Team Effort Rids Gas of CO2

By Jack Money, The Oklahoman, Oklahoma City

Jul. 1–SandRidge Energy and Occidental Petroleum Corp. announced a $1.1 billion deal Monday to build a plant to process carbon dioxide-rich natural gas from SandRidge wells in the West Texas Overthrust belt.

Officials said the plant will enable SandRidge to develop 1.7 trillion cubic feet of additional natural gas reserves.

The Century Plant, which will be built by Occidental in Pecos County, Texas, will expand SandRidge’s carbon dioxide-rich natural gas treatment capabilities to 1 billion cubic feet per day by the end of 2011, officials said.

Today, about 200 million cubic feet of CO2-rich natural gas is treated from SandRidge wells, mostly by SandRidge plants. The plants produce 50 million cubic feet a day of market-ready natural gas for the company, officials said.

Deal called ‘win-win’ for both Once the Century Plant opens, the company will produce about 350 million cubic feet per day of market-ready gas from its Overthrust wells.

“It allows us to accelerate our production and to produce reserves that would have been difficult to do without having a place to send the gas,” said Dirk Van Doren, chief financial officer.

Both he and Tom L. Ward, SandRidge’s chairman and chief executive, said the agreement validates SandRidge’s reserves estimates and provides an environmentally-responsible way to deal with the carbon dioxide the plants strip from the natural gas.

“This is a win-win for everyone,” Van Doren said Monday. “We get methane, they (Occidental) get CO2, which they in turn will use to produce oil for the U.S., and it doesn’t get released into the air, and that is good for the environment.”

CO2 won’t be released into air Occidental will operate the Century Plant and treat the gas under a 30-year agreement. SandRidge and its royalty owners will own the market-ready gas, while Occidental will retain the CO2 for use in oil recovery operations in west Texas, officials said.

“I think that will be very significant for SandRidge,” said Bruce Bell, chairman-emeritus of the Mid-Continent Oil and Gas Association of Oklahoma. “Anytime you have an opportunity to process gas with CO2 in it, that’s good, because gas with CO2 in it is not as marketable.”

Occidental officials, meanwhile, said the CO2 will enable them to expand enhanced oil recovery operations, which already produce nearly 200,000 barrels of oil equivalent per day from west Texas’ Permian Basin. The deal will boost Occidental’s proved oil reserves in the field by 500 million barrels, said Stephen Chazen, Oxy’s chief financial officer told Reuters.

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