Economic co-optimization of oil recovery and CO2 sequestration

Highlights: • Combining rigorous economic analysis with dynamic reservoir simulation is feasible. • Oil fields that inject CO₂ and water should reduce the CO₂ fraction over time. • Subsidies for injecting and storing CO₂ in oil fields will likely be ineffective. Drawing on techniques from both petroleum engineering and economics, we analyze how oil fields that use CO₂ injection to enhance oil recovery are likely to respond to CO₂ storage incentives by "co-optimizing" oil recovery and CO₂ sequestration. We focus specifically on predicting the CO₂-injection path that co-optimizing operators will choose, and on how sensitive this path and the cumulative oil production and CO₂ sequestration resulting from it are to variation in the oil price and CO₂ subsidy. A study by Leach et al. (2011), which to date is the only rigorous economic study of co-optimization, addresses these questions using an ad hoc reservoir model. Our study applies Leach et al.'s analysis to dynamic reservoir-simulation models of two different oil fields. We find that, even though Leach et al.'s assumptions about how a reservoir responds to CO₂ injection are quite far off the mark quantitatively, their main findings hold up remarkably well qualitatively.