Enhanced Hydrocarbon Recovery Economic Analysis Presented to: West Coast Regional Partnership for Carbon Sequestration Sacramento, CA Presented by: Scott H. Stevens Advanced Resources International, Inc. (ARI) Arlington, VA (703) – September 30, 2003 EORCSEGR ECBM

Advanced Resources International Commercial E & P Consulting Coalbed Methane EOR Gas Storage Introduction to Advanced Resources Geologic Sequestration R&D ECBM EOR EGR Natural Analogs

Advanced Resources International Previous ARI Studies Calif Enhanced Recovery Economics Lifting the Ban on Alaskan Oil Exports – Benefits to CA oil producers (USDOE). “NEMS” Model : National EOR Production Forecasting Submodule (USDOE-EIA). Fuels Hearings : TEOR Forecast (CEC) “Buena Vista” CSEGR Economics (with LBNL) ECBM : National Screening and Potential (USDOE)

Advanced Resources International Cash Flow Economics Simple in concept, but modeling future operator behavior is an art. Capital & operating costs. Revenues from enhanced production. Taxes, royalties Carbon sequestration. Cash flow, sensitivity.

Advanced Resources International “Value Added” CO 2 Sequestration in the Petroleum Industry CO 2 -EOR: Currently performed at large scale in Permian, Rocky Mtn, Gulf Coast basins. Chevron tested first CA pilot at Buena Vista. Depleted Natural Gas Fields: Not currently performed, but large storage potential available. Probably requires emissions credits. CSEGR Potential. Deep Coal Seams: One commercial pilot underway in the U.S., second planned. Shows some potential but still early days.

Advanced Resources International Enhanced Recovery Economics Rules of Thumb CO 2 Input / Hydrocarbon Recovery generally is the most important factor (e.g., Mcf CO 2 / bbl oil). CO 2 supply therefore most important cost (or revenue stream in carbon constrained world). Capital costs less important than for conventional recovery projects, assuming good reservoir permeability (minimize injection and prod wells). Costs of post-injection monitoring unprecedented; estimated to be low (several %/year; Calif?).

Advanced Resources International California CO 2 Flood Potential EOR EGR California has region’s greatest “value added” potential. Conversion of existing thermal EOR to CO 2. New CO 2 -EOR projects. CSEGR Limited ECBM potential Organic-rich shales (Monterey Fm & equiv)

Advanced Resources International Sources: Operator data, ARI estimates Net CO2 Purchases Mcf/BO 472 Bcf 25 MtCO Mcf/BO 1,167 Bcf 62 Mt CO 2 Gross CO2 Inj 472 Bcf 25 Mt CO 2 CODissolved (Sequestered in Immobile Oil) 2 Net Purchases CO 2 Sequestration at Rangely (Estimated Ultimate) Immobile Oil Rangley Weber Sandstone Reservoir Cap Rock CO Emissions 2 Unknown Volume Estimated at <1% of net Co Purchases 2 Recycled from Production Wells 695 Bcf 37 Mt CO 2 Vented CO 2 from Production Wells Unknown Volume Estimated at <1% of net CO Purchases 2

Advanced Resources International 0 50, , , , , Enhanced Oil Recovery (barrels/day) U.S. Average Crude Oil Price $/BO CO 2 –EOR Production in the U.S. GULF COAST MID-CONTINENT ALASKA (22% CO2) ROCKY MOUNTAINS PERMIAN BASIN Oil Price

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“Early Action Credits” U.S. Landfill Concern, Ontario Utility Agree to Swap Gas-Emissions Rights In a private exchange, anticipating an international emission trading system: Ontario Power Generation bought rights to emit CO2 from Zahren Alternative Power Corp. 2.5 MMt CO 2 Equivalent $25 MM Total Deal $10/ton CO 2 Equivalent

Advanced Resources International West Coast Region California Thermal EOR Production Though in decline, California accounts for over 98% of Thermal EOR production in the USA 297,000 BOPD in 2002, down sharply from 372,000 BOPD in 2001 due to high fuel costs (natural gas). 3 fields account for >75% (Kern River, Midway-Sunset, S. Belridge) 20,000 production wells and 16,000 steam injection wells Well-characterized resource base for future CO 2 flooding.

Advanced Resources International Modified by permission from Espie, Dublin CCP Workshop, Sept 2003 BP CSEGR Project “In Salah” Gas Field, Algeria Will be first commercial CSEGR project Expecting CO 2 breakthrough in 5-10 years.

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Location of ECBM Pilots San Juan Basin, USA

Advanced Resources International Burlington Resources Allison Unit CO 2 -ECBM Pilot, San Juan Basin

Advanced Resources International Regional geology Coal reservoir properties CBM pilot performance Potential reserves and deliverability Market assessment Western Washington Enhanced CBM Potential

Advanced Resources International Conclusions:  Proven technology but not yet in West Coast.  California depleted oil fields mainly immiscible, some miscible potential.  Field demo needed.  Good potential in Calif, possible OR/WA/AZ/AK  Not commercially proven, watch BP Algeria project  Not commercially proven.  Limited West Coast deep coal potential (Western Washington) EOR CSEGR ECBM

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