November 2018

Features

Q&A: Kinder Morgan CO2 President Looks at Capture Options

Jesse Arenivas is president of CO2 for Kinder Morgan, which is the largest transporter of carbon dioxide in North America, delivering approximately 1.3 Bcf/d for use in enhanced oil recovery projects.

As such, he is responsible for overseeing the engineering, development, production and marketing operations for the CO2 source, pipeline and enhanced oil recovery assets owned by the company.

Arenivas joined Kinder Morgan in 2003 and has served in various financial, accounting, and business development roles, including vice president of Finance and Accounting for the CO2 business segment. He became president of the CO2 business in 2014.

Arenivas holds a bachelor’s degree in business administration/finance from the University of Texas, Permian Basin.

 

PGJ: Where does the CO2 come from that Kinder Morgan transports, and is the majority of it used for enhanced oil recovery (EOR)? 

Arenivas: The CO2 is produced from two source fields located in Southwest Colorado: the McElmo Dome and Doe Canyon fields. Kinder Morgan CO2 Company consumes approximately 40% of the product and markets 60% to third-party customers for use in EOR projects in the Permian Basin of West Texas.

 

PGJ: What are some of the economic costs and benefits involved in using CO2?

Arenivas: The life cycle of an oil field includes three stages. The first or primary phase recovers up to 20% of the original oil in place (OOIP).  The second phase, water flood operations, recovers an incremental 20% for a total of 40%. The third phase is EOR. The use of CO2 as an injectant can recover up to an additional 20% for a total of 60% of the OOIP.

The nature of the EOR business involves heavy upfront capital expenditures for CO2 handling infrastructure and drilling operations. The economic result is the development of long-lived assets with very robust incremental investment returns. 

 

PGJ: What is the size of Kinder Morgan’s CO2 pipeline network, and what are your biggest CO2 pipelines?

Arenivas: Kinder Morgan operates over 1,200 miles of pipelines that deliver approximately 1.3 Bcf/d of CO2. The Cortez pipeline is a 30-inch line that originates in Cortez, Colo. and delivers into the CO2 hub in Denver City, Texas.  The CO2 is then distributed throughout the Permian Basin via three operated pipeline systems.

 

PGJ: Does Kinder Morgan have enough CO2 pipeline to meet demand? Are more projects anticipated?

Arenivas: The Cortez pipeline and associated pipelines have delivery capacities of 1.5 Bcf/d, which is adequate to meet current demand.

 

PGJ: Are there other regions you would like to go into?

Arenivas: We evaluate opportunities to further develop and utilize CO2 for EOR on an ongoing basis. 

 

PGJ: With government wanting more CO2 capture, is more infrastructure needed, and is that something KM is looking into? 

Arenivas: The largest economic barrier for CO2 capture is infrastructure.  Projects located near existing infrastructure have the highest probability of success.  We continuously evaluate capture technologies, industry demand and project economics to identify and assess new opportunities.

 

PGJ: In what state (liquid, gaseous, solid) does KM transport CO2, and are there safety benefits compared to transporting natural gas?

Arenivas: The CO2 is transported as a dense phase gas, between 1,200 to 2,000 psig. It has the density of a liquid, but the viscosity of a gas. 

Unlike natural gas, CO2 is not flammable. However, as with our natural gas systems, Kinder Morgan places a high priority on safety and pipeline integrity to ensure our high-pressure CO2 system is operating safely. Some of the steps we take to keep our systems safe include monitoring pipeline operating conditions 24/7 using a SCADA computer system, conducting internal inspections by passing sophisticated computerized equipment called “smart pigs” through the pipeline and by visually inspecting the pipeline right-of-way on a regular basis.

PGJ: Discuss KM’s CO2 history. How was the business unit started and how has it performed over the last five years? Also, what is current outlook?

Arenivas: In 2000, Kinder Morgan Energy Partners LP acquired Shell CO2 Co., which was renamed Kinder Morgan CO2 Company. The company’s original assets were the source fields in Southwest Colorado and associated pipeline infrastructure.  Shortly after the acquisition, Kinder Morgan entered into the EOR business through the acquisition of the SACROC Unit in Scurry County, Texas, and currently operates five EOR projects in the Permian Basin producing approximately 70,000 gross barrels of oil equivalent per day. P&GJ