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The Investment for 2013: Solar Oil Extraction

Two words can change everything when they are combined: solar and crude.

We’re just getting started with this in earnest, but what we’re talking about is solar technology that can extract heavy crude from played-out wells cheaper and more effectively than natural gas processes.

First, let’s look at the process, and then we’ll get to the investment opportunities.

As much as two-thirds of every well’s crude oil is left behind, unproduced. These are “aging” or “played-out” wells. More to the point: most current oil production actually comes from these “mature” pools. Enhanced oil recovery (EOR) is the process of extracting these significant leftovers.

Most commonly, EOR is conducted through three separate process: natural gas EOR, carbon dioxide (CO2) EOR and chemical EOR—to a lesser extent nitrogen and oxygen are used.

Carbon dioxide (CO2) injection is one of the most common methods of EOR, and there are over 100 CO2EOR projects currently in process in the US—the bulk of them in western Texas. One problem with this method is that there are often challenges to finding suitable CO2 volumes. This can get expensive, especially if CO2 has to be piped to the location. If there are no nearby supplies, a pipeline has to be built to pump it in.

While nitrogen and oxygen can also be used and can be produced on site, they also require the use of huge compressors to inject the gases into the well—so this is only feasible if we’re talking about a massive reservoir. Likewise, chemical flooding, which is combined with water flooding, is costly depending on water sources and the type of chemicals used. So we’re talking about a cost of anywhere between $2-$40 per barrel. So, it’s economically feasible—sometimes. 

Natural gas EOR is increasingly attractive because of low gas prices and high availability. Natural gas is used to boil water into pressurized steam to flood the well and make the oil more fluid for pumping. But still, this requires diverting natural gas that could be used elsewhere.

Enter solar. The production of this leftover oil and natural gas ultimately requires ENERGY to lift the fluids to the surface. EOR was already a $3.1 billion market way back in 2005. By 2015, analysts think the market will be worth $1.3 TRILLION. Those figures are set to look even nicer as solar makes major gains in the EOR market.

How does it work? That’s easy. Solar technology uses the heat from the sun to coax heavy crude to the surface.

Recent studies show that solar EOR may be better than natural gas EOR. Specifically, solar EOR can produce 16% more oil from a played-out well than natural gas processes—and there is no fuel cost. So the process works better and is more economically viable.
It’s an idea that is gaining ground with—and investment from—big oil companies like Shell. And the US and Middle East are the two current venues of choice for this EOR method.

Here’s who you need to look at:

GlassPoint Solar Inc.

• This month, Royal Dutch Shell Plc. (RDSA), RockPort Capital and a few others invested a total of $26 million in this California-based upstart. The investment will spur the company’s expansion in the Middle East.

• GlassPoint is showcasing its Enclosed Trough Concentrating Solar Power (CSP) enhanced oil recovery process, which uses solar to tap into played-out wells

• GlassPoint already has a 300 kilowatt solar EOR project in Kern County, California, and another project close to completion in an oil field south of Oman.

• It is now seeking to expand to Kuwait and Bahrain where its technology will reduce oil production costs. (The Middle East is excited because this means it can export that natural gas instead)

• GlassPoint is the clear driver of large-scale solar EOR

BrightSource Energy (BSE)

• BSE has taken the technology to new heights and taps into aging wells for Chevron (NYSE:CVX) in the Coalinga oil field.

• BSE has spent $67.3 million on this project, which began in earnest last year.

So we’re talking about a new (and old) option for EOR, which is already set to become a trillion-dollar market in the next few years. We’re talking about a proven technological process that can access billions of barrels of oil from played-out wells around the world. And it’s cheaper and more effective. It’s a win for investors, and a win for the marriage of fossil fuels and renewable energy.

By. Oilprice.com Analysts

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