GlassPoint's 7 MW solar thermal EOR facility in Oman. Image: GlassPoint.

By Ángela Castillo

In fact, the limited oil resources that heavy crude-extracting countries with ample sunshine have and the long-term nature of EOR projects might prove to be a golden opportunity for CSP developers to adopt forward-looking strategies. On the one hand, it could provide the right timeframe to decrease production costs and make products more competitive and, on the other hand, it could encourage developers to focus on other CSP industrial applications to better cope with future oil-price swings.

A contrasting picture

No one could have predicted a more different situation. Back in 2012, when oil reached an all-time high at more than USD $110 a barrel, GlassPoint, a company specialized in the design and manufacturing of solar steam generators for EOR, raised USD $26 million in capital. The money came from oil-companies such as Shell Technology Ventures and investment funds RockPort Capital, Nth Power and Chrysalix Energy Venture Capital.

Later in 2014, the company closed an additional USD $53 million funding round, which included the Royal Dutch Shell and the Oman State General Reserve Fund (SGRF) as investors. In the opinion of David Sorin, vice president of EOR at Solvay, that was not a surprising move from the Sultanate, even at a time when the barrel price was falling to around USD $90 per barrel.

“Oman has very limited reserves and its current production is declining. That is the reason why they were early adopters of EOR technologies,” Sorin explains. In fact, as reported by the U.S. Energy Information Administration (EIA), EOR techniques played a key role in curbing the country’s output decline over the 2007-2012 period.

Oman’s average annual crude oil production peaked in 2000 at 970,000 barrels per day (bbl/d), dropped in 2007 to 710,000 bbl/d and hit again 919,000 bbl/d in 2012, based on EIA’s records.

EOR economics

According to the Society of Petroleum Engineers (SPE), the oil sourced through EOR techniques in Oman accounts for between 180,000 bbl/d and 200,000 bbl/d of the country’s 940,000 bbl/d annual oil production. This trend is set to continue, as Petroleum Development Oman, the national oil company, announced in 2013 that nearly 22 % of its oil production would be from EOR by 2020.

In countries like Oman and Kuwait, the extraction of their heavy-oil reserves requires the injection of steam to facilitate the flow of the viscous substance out of the ground. In the former, thermal EOR methods are used at the Mukhaizna, Amal-West and Qarn Alam fields.

At the other end of the equation, however, the costs of EOR could be around USD $10-12 per barrel, in comparison to USD $4-5 for conventional oil extraction methods, according to Salim bin Nasser Al-Aufi, undersecretary of the Ministry of Oil and Gas of Oman, as quoted by SPE.

“The incremental cost for Oman to employ EOR is much lower than for other countries. Even though the cost of production is higher, their internal demand for oil is higher as well, which would justify their need to employ such technology to extract oil,” says Steven Meyers, researcher at the University of Kassel in the Institute of Thermal Energy Engineering.

Long-term approach

Although there have not been further announcements of new solar thermal EOR projects in the MENA region since GlassPoint completed a 7 MW solar thermal EOR facility in Southern Oman in late 2012, companies involved in the sector report that there may be developments soon.

Indeed, John Van Scoter, CEO of the California-based CSP developer eSolar, told CSP Today last year that his company was exploring opportunities in Kuwait. At that time, he stated they were sourcing local partners to bid on both solar power and non-power applications in early 2015.

In this regard, Van Scoter now reveals that the projects are in the approval phase. As for the question of how falling oil prices are affecting the prospects of solar thermal EOR, he added: “These are long-term projects. Oil prices swing dramatically, up and down in short cycles, therefore producers have to take the long-term vision.”

As an example of this long-lasting endorsement, the company, whose solar thermal technology is designed for use in the ISCC, desalination, industrial process heat and EOR markets, received an additional USD $22 million in late 2013.

The funding, provided by investors including venture capital firm Oak Investment Partners, was aimed at improving heliostat design and molten salt storage in order to gain traction in the MENA region.

Cost reduction

Tough times could also provide the perfect excuse to improve technologies and enhance cost-effectiveness. According to Van Scoter, the newest version of eSolar’s heliostat, the SCS5, will reduce costs by around 70 % in comparison to their first version. The company is planning to launch improved heliostat designs based on their SCS5 in 2016 and 2018, which would lead to considerable cost reduction figures, as stated by Van Scoter.

In similar fashion, GlassPoint says in their website that they are able to reach a Levelized Cost of Energy (LCOE) of less than USD $5 per MMBtu (million British thermal units). The company claims that this figure compares favourably to that of the other solar thermal technologies that produce steam at costs between USD $10 to $12 per MMBtu.

Whereas eSolar makes use of tower technology and molten salt thermal energy storage in its proposed solution for solar thermal EOR, GlassPoint employs troughs enclosed in a glasshouse structure.

Diversification

At a time when upstream projects seem to be at a standstill, a sensible approach for companies like eSolar would be to focus on other applications. After all, one of the things that these capital investments underscore is the fact that CSP is still very much valued for industrial applications in general.

“Thermal energy accounts for nearly half of the world’s final energy consumption, with half of that demanded by industry and it is a market largely untapped. It is a low-hanging fruit often overlooked,” enthuses Meyers.

Besides, there are the obvious advantages associated to the predictability of solar prices as opposed to the volatile nature of fossil fuels. “As a risk minimizing energy technology, solar is much better than oil and gas. It is a consistently priced energy source and it is independent to the threats of overproduction and political instability,” Meyers states.

Unsurprisingly, Van Scoter adds: “Our approach to this matter [falling oil prices] is to be nimble, quick and adaptive. If, for instance, the EOR market was to go through a slightly declining time, we would just focus on other markets such as desalination, ISCC and agricultural. It is the same technology and the same principles, so you just have to adapt.”

Although it is nearly impossible to predict future oil prices, Oman’s projected EOR-based crude extraction is revealing of a fact with greater implications for global oil producers: every barrel sold at a profit is more valuable than a barrel that will never be sold.

As a result, CSP developers have two alternative avenues: improving technologies to become more cost-competitive and, in the process, focusing on other industrial applications for thermal energy production. In the end, nevertheless, it may prove to be a parallel route rather than an alternative one.