Exxon Could Benefit from Emissions Work

Technology for Capturing and Storing Greenhouse Gas Puts Oil Giant in Unusual Favor with Environmentalists

By RUSSELL GOLD
While Exxon Mobil Corp. has been among the most vocal skeptics of man-made causes of climate change, the company has spent the last two decades forging an expertise in one of the key technologies to combat the problem: capturing and storing carbon-dioxide emissions.
Since the 1980s, an Exxon natural-gas processing plant in Wyoming has been doing just what many environmentalists say needs to happen on a global scale: capturing carbon dioxide and storing it underground instead of venting it into the air. Indeed, Exxon's La Barge, Wyo., facility, for years has captured more carbon dioxide -- the most abundant greenhouse gas -- than any other facility in North America.
Technology at Exxon Mobil's La Barge, Wyo., facility strips carbon dioxide from natural-gas wells and reinjects the greenhouse gas underground.

Now Exxon, at the insistence of state officials, is spending $70 million to expand by 50% the plant's capacity to capture carbon dioxide, brought to the surface along with the natural gas. The plant separates the natural gas from impurities. And the Texas oil giant is spending another $100 million to test new technology to make it easier and less expensive to strip carbon dioxide out of the natural gas.
Both investments could secure a place for Exxon in the emerging marketplace aimed at lowering emissions of greenhouse gases into the atmosphere. There is also a growing market for carbon dioxide itself, because it helps produce more fossil fuels.
Carbon dioxide is a key tool in the growing work of rejuvenating worn-out oil fields. The gas is pumped into old reservoirs and helps the remaining oil flow out.
Much of the carbon dioxide worrying environmental regulators comes from burning fossil fuels, which is why coal-fired power plants and automobiles are major emitters. But the global hunt for natural gas to heat homes and generate electricity also contributes.
About one-third of the world's natural-gas reserves are mixed with high levels of carbon dioxide, according to Exxon Mobil. That means producing more natural gas will lead to even more carbon dioxide being vented into the air. In Exxon's natural-gas fields near La Barge, about 65% of the gaseous mixture from the wells is carbon dioxide. Natural gas is only 22%.
Wyoming officials have urged Exxon for years to capture more carbon dioxide. "In a world that is very concerned about too much carbon dioxide, we are actually carbon dioxide short. We could use a lot more carbon dioxide right now," says Rob Hurless, energy adviser to Wyoming Gov. Dave Freudenthal.
Exxon's carbon-dioxide efforts have earned the company grudging respect from environmentalists.
"Certainly, Exxon isn't usually thought of as being in the forefront of environmental progress," says A. Scott Anderson, a senior policy adviser with the Environmental Defense Fund, "but the fact is they are deeply involved in carbon capture and storage technology."
Exxon has recently turned a corner in its views on global warming. The company, which once funded a think tank that argued carbon-dioxide emissions were helpful to human life, today acknowledges that burning fossil fuels is a significant source of greenhouse-gas emissions and increases the risks of climate change -- although it remains unsure about the exact role of human activity in global warming.
Exxon currently captures about four million metric tons a year of carbon dioxide at La Barge, the equivalent of tailpipe emissions from 600,000 cars. The plant's expansion, scheduled to be completed in 2010, will increase that to six million tons a year.
Exxon spokesman Len D'Eramo said the company's goal is "to safely and efficiently extract additional CO2 for sales as market conditions warrant. La Barge CO2 has been extensively utilized by producers in Colorado and Wyoming."
Outside of the Rockies, oil producers in West Texas also are using carbon dioxide to boost recovery in the Permian Basin's aging fields. A new $1.1 billion natural-gas-processing plant in West Texas scheduled for start-up in 2010 will capture about 13.5 million metric tons of carbon dioxide a year -- twice as much as the expanded La Barge facility -- according to SandRidge Energy Inc., which is developing the project with Occidental Petroleum Corp.
None of the companies would disclose the price at which carbon dioxide is sold.
More carbon dioxide for use in old oil fields could be a boon for oil production. A 2006 report to the U.S. Energy Department, by industry consultants Advanced Resources International, noted that with enough carbon dioxide 210 billion additional barrels could be recovered from worn-out U.S. oil fields -- enough oil to satisfy U.S. consumption for 29 years.
As an added bonus, the same rock formations that trapped oil for thousands of years can be used to store the carbon dioxide.
About half of the carbon dioxide that Exxon Mobil pulls from the ground at La Barge is captured and then sold. The other half is vented into the atmosphere, according to state records, one reason Wyoming officials insisted that the plant's capacity to capture carbon dioxide be expanded. After the expansion, about 75% of the carbon dioxide will be captured.
The demand for carbon dioxide for enhanced oil recovery far outstrips current supply, says Michael Moore, executive director of the North American Carbon Capture and Storage Association. Future projects to capture carbon dioxide emitted by industrial facilities or power plants could increase the supply of gas to be injected into oil reservoirs.
Plano, Texas-based oil company Denbury Resources Inc., is planning to build a large pipeline from Mississippi to Texas to transport carbon dioxide that it can inject into the historic Hastings oil field, which has been producing since 1935. The company would tap into a large natural source of carbon dioxide in Mississippi, and is negotiating with industrial plants along the pipeline route to acquire more captured gas.
In addition to its continuing expansion, Exxon is building a pilot plant in La Barge to test a new way to separate carbon dioxide from natural gas, making it more economic to capture carbon dioxide for storage.
The process, originally patented in 1985 by Exxon scientists, makes the separation simpler -- eliminating the need for expensive equipment -- and leaves the carbon dioxide as a liquid that can be easily injected underground. It is expected to be operational in late 2009.
The Exxon natural-gas wells are about 40 miles from its La Barge processing plant. The mixture of carbon dioxide, methane and other gases is produced and gathered and sent to the plant, where the methane is separated from the carbon dioxide. The carbon dioxide is then sent via pipeline hundreds of miles to injection sites in Wyoming and Colorado.
Write to Russell Gold at russell.gold@wsj.com