Companies to open natural gas plant in West Texas

Oklahoma City-based SandRidge Energy Inc. and Los Angeles-based Occidental Petroleum Corp. announced the agreement Monday. Officials from the companies said the plant, which will be located in Pecos County, Texas, will produce at least 450 million cubic feet of carbon dioxide per day after it opens in 2011.

Carbon dioxide is used in crude oil production.

SandRidge will drill, produce and deliver natural gas to the plant for processing, while Occidental will pay the $1.1 billion in construction costs for the plant and will operate the facility and treat the gas under a 30-year agreement.

SandRidge will retain 100 percent of the methane gas after treatment at the plant, while Occidental will retain all of the carbon dioxide. As part of the agreement, Occidental will receive an additional 50 million cubic feet of carbon dioxide from existing SandRidge gas processing plants.

The project also will include a 160-mile pipeline from McCarney, Texas, to an industry carbon dioxide hub in Denver City, Texas. The pipeline is not part of the agreement.

Ray R. Irani, the chairman and chief executive officer of Occidental, said the project will allow his company to develop about 500 million barrels of oil reserves from currently owned assets.

"This agreement underscores the vast resource of natural gas that SandRidge controls in the West Texas Overthrust," said Tom Ward, SandRidge's chairman and CEO. "The Century Plant will allow us to not only produce this high (carbon dioxide) gas, but will also provide an environmentally responsible process for the use of (carbon dioxide) to increase U.S. oil production."