Carbon Storage Evaluation with Core Lab

Core Lab’s Larry Bruno, Chairman and CEO, Alastair Crombie, VP of Reservoir Description, and Andrew Benson, VP of Corporate Sustainability & Energy Transition discuss how Core’s fossil fuel reservoir analysis is being used to evaluate CO2 storage sites with Marc Bianchi, Industrial Gas & Equipment and Energy Oilfield Services & Equipment Analyst.

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Transcript

Speaker 1:

Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Marc Bianchi :

Hey everyone. This is Marc Bianchi from the Cowen energy team. In this episode of the Cowen energy transition podcast, we’re speaking with Core Labs on carbon capture. Like many companies in the oil service industry core has a suite of capabilities that can be valuable in energy transition. And in this case, it’s their reservoir analysis that’ll be used to evaluate carbon storage sites. So team, thanks a lot for being here. We’ve got Larry Bruno who’s chairman and CEO, Alastair Crombie who’s Vice President of Reservoir Description, and Andrew Benson who’s Vice President of Corporate Sustainability & Energy Transition. So with that, maybe each of you could go around the table and give a quick introduction. And then Larry, maybe if you could give us an overview on core kind of from a really high level for people that might not be as familiar.

Larry Bruno:

Sure Marc, thanks always a pleasure to engage with you and with your audience, always get some very thought provoking questions that come out, and hopefully we can tell people about how Core Labs, the role that we’re going to play in this emerging business opportunity. So I’m a geologist my background, came up through the ranks of doing evaluation of rocks for oil and gas exploration, and I worked my way up through the system. So effectively been with Core Lab, my whole career got in an acquisition of a small company in 1999, but haven’t changed jobs since I got out of grad school. And now have the great opportunity to represent the hardworking, innovative folks here at Core Lab. And so let me introduce Alastair Crombie. Alastair, I want you to tell a little bit about your background.

Alastair Crombie:

Yeah. Hey Marc. Yeah, so I started my career at Core Lab in Aberdeen back in our early ’90s, spent several years there, moved down to BP in London at St Down in London as our fluid specialist background as a chemist, moved back to Aberdeen and then found my way to the Middle East in Abu Dhabi, running the facility down there as the fluid specialist and then ultimately general manager and spent 18 years down there before moving across into this new role as VP of Reservoir Description here at Houston.

Larry Bruno:

So, okay. And Andrew.

Andrew Benson:

Yeah, so I started my career with a company that was shortly after I started acquired Core Laboratory. So started off as a geologist with Core Lab, stayed for a few years and took a long stint at a MidCap operator doing domestic EMP and stayed there for a pretty long time until an opportunity came up here back at Core Laboratories to do some business development. That sort of migrated into a role focusing on business development as it pertains to the energy transition. And then coupled with that, I’ve now taken on some additional responsibilities as the VP of Corporate Responsibility or Corporate Sustainability, which is kind of a hand in hand approach to that, sustainability energy transition world.

Larry Bruno:

Yeah. So maybe a little bit about Core Lab, Marc. So for those that don’t know us, we are pretty internationally exposed company. About 70% of our revenue traces to international projects. We might do a good part of that work in the U.S. at our major laboratories here, but the projects’ generation around the world, we have a hub and spoke structure with advanced technology centers strategically positioned around the planet that serves as a pipeline for projects to come into the company. We operate in two business segments, reservoir description and production enhancement. So when you think about reservoir description, think about a laboratory based business where we’ll analyze rocks and reservoir fluids and the derived products that come from those reservoir fluids. When we talk about reservoir fluids, we’re talking about crude oil, natural gas, and formation water. So a lot of expertise on the reservoir description side on understanding subsurface geology and the interaction of fluids through those rocks.

Larry Bruno:

One of our, I would say our tagline expertise is we understand and the world’s leading commercial laboratory for analyzing fluid flow through porous rocks. And that’s going to come back around as we talk about CCS here, because it’s the same type of technology that’s going to be deployed that we’ve been using to work on getting oil and gas out of rocks. We’re going to talk about what that can tell us about the ability to put CO2 into the rocks. The other segment of the company production enhancement think of that as a more U.S. exposed business, but in that segment two main areas of activity.

Larry Bruno:

One is on completion products. When you drill a well into the subsurface, that you were going to try to get oil and gas out of, or put CO2 into you drill-up a hole, you set pipe in that hole called casing, and then you have to penetrate or perforate that casing to create conduits for the fluids to either get out of the rocks or into the rocks. And so we make those energetic projects that perforate through that steel casing and create those avenues of communication between the formation and the wellbore.

Larry Bruno:

We also do diagnostic services. And by that we mean, we introduce chemical molecules into say a frack design or a completion design. And from that we can help our clients understand if they completed the well, the way they intended to. So think about this mental picture for say a well in the Permian Basin, that might be 10,000 feet down and 10,000 foot lateral. So add that all up, you’re 20,000 feet away from the surface facilities for that well, and you’re trying to figure out, did I execute my completion the way I intended it to in the subsurface. But you’re using the diagnostics we could help our clients understand, did they open up all the areas of the well that they wanted to communicate with and give them a better idea of whether their completion program was effective or whether they need to do remediation on it?

Larry Bruno:

One of the things that I would say that you’ll find about Core Lab is where our expertise is close to the wellbore. That’s kind of our wheelhouse, whether it’s analyzing the rocks or fluids, completing the wells or determining whether the completion went the way they wanted close to the wellbore, that’s our place. One of the things that Marc you’ve heard me say many times, and I say it for effect, but it really is true. I hate rust. We’re not a heavy metal company when you compare Core Lab to most of the other oilfield service companies, which you’re going to find is there are a lot of metal and we’re not, and it’s not to speak pejoratively about metal, but you could not have an oil industry without the metal heavy companies, the rigs, and the pressure pumpers and all, you have to have that to have an oil industry. That’s just not what we do. We’re more of a technology scientific approach, helping our clients get the most out of their wells through evaluating the rocks and fluids or making their completions better.

Marc Bianchi :

That’s a great overview, Larry. Maybe so now drilling down into the CCS part of it, if I heard right. All that’s going to sit within the reservoir description side of the business, and essentially you’re analyzing the geology. But what specifically are you doing there and how is it different if at all, to the oil and gas work, you mentioned, oil and gas is coming out in this case, CO2 is going in, but I suspect there’s some technical difference beyond that.

Larry Bruno:

Yeah. Marc, I’ll hand it over to Alastair maybe to get us started on that, but just to maybe make a point there, the early sort of our first touch on these projects is going to be on the reservoir description side, but eventually, well is it going to have to get drilled and perforated and completed? So there’ll be opportunities for production enhancement as well. Sort of our first touch at this is a value in the rocks and fluids, Alastair maybe you could give us some background on that or example.

Alastair Crombie:

Yeah. So I would say just to add to what Larry was saying there, our immediate opportunity here really comes within the reservoir description segment of Core Lab. We do see and time as they start to drill injection wells, we see the production enhancement side as they complete perforate these wells, that there’s opportunities there, but at the present moment, the opportunity lies within reservoir description. So many of the same subsurface risk that are associated with oil and gas projects also exist for CCS projects. So I look at this as, and I’ve tried to define this as a CSI, so a containment storage and injection. So you could also think of flow there as well. So any time that when we think about flow, we’re thinking about both injectivity as well as how the fluids, once you inject that CO2, how that fluids, that CO2 and water mixture will flow through the rocks.

Alastair Crombie:

And also when you consider containment, the seal, what holds that fluids in place, the geochemical properties that contain the water would be affected. If you take CO2 and you mix it with water, you are essentially creating carbonic acid there. And that carbon acid can react with that seal. So what might be okay to contain water may not be okay to contain a mixture of CO2 and water. So the size and the properties of the CO2 molecule are completely different than that of water. So injecting CO2 forms that carbonic acid, reacts with the minerals can cause fines and things to precipitate out of there. And that can also the permeability and how that fluid flows through the lock. So that’s where we see the reservoir description. That’s what we’re focused on right now.

Larry Bruno:

So I think Marc, if you take a step back a little bit and look at a CCS project that somebody might have on the drawing board here, they’re going to put most of the money in that project, turn it around now, upstream is going to mean the emitters, right? And so they’re going to put most of the money into capturing the CO2 at the source that’s being created, where the combustion’s taking place and into the transportation or the midstream to get that CO2 into transport, right? But the biggest risk in any of these projects is miscalculating or not fully appreciating the complexities of the geologic injection site. Okay. So that’s really where our first touch is going to be, is in helping to de-risk those subsurface uncertainties about the rock. So might be getting a little bit ahead here, but one of the things that people have looked at early on was that, hey, we’ve got all these places where we’ve been producing oil and gas.

Larry Bruno:

Let’s just drive the CO2 into that. Because we’ve created accommodation space by removing oil and gas, large volumes over decades. I’d say many companies have turned away from that thought, because while you may have accommodation space, you have also got a lot of penetration. So say in the Permian Basin, you might have thousands and thousands of penetrations in an area that are all sources of potential leaks to your program. And so a lot of the targets that people are looking at to pursue are saline aquifers. And one of the things with those is since there’s very little money in producing salt water, no one’s really looked at these. So if they were drilling an oil and gas well, say in the Gulf Coast down to the basin at 15 or 17,000 feet, they just drilled right on through the saline aquifers that say six or 8,000 feet and they might have logged it and they may not have logged it. They didn’t pay much attention to it because there wasn’t any economic interest. Now they’ve got to go back and evaluate those rocks and those fluids.

Marc Bianchi :

If they did log it, does that make it less likely that your services would be needed or how does the kind of logging versus rock and fluid analysis interplay matter for this sort of stuff?

Larry Bruno:

Yeah. So there are two companies with blue logos that might take, give slightly different answers on that. One of the things that Core Lab has always done is objectively made hard physical measurements. And an important part of why we do that is to calibrate logs. Logs are always going to be based on some model of physical assumption. And so it’ll try to shoot a sonic wave through a rock or a neutron pulse into rock. And from that, they’ll try to deduce things like porosity very important in the CCS project. If you’re trying to figure out the storage capacity, you’ve got to know about how much storage capacity porosity is there. And then another question is how much water is present in that rock and what’s the salinity of that water. And so they’ll use a log, that’ll put an electrical conductance or an NMR signal and they’ll try to deduce that.

Larry Bruno:

By cutting core, we get the hard physical measurements and then our clients take the log data and they shift it or calibrate it back to the ground truth, if you will, that we provide with the hard physical measurements. So a great example to put it into maybe oil and gas space is the big oil and gas project going on the planet. People have to use Core Lab to calibrate the hard physical measurements that the logs will be moved to and shift it. So no change on the CCS side still have to calibrate those logs.

Marc Bianchi :

Okay. Maybe just on the rock analysis side, what’s the competitive landscape like that as it relates to CCS, if I go back several years, I think you guys would’ve said, there’s big operations inside the majors that do their own analysis. I’m not sure what the state of that is now given what’s happened in the industry the past few years, but also are they equipped and are they interested in doing this type of CCS analysis like you’re talking about?

Larry Bruno:

Yeah. So I think the landscape is very much aligned the same way it is toward the upstream side of oil and gas production in that the NOCs and the IOCs, for example, some of them still maintain internal labs. Some of them have gotten out of that business. And I talk about over the arc of my career, that Marathon used to have a research lab up in Littleton, Colorado, previous down cycle. They didn’t downsize it gone. ARCO had a big research facility in Plano, Texas years ago. Now I think it’s the NTT building. It became the Dell building and then the NTT building down there that old ARCO lab. And so after BP bought them, they didn’t downsize it that lab is gone. This cycle Conoco closed their lab. So there are fewer internal labs than there used to be.

Larry Bruno:

And mostly because the clients have recognized that when they need this type of work they’re better off bringing into Core Lab to do. Now, there are still some of the IOCs and the NOCs. So the Exxons of the world, the Chevrons of the world, the Aramcos of the world, the Petro Bros of the world, they have internal labs and they can do this type of work. And we know they can do it because many of them are equipped with laboratory equipment that we built and sold to them. So they have capacity to do that. I think the better way to understand that is, who doesn’t have labs to do that. And basically the answer is everybody else. So if you’re another company that’s interested in this space or going to be engaged in a project like this, whether you’re an OXY or an EOG or an AWA Conoco, you’re going to have to look for a service provider for it. And we are the premier provider for that.

Marc Bianchi :

Okay, great. Well, I want to get into some of your projects now and some of the announcements you guys have made. So maybe if you could just give us an overview of the recent announcements you’ve had, there’s some collaborations and then there’s the consortium. So just sort of introduce us to all that stuff, if you could.

Larry Bruno:

Yeah. Andrew, why don’t you take that?

Andrew Benson:

Yeah, sure. So, really Core Lab has a long history of providing joint industry type projects and consider that serve to accelerate development of knowledge and best practices within specific regions or basins or play types or practices. If you want to take practices apart you’re talking completions or profit types, or looking at enhanced oil recovery, maybe as a specific practice and through those studies and the in-house experts we have here at Core Lab that drive those studies, we’ve been able to help our clients achieve and maintain leading edge positions as the industry has evolved through its many cycles. And again, I’m talking conventional reservoirs, EOR, deep water, unconventional gas, and oil plays, and that evolution. And now we’re talking about CCS. So what we’ve done recently, and this is part of some of the recent press that you’ve seen is we’ve launched the CCS consortium and the purpose of that will be to do what we’ve done in the past. And that is to build a forum for knowledge development as the industry continues to emerge and evolve. And so the members we have signed up right now include the likes of Shell, Chevron, Talus, EOG, Repsol, JX Nippon. And we think that list is likely to grow as folks figure out what they’re missing out on.

Marc Bianchi :

If you were to say, we’re the top two or three questions that you and the participants of this consortium are looking to answer.

Andrew Benson:

Yeah. So as Alastair touched on earlier, we sort of take apart the CCS topic or subject into topics around capacity, injectivity, and containment. And right now what we’ve done is because containment seems to really rise to the surface or the top level of interest, not only for the operators but also the regulators that are involved in overseeing all this capacity and injectivity are important economic parameters and operational parameters for folks involved. But secure containment sort of seems to carry the day as far as priority. And so that’s the track that we’re taking for the inaugural year of this consortium, it’s where a lot of our clients’ minds are right now. And so we’re here to sort of follow their direction, follow their lead and solve their problems.

Larry Bruno:

So when we talk about containment here, we’re talking about identifying natural containment. So that is impermeable layers of rock that would provide the lid to the pot that they’re trying to fill with CO2, so that it doesn’t just drift off into shallower strata eventually into drinking water, and then back out to the surface. So that’s we’re talking about containment there, and just like in an oil and gas reservoir, you need that seal rock. You need closure, if you will, is what Alastair referred to, to make sure that you have that lid on the pot so that the CO2 you put in will stay where you intend to put it.

Marc Bianchi :

Yeah. And maybe this is a good opportunity to ask kind of the generalist question on that, because I think people are concerned about, the general public is concerned about putting CO2 in the ground and what’s the risk of it coming out of the ground. And the industry has generally said, hey, the oil and gas has been in there for millions of years and it doesn’t come out unless we drill a well, so we’re not worried, but maybe there’s a finer point. You can put on that explanation.

Larry Bruno:

Yeah. Andrew, won’t you?

Andrew Benson:

Yeah. So it’s certainly a societal concern, but when you think about the regulatory horsepower that is being used and brought to bear to oversee these operations, there’s a lot of infrastructure and mechanism in place to see to it that the operators interested in CCS are doing their part, doing the science, providing the measurements and the predictions and the modeling that’s needed to ensure that CO2 once it’s injected will stay put. Again, this is not a process that anybody is embarking on in a half cocked way. And the operators involved, operators having an interest in this are very well versed in this being part of the process, the data collection being part of the process and providing some ground truth evidence and support to back up their claims that what they put in is going to stay put.

Marc Bianchi :

And how is the results of the analysis that you guys are doing? Does that find its way into specific checklists or whatever the regulatory approval process is, or are there outputs of the analysis you’re doing that are going into the regulatory filing or regulatory process that we have? I mean, the thing I’m thinking of this class six license, but maybe there’s other elements of the process.

Andrew Benson:

No Marc, hit the nail right on the head there. I mean, that’s one of our priorities right now is helping our clients understand and adhere to those class six requirements. So class six, that’s the EPA permit required to inject CO2 into the ground for sequestration. And it’s a process and a lot of the requirements the EPA lays them out, but I’m going to have to say, they’re a little bit vague in their language. They’re not going to tell you exactly how to find all the answers, but they’re going to tell you what answers they want to see. And so it’s incumbent on us to help our clients understand how to get there, how to collect the right data and how to do it in the cost effective and efficient way.

Larry Bruno:

So Marc, may add a couple points here. So one thing about containment, let me go back on that is many people made out, know the history here, but the Spanish were reporting tarballs watching up on the beaches in Texas, in the 1700s, there are natural sea pigeons. And so oil and gas reservoirs do leak in places La Brea Tar Pits is an oil and gas deposit, right? At the surface, you can drive down, I guess, I think it’s Wilshire Boulevard. And there it is right there. So oil and gas does find its way out of leaky containers. And so what our clients are going to do is they’re going to have to validate a stratographic model here where they’re going to core through the seal rock, and they’re going to core through the injection target, and then they’re also going to take stuff that’s kind of outside of Core Labs, wheelhouse.

Larry Bruno:

They’re going to look at size, big pictures of this pot, if you will, of this container and say, is it faulted? Are there leaky places around this container that I might have to avoid or stay away from? Because if I put that CO2 in there, it may just travel up a fault plane and I’ve lost my containment. One of the ways I’ve tried to explain what we do to help our clients on the oil and gas side that I think is applicable here is oil and gas reservoir engineers are not much different than financial analysts. You get hard data points where you can, you make assumptions where you have to, and then you try to model future performance. Well, that’s exactly what a reservoir engineer does and exactly what our clients will do with the CCS project. They’ll get hard data points.

Larry Bruno:

That’s our job to do that, to give them the hard data points or the rock or the fluid properties, they’ll make assumptions where they have to, and then they’ll try to model, can I have a 30 year or a 40 year or 50 year horizon to putting CO2 away into this thing? If they make a mistake in that, because they don’t have a robust model built on hard data, too many assumptions, not enough hard data, they could find they fill the thing up too quickly, or it leaks. And so that I think maybe helps explain the role that we’re going to play and the task that our clients face. And as it relates to the regulatory side of it is they’re going to have to convince the regulators that they’ve done this thorough analysis and that they can make this project work and achieve the desired goal of containing the emissions.

Marc Bianchi :

And I want to ask some more about that regulatory process, but just because we’re talking about the complexity of analyzing these storage assets, there’s been some academic analysis that says, we’ve got all the storage we could ever need multiples of, the most aggressive sequestration estimates out there would never even come close to using all the storage in the world. Have you seen those studies? Do you have a view on that? And then maybe more importantly with it is there a difference in cost of storage depending on the quality of the asset, or is it really, it’s just the transportation, how far away it is from where you’re collecting the carbon and that’s the most important factor.

Larry Bruno:

Yeah. Alastair once you comment on that.

Alastair Crombie:

Yeah. So touching on your first point there with the academic side of things, we don’t really have a view in that. I mean, at the end of the day, our primary role here is to evaluate the containment, the volume metrics, the storage volume, as well as any issues arising from the injectivity of that CO2 into that rock. So I mentioned before, anytime that you’re injecting CO2, if you’re injecting into an aquifer, the properties of that fluids are changing. It can react with the rock, it can change the permeability, it can create blockage. If we’re also talking about injecting CO2 into a depleted oil and gas reservoir. So a lot of the focus right now has been on aquifers, but there is obviously other ways to dispose of that CO2. So one of those methods is EOR, which is we’ve been doing that type of work for the last several decades.

Larry Bruno:

EOR meaning?

Alastair Crombie:

Enhanced recovery type work. So injecting CO2, it’s a great solvent for displacing even more hydrocarbon, and then recirculating that gas back into to push our more hydrocarbon. So people are still looking at that methodology to dispose of that CO2. The other focus was on depleted oil and gas reservoir. So anytime you’re injecting CO2 into a depleted hydrocarbon reservoir, you still have enough space. However, that CO2 can also react with that in situ fluid and you get these precipitate called long chain hydrocarbons called Asheville teams. And those things can, as the name would suggest is what you lay on the road. Those can block up your rock and prevent that CO2 flowing in and preventing that injectivity. So we don’t really have much to say regarding on the academics of it. Our job here is to analyze that rock, analyze the fluid compatibility, assess whether there’s problems and try to help mitigate those risks.

Larry Bruno:

So, one aspect I’m about to add to that Marc, is rate of injectivity. And so depending on the peculiarities of an individual rock, the rate at which you might be able to introduce to CO2 can be better or worse, or it could be that if I pump this rock too fast, I’m going to displace fine particles, which will then plug up the poor throats and reduce the permeability, which means I’ll see a declining injectivity over time. The ideal circumstance, I’ve got a clean pores and a stable rock that’s going to be unreactive to the fluid. All those things have to be assessed. If they have a say a nearby target, that’s economically favorable because of its proximity, but it is unfavorable in terms of its geologic attributes, say the pores are too small, or the permeability is too low. They won’t be able to inject it as fast. So then the economics of the project change.

Larry Bruno:

Again, just like an oil and gas project, when you want to get oil and gas out of the ground, you want high permeability so that you can get the fluids out faster, with an injection project you want high permeability. So saying that there is accommodation space on the planet is a rather, I’ll call it, very broad statement. There’s going to be places where it’ll work better and where it won’t work as well. Another thing you’ve got to be concerned with is fracking the rock that you’re trying to put the CO2 in. It’s no different than fracking, an unconventional reservoir. If you pump too fast, you will break that rock and create cracks. Now that might be good in terms of helping you put the CO2 away faster, but if you go too far, you might break the seal. All that has to be measured, geo mechanical measurements, how it lasting and how brittle the formation is, all of that’s going to have to be measured and validated. And that’s where we come in.

Marc Bianchi :

So you mentioned the aquifer as maybe a better storage solution, just as you look around the world, we’re seeing a lot of offshore sequestration projects. Is there something unique to offshore that’s driving that? And then, what are the other characteristics that might make certain basins of the world more or less attractive?

Larry Bruno:

Yeah. So maybe go back to the first point there. I think there’s a range of opinions about saline aquifers versus depleted reservoirs. Different companies have different perspectives on it. I think the saline aquifers are getting a fair amount of attention right now. The Gulf Coast is a good example here. There’s a very thick pile of sedimentary rock that’s accumulated over tens of millions of years. And so there’s a variety of potential targets there, but it’s not only the rock properties. And again, this is a little out of Core Labs wheelhouse, the size of the structure, the size of the pot or the container has to be assessed, and that’s going to come through seismic. So say for example, one of our other initiatives that we’ve announced is a strategic arrangement with Alliance with Talus. We worked on them with their oil and gas projects for a long time. They’re really good at looking at the seismic picture, looking at big scale models of a target zone. And then we help provide the details of the rocks and the fluids that they incorporate in their models. Well, we’re going to do the same type of thing for them.

Larry Bruno:

And so saline, aquifer opportunities, I’d say on the Gulf Coast are there. I think whether it’s onshore or offshore, the rocks will determine where the best places are to put them. So if you have a big structure and it’s onshore, and you’ve got ACC rock that’s got a lot of storage capacity and you can flow through quickly, then onshore will be a cheaper place to do it. But if you need a big structure that you’re going to be able to pump into for multiple decades, some of those structures are going to be offshore. And so the rocks and the proximity to the emitters are going to determine where you can look to put these storage sites.

Marc Bianchi :

Maybe going back to the classics permit. Can just to the extent you’re able explain what that is, and we’ve heard that, it could take a few years, Air Products is an example of a company that’s working on a class six license and storage project in Louisiana. And they’ve recently said it could take a few years, which I think surprised some people, but maybe talk to us about the timeline. And I would think that if all of a sudden everybody’s trying to apply for one of these permits and the government’s just not equipped to process all of it, that could become a major bottleneck, but just kind of curious how you guys are seeing all of that.

Larry Bruno:

Yes. I mean, I can’t speak terribly directly about the timeline, but I would say that what you’re proposing is consistent with what we’re hearing from operators and clients who are interested. This is not a quick turnaround couple month process. It’s a good bit longer than that. You look at the number of active permits right now, active EPA permits right now, there are two active EPA permits and a number of others that are pending about 14 others pending in the mid continent and Louisiana and California. And so I think I agree with what you’re saying is there’s likely to be sort of a waterfall of permits on the near horizon, based on the activity and the interest that we’re seeing in the number of companies that are prospecting around and poking around looking for potential sites, it is going to be a long process.

Larry Bruno:

I think supports the idea that interested operators need to be very, very careful about crossing their Ts and doting their eyes along the way. Because what you don’t want to do is get down the road in well into a permit and the process is involved there and realize that you didn’t collect some data along the way that you should have. And again, that’s one of the ways we have a toe in the door and the ways that we’re able to assist clients and folks that are interested. Again, it’s the language and the requirements behind these permits, is pretty substantial. But the companies seeking to obtain these permits are more than accustomed to doing this kind of work. It may be a new scope or topic, but this is part of what’s been in these companies wheelhouses for a long, long time demanding licensing processes and using hard data for decision making and to address technical unknowns. You think about what’s required to get an offshore permit to drill a hydrocarbon well, it’s extensive substantial amount of work that needs to get to be done to do that type of operation. So these folks are competent and innovative, and they’re well prepared for this type of process.

Marc Bianchi :

I just want to follow up on that point though. Does that mean that we ought to see some sort of oil and gas company involvement in all of these projects? Or can industrial emitter just go through the service companies and just use you and use the diversified service companies to satisfy that? Or do you need that sort of to the point you were just making about capability that they’ve had from getting permits for production that they’re applying to this class six process is that a gating factor?

Larry Bruno:

So it’s a good question. So we talked about the consortium study, we talked about strategic Alliance with Talus. We’re also getting projects from individual organizations like the CarbonNet Project in Southeast Australia. That’s not being driven by an oil company. I think Marc, it’s an important point. Maybe indirect answer, we’ve been working on CO2 sequestration projects off and on, and I will call it modest ways for more than a decade, right? And most of those were a single emitter looking at, do I have an opportunity to take some of this CO2 and inject it into the ground? What’s changed in the last, I would say two years or so has been that oil companies, our traditional clients have now emerged because they’re looking for how they’re going to handle their CO2 reduction programs. They’ve now gotten into the forefront of, hey, there’s an economic opportunity here to take what very few people know how to do well, drill a deep well in the ground or multiple wells in the ground, and put a lot of fluid through pipe and get it where we want it.

Larry Bruno:

They are the logical and I would call it the most adept at doing these types of filings, building robust subsurface models, understanding the geologic risk, where they’re going to have to morph to do that is they’re probably going to have to go get some midstream and capture collaboration into their portfolio. If they’re going to do large scope where they’re going to try to say, hey, we want to take a refining belt across Southeast Texas here. They’re going to have to get those emitters and the people who are going to do the collection together that may not all be within any given oil company. Although some of the clients we’re working with have pieced together that model now where they go get it, go move it. And now they’re going to put it in the ground. They’ve got all the pieces put together there. Those are the ones that are going to lead the charge on this,

Marc Bianchi :

Besides the regulatory element. And as you look at the bottlenecks or gating factors that could be holding back faster growth, what are those right now? And is there a pathway that you see to kind of accelerating the growth for the industry over the next couple years?

Larry Bruno:

I think one of the uncertainties is going to be the political motivation and the intensity of the political motivation. People sometimes ask us, how big could this be in your business, say, over the next five or 10 years? And I said, hey, it could grow. It can be 10, 15, 20% of our business. That’s going to be more driven by how hard the regulatory side, the political side pushes companies to engage in these projects. If they push real hard, that part of our business could grow pretty quickly over the next few years. And if there’s maybe less attention paid to it that may grow a little slower.

Alastair Crombie:

Maybe if I could add something there as well, Marc. I mean, what we are seeing on our old board here, we’re probably seeing eight to 10 times the number of projects that we saw say 12, 18 months ago for CCS directly and from all parts of the world here. So before they can apply for these class six permits, they have to have the data that’s part of the requirements. So we are seeing on our project board a significant increase over the last, as I said, probably 12 to 18 months. So I think that gives an indicator of where the market is right now and why they’re pushing because they need that data to get this class six experiment.

Larry Bruno:

And those requests for our engagement are coming from?

Alastair Crombie:

I mean, it’s coming from both traditional and gas companies, plus there’s lot of alluded to there, CarbonNet in Victoria, Australia, but we’re seeing projects coming out of U.S., Canada, Middle East is really focused on probably the ER part, although we’re seeing some specific CCS sequestration projects coming out of even the Middle East, so Latin America really across the board. So it’s not just confined to one geographical region. It’s not confined to offshore or onshore. It’s really a global phenomenon that’s going through right now.

Marc Bianchi :

That was great. That was a question I planned to ask. So thank you.

Andrew Benson:

I might add to that too, that there’s a possibility as companies find pathways toward commercial success with CCS, that they may end up driving some of the legislation rather than having the legislation drive their ability to do it as well. Long term.

Marc Bianchi :

Yeah, I guess Larry, you mentioned, over the next few years, maybe this could become 20% of the business. I think that’s what I heard. Is that-

Larry Bruno:

That’s a stretch, I’d say over the next 10 years or so it could approach that I would say near to midterm call it five to 10% of reservoir description. And then if it really gets pushed hard from the regulatory side, it can exceed that.

Marc Bianchi :

And your involvement. So you mentioned how we’ve got the reservoir description end of it. But then as we start drilling injection wells, maybe there’s a production enhancement element to it. That’s still all up front, but your legacy business for lack of a better word, but your fossil fuel business has a lot of production evaluation and monitoring that’s going on. Is there an ongoing service element of the revenue opportunity from a carbon project?

Larry Bruno:

Yeah, I’d say two fronts there that we haven’t really talked about. One is potentially tracing the injected CO2 to look, to see whether we get an early indicator of unexpected breakthrough, that there’s a leak somewhere, right? And then another is quantity and quality value validation. And so at some point, someone’s going to say, hey, I just pumped X amount of CO2 into the ground. Someone’s going to need to independently verify what was that quantity? And was it pure CO2, or was it a 5% nitrogen mixed in with it? And that we have to deduct from your scorecard, if you will. And so quantity and quality valuation is right within our wheelhouse. We do that today in a number of different areas, mostly on crude oil and core derived products. And then also monitoring injection and flood, we call it in the oil and gas space. We would call it floods of injected gas or liquids. We put injectors in there, we put traces in there to monitor those injection programs.

Larry Bruno:

One of the hard things to convey to people that don’t have a geologic sensibility is the rocks are not a uniform block where the properties are the same from the top to the bottom of the section. They’re very variable. So a lot of times what’ll happen is there’ll be high permeability streaks and low permeability streaks. Well, in this case, the CO2 is going to run hard down those high permeability streaks and may go to places that they don’t necessarily anticipate early on. And it’s not going to move as fast down the slow or the lower permeability phases, all that has to be worked into a geologic model and a reservoir model and the company’s been working with well equipped to do that.

Larry Bruno:

One other point I’d make is that on our sort of job board that we’ve got sort of over the next call it year or so, there are some companies that don’t have that oil well or oil and gas experience. They’re going to have to hook up with someone that does because to build that knowledge base within a company that maybe has an agricultural background or a power generation background, I would say that’d be a really high hurdle for those folks to figure out how to drill and how to build a reservoir model and then to drill and complete wells effectively.

Marc Bianchi :

Yeah, that’s a great point. Well, thanks. I guess I just have one more and this is sort of the question that we’ve been asking everybody at the end of the discussion is to make a prediction. And it’s not a prediction that we’re not asking for guidance or anything like that. It’s not something that we’re going to hold you accountable, but just over the next few years, what’s something that you would predict happening. It’s really meant to be thought provoking something that’s off the radar for people. So each of you doesn’t need to provide an answer. One from the team is fine, but however you guys want to do it.

Larry Bruno:

Can we have a few minutes to confer? I think the unknown here is what are the drivers going to be on energy transition and the pace of energy transition and oil and gas. We have a very sort of bullish view on oil and gas demand that I would say the aligns with, or maybe even exceeds a bit the EIA, which is their model is saying 30 years from now, we’re going to see 20 or 25% higher oil and gas consumption than we’re seeing today just to meet the growing demand for energy on the planet. And so I think that people that particularly in I’ll call it Western Europe and the U.S., maybe they see that these projects move transition to renewables or non CO2 emitting sources of energy.

Larry Bruno:

We hear it and see it and feel it every day. The rest of the world is going to transition from burning wood and coal and leg night and other fuels that are less effective. They’re going to be more than making up for the reduction in CO2 from burning fossil fuels in the west. So I think that CO2 sequestration will be an important player in finding a balance between the continued demand for oil and gas, that is going to be required to meet the growing energy demands of the planet, which I think are being maybe even the high cases are being underestimated. As people transition out of third world economies into second, first world economies, that’s going to be huge in order to get there. We’re going to need to use a lot of hydrocarbons to get there. So catching the CO2, controlling the emissions. I think that leaves that puts a tailwind behind CCS projects and CCS investment.

Marc Bianchi :

Yeah, I couldn’t agree. I mean, I’ve heard somebody say it pretty eloquently that you can’t have energy transition without simultaneously solving energy, poverty, and that’s-

Larry Bruno:

Correct. That’s great way to put it.

Marc Bianchi :

Thanks so much, Larry, Andrew, Alastair, I think this has been great and we’ll look forward to catching up again soon.

Larry Bruno:

Okay. Wonderful Marc. Appreciate it.

Andrew Benson:

Thanks Marc.

Alastair Crombie:

Thanks Marc.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of Cowen Insights.

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