US independent Denbury Resources announced Thursday a slight increase in its 2022 capital expenditures for oil and natural gas development from $290 million to $320 million, up from $252 million in 2021.
At the midpoint of that range, $115 million will be dedicated to the Cedar Creak Anticline (CCA) enhanced oil recovery (EOR) development.
About $190 million of this increased budget will also go toward other tertiary and non-tertiary oil-focused projects, capitalised internal costs, plus carbon dioxide sources and pipelines, compared to $129 million last year.
Denbury also anticipates 2022 expenditures of at least $50 million in connection to its strategic carbon capture, utilisation, and storage (CCUS) initiatives.
“Our 2022 capital programme is designed to invest in our current operations at a sustaining level for the first time in several years, to continue the development of our cornerstone CCA EOR project, and to make strategic investments that further advance our leadership in CCUS,” said Chris Kendall, Denbury’s president and chief executive.
“Based on our current oil price expectations, we anticipate accomplishing these three objectives while generating significant free cash flow, which will further strengthen our company for transformational growth in CCUS.”
In 2021, Denbury completed 105 miles of carbon dioxide pipeline for the CCA EOR project.
New expenditures on the project will go towards the construction of field carbon dioxide recycle facilities and infrastructure, capitalised phase 1 carbon dioxide costs, and the implementation of a pilot project.
Carbon dioxide injected during Phase 1 will be treated as a capital expense, but as tertiary production begins, likely in the second half of 2023, costs will be treated as a lease operating expense.
The CCUS expenditures will go toward acquiring, testing and Class VI permitting of several sequestration sites.
Carbon solutions business
Denbury Carbon Solutions, the company’s CCUS business, also has its eyes on new deals to beef up its capabilities.
These 2022 goals include reaching agreements to transport and store carbon dioxide emissions totaling more than 10 million tonnes per year; securing carbon dioxide sequestration sites with a total storage potential of at least 1.2 billion tonnes; and progressing pre-development activities on several potential sequestration sites, with Class VI permitting processes beginning this year.
“In our existing Gulf Coast enhanced oil recovery business, we can inject upwards of 10 million tons of captured industrial CO2 per year, under existing permits and regulations, making us the only CCUS company that can provide an integrated CO2 solution and certainty of takeaway today,” Kendall claimed.
Several sequestration agreements have already been signed in 2022, including for a site east of Donaldsonville, Louisiana, with an estimated capacity of more than 150 million tonnes of carbon dioxide and first injection targeted for 2025.
Denbury previously announced it had secured sequestration rights from Natural Resource Partners for a site near Mobile, Alabama, with over 300 million tonnes of capacity and first injection targeted for 2026.
The company also announced two new transportation, utilisation and storage agreements in Louisiana and Wyoming, with cumulative agreements currently over 5 million tonnes of carbon dioxide per year.
In addition, Denbury is entering into a strategic alliance with clean fuels innovator Infinium to develop a low-carbon fuels project in Brazoria County, Texas, to replace traditional jet fuel and diesel. The facility plans to utilise up to 1.5 million tonnes of carbon dioxide per year.