The Stunning Key That Could Unlock 160 Billion Barrels of Oil Trapped Underneath America

NRG Energy is investing a billion dollars in a carbon capture and storage project that will spur a 30-fold jump in oil production from a dying oil field.

Jul 20, 2014 at 3:00PM
 Rusty Oil Well

Photo credit: Flickr/Melissa 

It is estimated that there are 160 billion barrels of oil still trapped underneath this country in what are considered depleted oil fields. That's a tremendous amount of oil given that America uses about seven billion barrels of it each year. In fact, if we could only find the key to unlock this trapped oil we could extend fleeting our reserves by more than 22 years.

That's why it probably comes as a surprise to learn that we've already found the key we need to unlock this oil. That key is none other than discarded carbon dioxide, with the primary source of this practically prized greenhouse gas coming from none other than coal emissions. It's a stunning turn of events to say the least.

Cleaner coal and more oil, too
America has actually been flooding depleting oil fields with carbon dioxide since the 1970's. Most of the carbon dioxide used has come from naturally occurring sources. The problem is that carbon is costly as getting it from those sources to spent oil fields requires pipelines. But thanks to technological advances in carbon capture and storage we're beginning to see new investments that are directed to cleaning coal and using the captured carbon to produce more oil. It's this combination that has the potential to breathe new life into some of America's long dormant oil fields. 

A positive forward was taken when NRG Energy (NYSE:NRG) announced earlier this week that it began construction on a billion dollar retrofit to its East Texas coal-fired power plant. While the project is being underwritten in part by $167 million from the Department of Energy, NRG Energy sees it being self-liquidating as the carbon dioxide that is captured will be used to yield a 30-fold increase in oil production from an aging oil field NRG Energy also co-owns.

The reason production will surge is because carbon dioxide, which is injected into an oil reservoir, mixes with oil droplets that are left behind after initial production and expands the oil so that it can move through producing wells. The following slide shows how the oil recovery process works.

Denbury Eor Process

Source: Denbury Resources Investor Presentation (link opens a PDF

NRG Energy expects this process will improve the production at its West Ranch oilfield from a meager 500 barrels of oil per day to 15,000 barrels of oil per day at its peak. Put another way, at current oil prices that field will go from producing about $18.2 million worth of oil each year to well over half a billion dollars of black gold per year.

Meanwhile, the project will also substantially clean up the carbon emissions of NRG Energy's coal plant. About half of the flue gas that would typically be emitted into the atmosphere will go into the carbon capture facility, which will remove all of the sulfur as well as capture about 90% of the carbon. Because of that it will remove the equivalent of the exhaust of 336,000 cars each year.

Small steps
NRG Energy isn't the only company seeking to use captured carbon to clean up coal and fuel oil production. Denbury Resources (NYSE:DNR) is building its business completely around the enhanced oil recovery process. So far the company has produced over a hundred million barrels of oil through carbon flooding. However, it is investing to build out the necessary carbon dioxide transportation infrastructure to revive even more nearly dead oil fields.

While most of Denbury Resources investments have been to take naturally occurring carbon dioxide to these fields, the company is beginning to use more industrially produced and captured carbon in its Gulf Coast operations as noted on the slide below.

Denbury Gulf Coast Partners

Source: Denbury Resources Investor Presentation (link opens a PDF

As that slide points out, Denbury Resources currently has three projects either currently producing or pending start-up. The most important is the upcoming Mississippi Power project from Southern Company (NYSE:SO). The $5.2 billion power plant is the first large-scale plant in America that will transform coal into a gas, capture the carbon, and then sell it to Denbury Resources for enhanced oil recovery. If successful, Southern Company's plant should supply Denbury Resources with about 115 MMcf/d of carbon dioxide. Overall it is expected that the carbon captured from Southern Company's plant will be used to boost oil output by two million barrels per year.

Investor takeaway
There is an incredible amount of oil stranded in America in what are currently thought to be depleted oil reservoirs. But by using carbon dioxide captured by coal power generation, the energy industry will could breathe new life into these oil fields and revive production. It's a stunning turn of events that can provide Americans with cheap and cleaner coal-fired electricity as well as enough oil to get our nation off of OPEC's oil. 

OPEC is absolutely terrified of this game-changer
OPEC isn't afraid of carbon capture and storage. At least not yet. That's because it has its hands fully worrying about another game-changing technology in the energy patch. You can learn all about it in an exclusive, brand-new Motley Fool report where we reveal the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock.

Matt DiLallo owns shares of Denbury Resources. The Motley Fool recommends Southern Company. The Motley Fool owns shares of Denbury Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information