When people talk about enhanced oil recovery, carbon dioxide-flooding immediately springs to mind, in particular floods in the Permian Basin. Currently, some 40 such projects are active in West Texas, using 1.2 billion cubic feet of CO2 per day and resulting in daily production of 150,000 barrels of oil. West Texas is not the only area where CO2-enhanced recovery methods work well, however. Across the country in the Magnolia State, a very successful project is also under way. Dallas-based Denbury Resources Inc. has scored a home run at Little Creek Field, and believes it can parlay its experience there into a string of profitable floods throughout southwest Mississippi. Since Denbury's inception in 1990, the company has focused its efforts on redevelopment of older fields, particularly in western Mississippi. In addition, it operates properties in South Louisiana, East Mississippi and the Gulf of Mexico. When Denbury purchased Little Creek Field in 1999, however, it had no prior experience with CO2 flooding. CO2 technology has never been for the faint of heart, as the start-up costs for a flood are huge, and operating costs run about 10% higher than for a waterflood. In a typical oil field, 40% to 50% of the original oil in place can be extracted using primary and secondary recovery. CO2 flooding can recover another 10% to 20%. But those incremental barrels can be expensive, as enhanced oil recovery via CO2 flooding requires a tremendous amount of well work and a specialized infrastructure. Those obstacles notwithstanding, Denbury raised Little Creek's daily production from 1,350 net barrels of oil equivalent at acquisition to 3,222 currently. Furthermore, it believes CO2 flooding in southwest Mississippi offers it the potential to double its reserves and raise its net production from that region to 17,000 barrels per day by 2008. "We believe this increase in production can be achieved by spending less than $60 million per year," says Gareth Roberts, president and chief executive officer. "We do all of our economics at $18.50 per barrel. All of the long-term projects we are working on are economic at that level." Little Creek Field Little Creek Field, located in Lincoln and Pike counties, was a Shell Oil property. In 1958, oil was discovered in the Lower Tuscaloosa sands at a depth of about 10,700 feet. Of the 120 million barrels of original oil in place, some 25 million were produced on primary recovery. The 6,200-acre field was put under waterflood in 1962, and another 22 million barrels were recovered. Little Creek appeared to be an excellent candidate for CO2 flooding-it contained light-gravity crude, sufficient residual oil and enough reservoir pressure to make CO2 miscible with oil. And, it was one of the largest of a group of similar fields scattered throughout the area. Conveniently, a sizeable CO2 accumulation existed about 90 miles north of Little Creek Field, in Rankin, Madison and Scott counties at Jackson Dome. Shell developed a long-term, reliable supply of CO2 from structural closures around the volcanic intrusive dome that had generated CO2 in great quantities. Deep, high-pressure reservoirs in the Buckner, Smackover and Norphlet were chock full of CO2. Estimates are that the Jackson Dome fields contain some 12 trillion cubic feet of usable CO2 at depths of around 15,000 feet. The major launched a pilot CO2-injection project at Little Creek in 1974. Shell built a formidable infrastructure to support what it envisioned as a thriving CO2-enhanced recovery area. It drilled a number of deep CO2 source wells, laid a 183-mile, 20-inch pipeline, and built a plant capable of processing 250 million cubic feet of CO2 per day. In 1985, Shell expanded the pilot program at Little Creek to a field-wide flood. The timing was unfortunate, as oil prices dropped dramatically in early 1986. Indeed, throughout the history of CO2 flooding, interest has risen and fallen in lockstep with crude prices. Although Little Creek Field responded quite well to CO2 injection, Shell's larger plans for a host of projects in southwest Mississippi never materialized. However, the company did proceed with pilot floods at West Mallalieu and Olive, two smaller Tuscaloosa fields that are close to Little Creek. Shell eventually sold its interests in the CO2 source fields, the pipeline and its Mississippi fields to various entities. Lafayette, Louisiana-based independent JP Oil Co. Inc. bought Little Creek, West Mallalieu and Olive fields in 1997. Airgas Inc., a producer of industrial CO2, bought the pipeline and source fields. In turn, Denbury bought Little Creek Field from JP Oil, acquiring a 99% working interest and 84% net revenue interest for $13 million. At that time, the field consisted of 37 producing wells and 17 injectors, plus several inactive wells. While the operator, Shell had completed phases I and II of the CO2 flood; JP Oil had started Phase III. When Denbury took over, it began to recycle the CO2 from the first phases into the other parts of the field, replacing the volumes with saltwater. Today, the company injects 165 million cubic feet of CO2 per day into about 25 injectors in the field. Along with oil, the 50-plus producing wells make back 125 million cubic feet of CO2 per day, which is processed and reinjected. Phases III and IV are currently producing oil and CO2, and Phase V is beginning to respond. Denbury develops the flood on nine-spot patterns, converting existing wells as needed and drilling new ones. Each new well costs $700,000 to $750,000. The reservoir has responded strongly to the CO2 injection. "We have drilled wells at Little Creek that have produced 200,000 barrels of oil," says Mark Worthy, operations vice president. "Some wells will produce as much as 500 barrels of oil per day." Denbury estimates CO2 flooding at Little Creek is allowing the recovery of 21 million barrels of oil, for an incremental recovery factor of 17%. Compared with fields in West Texas, the Mississippi fields react quicker to injection and a higher percentage of the original oil in place is recovered. Additionally, the company has unitized the adjoining 880-acre West Little Creek and 1,760-acre Lazy Creek projects on the west side of Little Creek, and has drilled several injectors. Eventually, it plans to flood West Lazy Creek, a 2,600-acre unit that will be formed this year. West Mallalieu and Olive After getting its feet wet at Little Creek, Denbury realized it could enhance its economics by acquiring its own supply of carbon dioxide. In 2001, the company bought the CO2 source fields at Jackson Dome, along with the 183-mile CO2 pipeline, from Airgas for $42 million. The acquisition included 10 CO2-producing wells with estimated reserves of 815 billion cubic feet (Bcf). The purchase was key to Denbury, for it drove its cost to produce and sell CO2 down to less than 50 cents per thousand cubic feet. In addition to supplying CO2 to its enhanced recovery operations, the company sells about 65 million cubic feet of CO2 per day to commercial customers at a long-term contract price of 60 cents per thousand. Denbury also saw opportunity to expand its activities to flood additional fields. But, to continue to grow its CO2 program, the company needed to drill more wells to supplement its productive capacity of 125 million cubic feet per day. Last year, it completed the Dinkman #1, a 16,400-foot producer from Norphlet. The $5.5-million well can produce 38 million cubic feet per day. At press time, another well-the IP 15-4 #1-was under way. The company will be able to produce 170 million cubic feet of CO2 per day. Denbury added to its portfolio of floodable fields in 2001, buying West Mallalieu and Olive fields from JP Oil for $4.7 million. West Mallalieu, in Lincoln County, was discovered in 1944 and fully developed in the 1950s. Never waterflooded, it was essentially abandoned by the late 1970s. Shell started a pilot CO2 project at the field in 1986, and West Mallalieu subsequently produced another 2.1 million barrels of oil from the pilot area. At the time Denbury purchased the field, it was making less than 100 barrels per day from the CO2 pilot flood. In 2001, the company drilled four new wells and reentered 10 existing wells. Last year, it drilled seven new wells and reentered four. Phase I of a field-wide flood is now producing and Phase II is under way; gross production is in excess of 1,000 barrels of oil per day. Olive Field is a minor property located in Amite and Pike counties. It has produced about 6.7 million barrels of oil on primary, secondary and tertiary recovery, and is now near the end of its life. To Denbury, the value at Olive is in its infrastructure and the 10 Bcf of CO2 that it contains. This gas can be recycled to another project. Today, the company is producing 3,894 net barrels of oil equivalent per day from its CO2 floods at Little Creek, West Mallalieu and Olive fields. In 2002, its proved reserves in its CO2 properties stood at 19.7 million barrels of oil. Denbury figures its development costs range from $3 to $4 per barrel on the properties, and operating costs are $9 to $10 per barrel. At today's oil prices, its rates of return are running between 40% and 50%. Brookhaven and McComb Fields in western Mississippi have produced more than 245 million barrels oil from Tuscaloosa sandstones. If Little Creek's 17% recovery factor for the CO2 flood is extrapolated throughout the region, another 60- to 75 million barrels of oil may be available via tertiary recovery, estimates Denbury. That's in addition to the barrels it has already booked. The company's newest portfolio additions are Brookhaven and McComb fields. As with most of the fields in southwest Mississippi, these are depleted or nearly depleted, so acquisition costs were quite reasonable. Each field could produce another 20 million barrels of oil via CO2 flooding, says Phil Rykhoek, senior vice president and chief financial officer. "We believe that we now possess 80% to 90% of the potential 60- to 75 million barrels of oil that could be recovered by CO2 flooding in southwest Mississippi." McComb Field, located south of Little Creek in Pike County, was acquired in September for $2.5 million from Rosewood Partners LLC. The 10,360-acre field is not currently producing, but it has made less than 50 million barrels of oil on primary recovery, out of 108 million barrels of original oil in place. The field was never effectively waterflooded, so Denbury estimates CO2 flooding could recover another 21%. The company plans to spend $10- to $15 million this year at McComb, converting two abandoned wells to CO2 injectors and returning a dozen abandoned wells to production. It will lay a five-mile pipeline from nearby Olive Field, and recycle the CO2 from that field into McComb. Injection is to start in June. Denbury acquired an interest in Brookhaven Field, which is six miles west of the main CO2 line in Lincoln County, in mid-2002 in its purchase of Coho Energy Inc.'s Gulf Coast properties. Through January 2001, Brookhaven had produced 74 million barrels of oil, on both primary and secondary recovery. It still has 25 active wells and is producing about 1,000 barrels per day. At a 17% recovery factor, another 30 million barrels could be produced. Denbury does not plan to spend money at Brookhaven this year; it will begin development in 2004. The current full-cycle budget for the CO2 flood there is $80 million. The company is also ramping up its CO2 deliverability, with the aim of producing 170 million per day by the end of this year. The budget for Jackson Dome is $18- to $25 million, with two more Norphlet wells to be drilled. One of these may also test the Haynesville formation, which could hold sizeable CO2 reserves. And finally, Denbury has acquired significant lease positions in several other candidate fields that could follow, after McComb and Brookhaven are flooded. After all, CO2 is recycled again and again. Eventually, the recovery method could even be applied to fields in eastern Mississippi.