government and industry
• Provide tax incentives for EOR
• Educate technical staff

• Better relations between operators and service companies
• Focus technology development on low investment options - optimize capital and oil recovery
• Place a value on sequestered CO2
• Change government mindset (Governments own the majority of oil reserves)
• Share the risk
• Develop innovative business schemes / models
• We need more successful projects
• Improve reservoir surveillance

• Develop asset management plans including EOR

As with the first question, we collectively lumped these factors into six common themes:

1. Create Tax Incentives
• Provide incentives for EOR
2. Strategic Thinking
• Develop long term strategic views shared by government and industry
• Develop innovative business schemes / models
• Each country should have a master plan for its natural resources which includes EOR
3. Develop Effective Partnerships
• Between government and industry
• Improved relations between operators and service companies
• Joint technology development
4. Provide Education and Training
• Technical staff
• Change government mindset
5. Value Sequestered CO2
• Place a value on sequestered CO2
6. More Successful Projects
• Document successful projects / pilots
• Improved surveillance

The results of the voting are shown on the graph below:

Here the group was more focused. To improve economics (identified in answer to the first question) the group felt that tax incentives (including a CO2 credit) and partnerships to share risk would help. Strategic thinking was again identified as an important factor, along with education and training.

In summary, the Workshop was very successful in developing views shared around the world on advancing EOR. Two major initiatives emerged:

A. Strategic Planning
Country by country, asset by asset, each field needs a long term strategic plan, including EOR, which maximizes its value. Value can be measured in both reserves and profits. The plan should be shared both by the host country and by industry.

B. Improving Economics
To compete effectively, the economic outlook for EOR has to compare favorably with alternatives. Among those are continued exploration and advancing technological improvements to improve recovery from ongoing projects. Effective partnerships between government and industry can help. This might take the form of joint technology development programs to spread costs and risks. More cooperation between service companies and operators will also help.

© Business Fundamentals Group - 2003