Elk Enters Agreement for CO2 Supply for Key Grieve Enhanced Oil Recovery Project
- Elk has entered an agreement with ExxonMobil for the supply of Carbon Dioxide (CO2).
- Agreement marks the transition into the development planning stage of its key asset.
- Expert simulation studies indicate potential for crude recovery in excess of 20 million barrels of oil.
- Injection of CO2 is planned to commence in the first half of 2012.
- Independent experts engaged to certify and classify the Grieve crude resource.
- The CO2 supply agreement contains several conditions precedent including the securing of funding for the development of the project; Elk is pursuing a range of options to fund the project and is in discussions with number of parties that have, at this stage, indicated strong interest to participate in development of the project.
Elk Petroleum Ltd (ASX Code: ELK) has made a major advancement towards production at its key United States asset, the Grieve oil field, by entering an agreement with ExxonMobil for the supply of Carbon Dioxide (CO2). The contracted volume is for supply of 150 billion cubic feet (Bcf) of CO2 over 10 years. CO2 will be used to enhance oil recovery from the Grieve oil field.
The enhanced oil recovery (EOR) project has the potential to recover in excess of 20 million barrels (MMBbl) of oil from the Muddy reservoir at the Grieve oil field. It is planned to commence injecting high pressure CO2 into Muddy reservoir in the first half of 2012 after completion of required field development work.
Elk Managing Director Bob Cook said the agreement marks a significant milestone for the Company which has been pursuing several different EOR development options for the field.
"This supply agreement is expected to lead to a significant upgrade of our oil reserve base and, importantly, underpins our future production outlook and the project's commerciality," Mr Cook said.
"Development of an enhanced recovery project and increased production at this major oil field has been Elk's aim for some time and this agreement is expected to lead to a significant change for the Company, both operationally and from a cash flow perspective," he said.
"The new CO2 supply agreement with ExxonMobiltogether with more favourable market conditions has materially improved the commercial viability of the project and the ability to attract joint venture parties and to raise the required financing."
"Gaining this CO2 supply commitment from ExxonMobil, which is subject to the securing of project funding, will allow us to move forward with our Grieve project and begin unlocking value for shareholders."
ExxonMobil will provide a secure supply of CO2 from the first half of 2012 conditional upon Elk arranging financing and completing required preliminary development works. The CO2 will be piped to the Grieve field and injected into seven CO2 wells in the field: two new wells and five re-entries of existing wells. The initial development expenditure is currently estimated at about US$65 million.
Ryder Scott has been engaged to re-visit their 2008 reserve-resource certification and classification for a CO2 flood of the Grieve Muddy reservoir. Their reassessment will take into consideration the completed simulation studies, the new secure CO2 supply contract and other commercial CO2 EOR projects in Wyoming.
Elk is currently pursuing a number of options to either independently finance and/or joint venture the project; the Company has appointed advisers to assist it in these processes. More information on these matters will be released once there are material developments.
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