Chevron Enhances Oil Recovery Using Solar Energy
Chevron (NYSE:CVX) launched a feasibility project this week to showcase the viability of using solar energy to enhance recovery from an old oil field. Chevron Technology Ventures (CTV) demonstrated the use of solar power to boil water into steam using around 7,600 mirrors to concentrate the sun’s energy over a solar boiler. [1] The steam is then injected into the oil well to improve its productivity. Chevron competes with other oil majors such as Exxon Mobil (NYSE:XOM), ConocoPhillips (NYSE:COP), BP (NYSE:BP) and independent explorers such as Anadarko Petroleum (NYSE: APC).
We have a $104 price estimate for Chevron which implies a 14% premium over its current stock price.
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Technology could reduce operating costs
The 100 acre solar power plant in Coalinga, California will be used to augment the gas-based steam generation facility at the oil field. [1] The steam is used to heat the heavy oil deposits to reduce its viscosity and make it flow more readily. The solar heating facility will reduce the use of natural gas spent on generating steam and the technology could significantly impact heavy oil production in regions with limited gas supply.
Solar thermal is thought of as being a much cheaper option to heat water into steam than burning natural gas, which should reduce the operational costs incurred by Chevron in the fields where it produces heavy oil.
Market in the Middle East
The Chevron solar facility could be the first step in the commercial adoption of solar thermal technology. Chevron is looking to work with Saudi Aramco and the Government of Kuwait in the exploration of the Wafra field that has around 25 billion barrels of heavy oil reserves. [2] The Coalinga project uses technology from solar thermal company BrightSource, in which Chevron owns an equity stake. [3] BrightSource, which entered into its contract with Chevron at a loss in order to prove its technology on a commercial scale, is expected to use the adoption to market its solutions to other facilities producing heavy oil.
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Notes:- Chevron Technology Ventures Launches World’s Largest Solar Enhanced-Oil-Recovery Project, Business Wire [↩] [↩]
- Chevron Uses Solar Power To Steam Oil Out Of California Field, Christopher Helman, Forbes Blogs [↩]
- UPDATE 2-BrightSource-Chevron project incurs heavy losses, Reuters [↩]