Shallow Oil & Gas, Inc., is an independent domestic oil and natural gas producer. The Company's strategy is to use efficient reservoir maintenance and innovative technology to generate stable cash flows and production by acquiring a portfolio of oil and gas leases to generate asset growth, and to deliver a sustainable rate of return for our shareholders.
The current market environment for crude oil and natural gas has created an opportunity for North America to reduce its dependence on unstable foreign sources of energy. Shallow is currently evaluating producing leases in southern Kansas, Oklahoma, Texas, Louisiana, Ontario, British Columbia and Alberta.
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Crude oil development and production in U.S. and Canadian oil reservoirs can include up to three distinct phases: primary, secondary, and tertiary (or enhanced) recovery. During primary recovery, the natural pressure of the reservoir or gravity drive oil into the wellbore, combined with artificial lift techniques (such as pumps) which bring the oil to the surface. But only about 10 percent of a reservoir's original oil in place is typically produced during primary recovery. Secondary recovery techniques to the field's productive life generally by injecting water or gas to displace oil and drive it to a production wellbore, resulting in the recovery of 20 to 40 percent of the original oil in place. However, with much of the easy-to-produce oil already recovered from U.S. and Canadian oil fields, producers have attempted several tertiary, or enhanced oil recovery (EOR), techniques that offer prospects for ultimately producing 30 to 60 percent, or more, of the reservoir's original oil in place. Three major categories of EOR have been found to be commercially successful to varying degrees:
Each of these techniques has been hampered by its relatively high cost and, in some cases, by the unpredictability of its effectiveness. CO2 Injection Offers Considerable Potential Benefits
The EOR technique that is attracting the most new market interest is carbon dioxide (CO2)-EOR. First tried in 1972 in Scurry County, Texas, CO2 injection has been used successfully throughout the Permian Basin of West Texas and eastern New Mexico, and is now being pursued to a limited extent in Kansas, Mississippi, Wyoming, Oklahoma, Colorado, Utah, Montana, Alaska, and Pennsylvania. Until recently, most of the CO2 used for EOR has come from naturally-occurring reservoirs. But new technologies are being developed to produce CO2 from industrial applications such as natural gas processing, fertilizer, ethanol, and hydrogen plants in locations where naturally occurring reservoirs are not available. One demonstration at the Dakota Gasification Company's plant in Beulah, North Dakota is producing CO2 and delivering it by a new 204-mile pipeline to the Weyburn oil field in Saskatchewan, Canada. Encana, the field's operator, is injecting the CO2 to extend the field's productive life, hoping to add another 25 years and as much as 130 million barrels of oil that might otherwise have been abandoned.
A turning-point in CO2-EOR advances is a project funded by DOE in the Hall-Gurney field in Kansas that seeks to demonstrate this technology's time has come - providing energy, economic and environmental benefits. A companion project underway in the Hall-Gurney field involves testing the feasibility of 4-D high resolution seismic monitoring of CO2 injection in thin, relatively shallow mature carbonate reservoirs. Incorporating such time-lapsed monitoring data into CO2-EOR programs could dramatically improve the efficiency and economics of using the technology in many Midcontinent fields. New breakthroughs in CO2-EOR recovery technology could further enhance oil recovery in Texas and other oil producing states. One DOE-industry partnership project is investigating gravity-stable CO2 injection in the Permian Basin in West Texas, where the goal is to increase oil recovery in the Scurry Canyon Reef field. DOE Basin-Oriented CO2-EOR Assessments
In February 2006, a series of technical reports released by the Department on Energy (DOE) Office of Fossil Energy highlight the significant potential for state-of-the-art and advanced oil recovery technologies to significantly contribute to the development of the large volume of remaining undeveloped domestic oil resources in the United States. Ten basin-oriented assessments- four new, three updated and three previously released- estimate that 89 billion barrels of additional oil from currently "stranded" oil resources in ten U.S. regions could be technically recoverable by applying state-of-the-art CO2-EOR technologies.
Additional work has examined potential improvements in CO2-EOR technologies beyond the state-of-the-art that can further increase this potential. This work evaluating the potential of "game changing" improvements in oil recovery efficiency for CO2-EOR illustrates that the wide-scale implementation of next generation CO2-EOR technology advances have the potential to increase domestic oil The presence of an oil bearing transition zone beneath the traditionally defined base (oil-water contact) of an oil reservoir is well established. What is now clear, and as recently documented in a series of DOE Office of Fossil Energy reports, is that, under certain geologic and hydrodynamic conditions, an additional residual oil zone (ROZ) exists below this transition zone, and this resource could add another 100 billion barrels of oil resource in place in the United States, and an estimated 20 billion barrels could be recoverable with state-of-the-art CO2-EOR technologies. Large volumes of technically recoverable domestic oil resources remain undeveloped and are yet to be discovered in the United States, and this potential associated with CO2-EOR represents just a portion, albeit large, of this potential. Undeveloped domestic oil resources still in the ground (in-place) total 1,124 billion barrels. Of this large in-place resource, 430 billon barrels is estimated to be technically recoverable. This resource includes undiscovered oil, "stranded" light
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