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To Convert Or To Continue? A Real Option Analysis of Injecting Co2 In A Mature Gas Reservoir

Injecting carbon dioxide into mature gas reservoirs could create environmental and commercial benefits. The resulting lower emissions and higher productivity could outweigh the associated costs. But what is the value of such inherent project flexibility? especially when value drivers like costs and production are uncertain. To reflect the value potential of such decisions, the commonly used “high” and “low” price forecasts are unlikely to reflect the value potentials. Instead, we use a stochastic model to describe uncertain price expectations and use an integrated techno-economic framework to address the managerial flexibility of converting some of the production wells to CO2 injection. Using numerical subsurface reservoir model along with a price model, we show the value of creating opportunity from optimally converting wells. The framework leads to insights into the feasibility of CO2 injection in depleted reservoirs. The outcomes show the key drivers of value in integrated project appraisals.