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California's largest solar project to be used for EOR

GlassPoint Solar and oil producer Aera Energy are building an 850-MWsolar thermal plant to supply steam for enhanced oil recovery at the 80,000b/d Belridge Field in California, GlassPoint said.

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"Solar powered oil production technologies -- solar steam generation andsolar electric power generation -- have the potential to contribute toCalifornia's economy significantly while reducing costs and risks associatedwith meeting the state's climate goals," John O'Donnell, GlassPoint's vicepresident of business development, said in an email Friday.

Dubbed the Belridge Solar project, the facility will use mirrors to focussolar energy on pipes containing water produced along with oil to generate 12million barrels of steam/yr that will be reinjected for EOR at the oilfieldlocated 45 miles northwest of Bakersfield. The plant will also include a26.5-MW solar photovoltaic array to generate power that will be used foroilfield operations.

Aera Energy, jointly owned by Shell and ExxonMobil, accounts for almost25% of California's 510,000 b/d of oil production. The Belridge Solarproject will be the state's largest in terms of peak energy output whencompleted in 2020, pending financing and permitting.

The Belridge field began steam injection for EOR in the 1960s, whichaccording to Aera, increased production tenfold. However, steam injection isenergy intensive and expensive to maintain, as it typically relies on largevolumes of gas, which is burned to generate the steam. The oil field currentlyconsumes 13,343 Mcf/d of gas for EOR.

Gas prices at Pacific Gas & Electric's Topock price point, nearBakersfield, were $2.44/MMBtu on Friday and the Southern California Gas Borderwas at $3/MMBtu, according to S&P Global Platts. GlassPoint declined todiscuss the project's costs, with O'Donnell simply saying Belridge Solar "willdeliver steam and electricity at market-competitive prices."

THE PROJECT REDUCES EMISSIONS AND COSTS

The switch to solar power is estimated by the companies to reduce CO2emissions by 376,000 tons/yr. The state emitted just over 440 million tons ofCO2 in 2015, according to the California Air Resources Board. Emissions fromoil and gas extraction -- about 20 million tons in 2015 -- represent 22% of2015 industrial sector emissions. Belridge Solar will cut California's carbonemissions from oil and gas production by around 2%.

California's cap-and-trade program and low-carbon fuels standard helpmake the economic case for the project. Using solar power instead of burninggas for EOR provides Aera an opportunity to reduce the number of GHG emissionallowances it needs to purchase.

Approximately 14% of the state's gas consumption is used for oilproduction, according to Timothy O'Connor, director of the EnvironmentalDefense Fund's California oil and gas program. "There are a number ofopportunities to reduce pollution across California and this is one of thebest examples of the types of projects that can be driven by the cap and tradeand LCFS programs," he said in a Friday phone call. "Aera partnered with GlassPoint on this project in part due toCalifornia's Cap and Trade and Low Carbon Fuel Standard (LCFS) programs, whichcreate market-based incentives for companies to reduce greenhouse gasemissions," O'Donnell said.

The cap and trade program prices carbon at $15/ton and LCFS emissionsreduction credits are currently at $100/ton.

"This project shows how market-friendly climate policies likeCalifornia's LCFS can effectively reduce greenhouse gas emissions," O'Donnellsaid. "We hope to plan and execute more projects like Belridge Solar elsewherein California and any other jurisdiction with similarly supportive climatepolicy."

Getting Aera Energy as a customer is a strong "seal of approval" for thetechnology's commercial viability, Raymond James analysts said in a Thursdaynote to clients. They added that solar enhanced oil recovery operations cancompete with gas prices in the range of $3/Mcf to $4/Mcf and the technologycould be "bearish for natural gas demand."

--Jared Anderson, jared.anderson@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com