Initial CO2 injection rates will also be increased to 40 million cubic feet per day, which could allow the minimum miscible pressure (NYSE:MMP), at which point the Grieve crude oil is soluble in the injected CO2, to be reached earlier.
All field construction and well workovers have been completed to enable the injection to commence with final hook-up of the remote meter station expected to be completed in the coming week.
Denbury expects to start charging the system with CO2 on 28 January as part of the commissioning of the facilities and the wells involved in the CO2 injection operation.
"With the start of CO2 injection in the Grieve Muddy formation, we commence the re-pressuring of the Grieve field, which will again become a significant Wyoming oil producing field," ELK managing director Bob Cook said.
"The formal involvement of Denbury in the Grieve EOR project in May 2011 assured the successful development of the project.
"The experience that Denbury has injected into the development concept of the Grieve EOR project together with Denbury's significant commitment to the Rockies means that Grieve will be a show case or in local vernacular, a "Cadillac" Wyoming operation."
Grieve oil field enhanced oil recovery
The Grieve oil field enhanced oil recovery operations are targeted at recovering the remaining oil in the Grieve Muddy reservoir that is currently immobile.
This requires the re-pressuring of the reservoir from its current pressure of about 750 pounds per square inch to the MMP of about 2,250psi.
At this point, the remaining oil becomes less viscous and mobile when in contact with the CO2 and as such, can flow through the reservoir to production wells and then to the surface.
The re-pressuring of the reservoir to a pressure equal or close to the original reservoir pressure and the presence of CO2 in the produced fluids means that each of the producing wells will flow as if it were a virgin well requiring no downhole pumps and provides for relatively low field operating costs.
Elk noted the time to MMP and in fact to achieve a higher reservoir pressure than MMP, is dependent on the rate of injection of CO2, rate of water injection and the geology of the reservoir.
Denbury is conducting modelling of the reservoir with final refinements to be made once the initial response to the CO2 and water injection can be measured and factored into the model.
These efforts are being used to decide into which wells CO2 and water will be injected. Changes in reservoir management will be made as new reservoir information is obtained and used to ensure the shortest possible oil response time.
3D seismic over the Grieve will be obtained in mid-2013 to assist in optimising field development and reservoir management.
First EOR oil expected in the middle of 2014.
Elk expects that its first tranche of funding (free-carry by Denbury) for capital costs and early CO2 purchases will be fully utilised in the first quarter of 2013. Elk expects to elect to then take up the second tranche of funding, a loan made available under its arrangement with Denbury.
Grieve has current proved and probable reserves of 18.6 million barrels of oil equivalent.
The Grieve Oil Field was discovered in 1954 by Forest Oil and has produced 30.2 million barrels of oil with the peak rate of 12,000 barrels of oil per day achieved in 1960.
Elk has a 35% working interest in the Grieve EOR project while Denbury holds the remaining 65%.
Grieve Madison wells
Elk and Denbury have also completed drilling of the Grieve 62 well and will complete the well in the Madison Formation.
Grieve 62 has provided valuable information on the Muddy reservoir and three cores were cut through this reservoir and an update on its future use will be made once the information is available from Denbury.
The rig is expected to move to spud Grieve 59, the second planned Madison well.
Elk had previously said the Madison wells would produce water from the reservoir that would then be injected concurrently with CO2 to accelerate re-pressurisation of the Muddy reservoir.
Elk has also found that the Grieve crude oil export pipeline remains in relatively good condition despite its age.
The company had run an intelligent pig (pipeline integrity survey device) through the 32 mile pipeline to measure pipe wall thickness and detect any dents in the pipeline.
This also exposed the pipe to pressure of about 450psi with the running of the pig with nitrogren.
The pipeline is currently free of crude oil and charged with nitrogen; while in this condition, some sections will be replaced to achieve a design pressure in excess of the maximum operating pressure which will be applied to the pipeline over the life of the Grieve EOR project
Plans to monetize the pipeline are progressing and the process has been enhanced by the completion of the intelligent pigging operation and the results from that operation.
Elk has flown under the radar in Australia for reason of lack of knowledge about EOR plays, which deliver almost as much production as primary and secondary oil recovery.
However, the upcoming injection of CO2 highlights the progress that is being made on the Grieve EOR project.
Additionally, the decision to increase the CO2 injection rate is a clear sign that operator Denbury - a US$7 billion market cap with 15 CO2 EOR projects under its belt - is bringing its expertise into play.
Share prices in Elk have risen in the past week to A$0.28 this morning, bringing its market capitalisation up to about $41 million and confirming Proactive Investors' forecast back on 5 September 2012 that the company offered significant upside potential when its shares were priced at A$0.18 ($26 million market cap).
Proactive Investors continues to believe that Elk remains significantly undervalued at current levels and is bullish on prospects of further share price increases beyond $0.30.
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