Oil producer Denbury plans CO2 storage hub in southern Alabama

Texas oil producer Denbury said it plans to develop a large carbon dioxide storage hub in southern Alabama that would contribute to enhanced oil recovery production and emissions reduction efforts.

The Denbury project with Natural Resource Partners is to evaluate and develop the permanent sequestration site on 75,000 acres near Mobile, Alabama. Denbury said it estimates the potential hub's total CO2 storage potential to be more than 300 million metric tons.

Denbury said it could expand its existing Gulf Coast CO2 pipeline network from Mississippi to connect to the site.

Denbury, which specializes in enhanced oil recovery techniques -- pumping carbon dioxide into wells to boost their production -- focuses on more mature oil fields in southeastern Texas, Louisiana and Mississippi, as well as the Rocky Mountain region.

Denbury said the project could be completed by 2026.

Opportunity in energy transition

Of late, Denbury has seized on the ongoing energy transition to tout itself as an oil producer that can help lower emissions. The Alabama CO2 project would fit with Denbury's tentative plans to achieve "carbon negative" operations on the US Gulf Coast by the end of the decade.

"The combination of this site's significant expected CO2 storage capacity and its proximity to deepwater ports should enhance the region's appeal for newbuild industrial development with carbon capture," Denbury CEO Chris Kendall said in a statement.

National Resources Partners, which historically focuses more on coal and soda ash, is planning to invest much more in CO2 storage as well.

"We expect this 75,000-acre project to be the first of what will potentially be numerous carbon sequestration projects conducted on the approximately 3.5 million acres where we own the rights to sequester CO2 across the United States," NRP President Craig Nunez said.

Enhanced CO2 focus

Denbury said it transports, processes, injects and monitors more than 70 million metric tons of CO2 every year, arguing that the company is "uniquely positioned to lead in the emerging CCUS industry."

Denbury filed for bankruptcy in July 2020 amid the early onslaught of the pandemic and, when it emerged, changed its name from Denbury Resources to Denbury Inc.

More than a year prior, Denbury had planned to acquire Houston shale driller Penn Virginia in a deal worth $1.7 billion, including debt, but the deal was called off in March 2019 because of financial struggles.

Since coming out of bankruptcy, Denbury has increasingly focused on CO2 projects.

In November, Denbury said it is planning a Texas CO2 hub southwest of Houston with more than 400 million tons of potential capacity. That project could come online as early as 2025.

Denbury also has new deals with Mitsubishi and Mitsui for potential CO2 projects connected to their plants along the US Gulf Coast.