GlassPoint Sees Solar EOR Opportunity in California
Solar enhanced oil recovery (EOR) firm GlassPoint Solar Inc. – which has successfully demonstrated its technology in Oman – is looking more carefully at southern California as a potential solar EOR market.
In 2011, GlassPoint commissioned the world’s first EOR project at Berry Petroleum’s 21Z lease in Kern County, California, but shifted its focus on deploying its technology in the Middle East due to decline in U.S. natural gas prices due to the shale boom.
However, GlassPoint is now in discussions with some operators to deploy its solar EOR technology, thanks to changes in the market and state regulations, John O’Donnell, vice president of Business Development for GlassPoint, told Rigzone in an interview.
O’Donnell sees parallels between California and Oman, where it has successfully demonstrated its solar EOR technology. Approximately 45 percent of the crude oil consumed in California is produced in state. About half of California’s oil production comes from thermal EOR. Over 200 MMBtu are used each year to produce steam for EOR operations in California, which accounts for approximately 30 percent of California’s natural gas.
While GlassPoint can’t replace 80 percent of the gas used in EOR as it can in Oman, it could replace more than 50 percent of the gas consumed in solar EOR in California under the right economic conditions. Under today’s market conditions, GlassPoint’s solar steam cost corresponds to $.50/MMBtu of natural gas. O’Donnell noted that oil producers that adopt solar EOR in California can see an internal rate of return of more than 25 percent.
So far, the economics for solar powered EOR in California haven’t been attractive, but that picture could change thanks to changes to California regulations. In 2009, then Gov. Arnold Schwarzenegger enacted comprehensive greenhouse gas laws, AB 32, that called for the carbon intensity of the state’s transport fuel to be reduced by 10 percent by the year 2020, with approximately 18 million tons of CO2/year by 2020. The governor intended for this goal to be achieved through the blending of traditional fuels with biofuels and other low-carbon fuels, or the purchase of credits from sources such as biofuels, natural gas vehicles and electric vehicles.
However, the impact of this rule was surrounded by controversy, with predictions calling for half of California’s refineries to close and gasoline prices to reach $7 and estimates that 45 percent of California motor fuel would come from Brazilian sugar cane ethanol, said O’Donnell. According to a report conducted by Boston Consulting Group (BCG) for the Western States Petroleum Association (WSPA), the price of credits could reach to as much as $1,000/ton due to the looming credit shortage.
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