Since the early 1980s, almost as long as US oil output has been waning, companies have been pumping small amounts of CO2 into old Texas oilfields to force to the surface remaining crude that is trapped between complicated rock formations.

Depending on the price of oil and CO2, the United States could quadruple its oil reserves to 89 billion barrels, by pumping more of the gas into oilfields, the Department of Energy said in a report earlier this month.

But to get to that prize the United States would need 350 trillion cubic feet, more than 10 times the amount in natural underground deposits of the gas, said Vello Kuuskraa, president of Advanced Resources International, whose study the DOE quoted.

"The great bulk of the CO2 is going to have to come from industrial sources," said Kuuskraa. Currently 80 percent of CO2 pumped into US oilfields comes from those natural deposits, such as the Bravo dome in New Mexico, of which Occidental Corp owns a majority share.

Taking CO2 from natural sources does nothing to cut emissions of the gas from coal-and-natural-gas-burning power plants, the source of 40 percent of CO2 emissions.

With incentives, CO2 could be captured from power plants helping companies to sell credits in future cap and trade emissions markets.

"Tragically in this era when we are worried about global warming and overloading the earth's atmosphere with CO2, most of enhanced oil recovery is served by pulling CO2 out of holes in the ground...and sticking it back into the ground rather than capturing it from huge industrial sources," said David Hawkins, a climate expert at the Natural Resource Defense Council in Washington, DC.

INCENTIVES

Equipment can capture CO2 at fossil fuel-burning power plants, but the technology, in its infancy, is expensive.

Utilities, such as American Electric Power and Cinergy Corp, are building clean-burning coal plants to which the equipment can be added more cheaply than conventional plants. But until the CO2-capturing technology becomes cheaper, or is required by law, they have no plans to add it to their plants.

US utilities can't earn credits for reducing emissions as their European counterparts can in an emissions trading scheme set up under the Kyoto Protocol. President George W Bush pulled the United States out of the pact.

But seven states in the Northeast are trying to create a market in which power plants that cut emissions can sell credits to companies that chose not to cut emissions. Other states, including California, hope to follow their lead.

And incentives for oil companies to bury more CO2 could be forthcoming. Under last year's Energy Act, the Bureau of Land Management and the Minerals Management Service are considering whether to extend incentives to oil companies that pump CO2 into offshore and on land oilfields.

Oil majors did not comment on whether they are planning in coming years to expand the production of US oil with CO2.

But in a report last month Exxon Mobil Corp said carbon capture and storage is an "important option to address global CO2 emissions." BP Plc and Occidental are considering injecting CO2 from power generation at aging California oilfields.

In addition, Royal Dutch Shell Plc and Norway's state oil company Statoil said last week they are planning the world's biggest scheme to bury CO2 from power plants off Norway. The $1.5 billion plan, due to start after 2010, would be the world's first project to use CO2 offshore.

HURDLES

Costs could be a concern. Kuuskraa said producing much of the technically recoverable 89 billion barrels in the United States would make economic sense as long as the oil price remains above $30 a barrel. The price of CO2 itself, currently about $1 per thousand cubic feet, would have to fall to about 75 to 80 cents.

At current costs, purchasing CO2 can cost oil companies about $6 for every barrel produced with the technology.

Beyond the expense, some environmentalists are concerned about the permanence of CO2 burial especially in oilfields which by definition have been drilled repeatedly over the years. They also worry the gas could leak after the fields are fully drained of oil and forgotten about.