On the economics of CO₂ contracts in the enhanced oil recovery industry

Figures & data

Figure 1. Location of current CO₂ EOR projects and pipeline infrastructure in the U.S.

Source: Carbon dioxide enhanced oil recovery (DOE, 2010)

Figure 2. Oil fields in Utah.

Table 1. Summary of number of contracts and total quantity from each supplier

Supplier	Freq.	Percent	Cum.	Total CO2 supplied (Bcf)	Percent	Cum.
Company A	7	6.80	6.80	549.83	12.10	12.10
Company B	4	3.88	10.68	202.18	4.45	16.54
Company C	83	80.58	91.26	3402.74	74.86	91.40
Company D	4	3.88	95.15	329.01	7.24	98.64
Company E	1	0.97	96.12	24.50	0.54	99.18
Company F	4	3.88	100	37.35	0.82	100
Total	103	100.00		4545.61	100.00

Table 2. Summary of number of contracts and total quantity from suppliers in the Permian Basin

Supplier	Freq.	Percent	Cum.	Total CO2 supplied (Bcf)	Percent	Cum.
Company A	7	7.37	7.37	549.83	12.43	12.43
Company B	4	4.21	11.58	202.18	4.57	17.00
Company C	75	78.94	90.53	3279.67	74.16	91.16
Company D	4	4.21	94.74	329.01	7.44	98.60
Company E	1	1.05	95.79	24.50	0.55	99.16
Company F	4	4.21	100.00	37.35	0.84	100
Total	95	100.00		4422.54	100

Figure 3. Oil fields in Mississippi.

Figure 4. Oil fields in Texas and New Mexico.

Figure 5. Location of the oil fields from the CO₂ sales contracts.

Table 3. Summary of contract duration, total contracted quantity and initial CO₂ price

Contract term	Obs.	Mean	Std. Dev.	Min	Max
Duration of Contract (Year)	103	7.74	6.28	0.02	24
Total Contracted Quantity (Bcf)	103	44.13	100.85	0.02	720
Initial CO2 Price ($/Mcf)	103	0.68	0.27	0.2	1.65

Table 4. Summary of different contract types in terms of duration

Contract duration	Freq.	Percent	Cum.
Short-term contract (T $\le$ 1 year)	25	24.27	24.27
Intermediate-term contract (1 year $\le$ T $\le$ 5 years)	21	20.39	44.66
Long-term contract (T $>$ 5 years)	57	55.34	100.00
Total	103	100.00

Figure 6. Different contracts by duration and indexing.

Table 5. Summary of indexes used in contracts

Index type	Freq.	Percent	Cum.
WTI	57	82.61	82.61
PPI	1	1.45	84.06
WTI & PPI	9	13.04	97.10
Natural Gas Price	2	2.90	100.00
Total	69	100.00

Table 6. Probit regression of the contract type ($\mathit{y}=1$)

	(1)
	Price-pegging Contract
Affiliation	0.175
	(0.373)
Area	−0.569
	(0.550)
Contract Duration	0.202 ${ }^{\ast \ast \ast }$
	(0.0464)
Initial Oil Price	0.0601 ${ }^{\ast }$
(Past Month)	(0.0362)
Total Contracted Quantity	0.000181
	(0.00187)
Constant	−1.658 ${ }^{\ast }$
	(0.996)
$\mathit{N}$	103
pseudo $R^2$	0.377

Standard errors in parentheses

${ }^{\ast }$ $\mathit{p}<0.10$, ${ }^{\ast \ast }$ $\mathit{p}<0.05$, ${ }^{\ast \ast \ast }$ $\mathit{p}<0.01$

Table 7. Summary of the price-pegging contracts

Variable	Obs.	Mean	Std. Dev.	Min	Max
Pegging Coefficient	46	.0189043	.0093721	.0061	.04
Std. Dev. – Past One Year	46	.2974696	.2563329	.108	1.428
Std. Dev. – Past Two Year	46	.3615478	.2413624	.1798	1.1966
Std. Dev. – Past Three Year	46	.4898609	.2226204	.3005	1.105
Net CO2 Utilization (Mcf/bbl)	39	7.336428	10.77578	.000119	45.93607
Contract Timing (year)	46	6.717391	6.094307	0	24
Contract Duration (year)	46	10.69565	5.206276	2	21
Total Contracted Quantity (Bcf)	46	122.5407	114.7132	.02	398
Daily Contracted Quantity (Mcf)	46	34,265.59	40,639.72	3.652968	191,506.8

Table 8. OLS regression of the pegging coefficient, against different initial oil prices

	(1)	(2)	(3)
	Pegging	Pegging	Pegging
	Coefficient	Coefficient	Coefficient
Affiliation	0.000252	0.000350	0.000275
	(0.00316)	(0.00314)	(0.00317)
Area	−0.0242 ${ }^{\ast \ast }$	−0.0239 ${ }^{\ast \ast }$	−0.0239 ${ }^{\ast \ast }$
	(0.00950)	(0.00943)	(0.00950)
Contract Timing	0.000145	0.000195	0.000186
	(0.000298)	(0.000304)	(0.000308)
Log Net CO ${ }_2$ Utilization	−0.000529	−0.000478	−0.000598
	(0.000690)	(0.000689)	(0.000680)
Oil Price Volatility	0.00146	0.00162	0.00184
(Past Year Annual Volatility)	(0.00186)	(0.00186)	(0.00197)
Initial Oil Price	0.00108 ${ }^{\ast \ast }$
(One Month Average)	(0.000468)
Initial Oil Price		0.00111 ${ }^{\ast \ast }$
(Two Month Average)		(0.000459)
Initial Oil Price			0.00105 ${ }^{\ast \ast }$
(Three Month Average)			(0.000457)
Constant	0.0183	0.0165	0.0182
	(0.0157)	(0.0157)	(0.0157)
$\mathit{N}$	39	39	39
adj. $R^2$	0.191	0.202	0.190

Standard errors in parentheses

${ }^{\ast }$ $\mathit{p}<0.10$, ${ }^{\ast \ast }$ $\mathit{p}<0.05$

Table 9. OLS regression of the pegging coefficient, against different annual oil price volatility

	(1)	(2)	(3)
	Pegging	Pegging	Pegging
	Coefficient	Coefficient	Coefficient
Affiliation	0.000275	0.000230	0.0000322
	(0.00317)	(0.00328)	(0.00313)
Area	−0.0239 ${ }^{\ast \ast }$	−0.0232 ${ }^{\ast \ast }$	−0.0217 ${ }^{\ast \ast }$
	(0.00950)	(0.00966)	(0.00937)
Contract Timing	0.000186	0.000107	−0.000163
	(0.000308)	(0.000339)	(0.000320)
Log Net CO2 Utilization	−0.000598	−0.000670	−0.000711
	(0.000680)	(0.000684)	(0.000667)
Initial Oil Price	0.00105 ${ }^{\ast \ast }$	0.000872 ${ }^{\ast }$	0.000473
(Three Month Average)	(0.000457)	(0.000491)	(0.000425)
Oil Price Volatility	0.00184
(Past Year Annual Volatility)	(0.00197)
Oil Price Volatility		0.000774
(Past Two Years Annual Volatility)		(0.00261)
Oil Price Volatility			−0.00289
(Past Three Years Annual Volatility)			(0.00238)
Constant	0.0182	0.0228	0.0369 ${ }^{\ast \ast }$
	(0.0157)	(0.0171)	(0.0162)
$\mathit{N}$	39	39	39
adj. $R^2$	0.190	0.170	0.204

Standard errors in parentheses

${ }^{\ast }$ $\mathit{p}<0.10$,${ }^{\ast \ast }$ $\mathit{p}<0.05$

DOE (2010). Carbon dioxide enhanced oil recovery–untapped domestic energy supply and long term carbon storage solution. Author, March 2010. Available online at https://www.netl.doe.gov/file

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