Natural resources company Highlands is hoping to acquire 46,000 acres of land in Arizona believed to host significant carbon dioxide (CO2) resources in the US.

The UK-based company has made an application to acquire leases in Apache County that are prospective for commercial volumes of CO2. Grant of leases is subject to ratification by the state and Highlands expects this within the next two weeks.

The company said the area sits adjacent to land which was identified as a target for future CO2 production by Kinder Morgan, one of the leading suppliers of CO2 to the Permian Basin.

Plans had been developed to construct a pipeline from Apache County to the existing pipeline network that provides CO2 for the Permian Basin. Pricing for CO2 in the Permian Basin is usually linked to the price of WTI oil and when it declined in 2015, Kinder Morgan announced that it would not pursue the build.

Highlands’s acquisition and maintenance of the leases will be at minimal cost and therefore the board believes that the recent sustained increase in oil prices signals the right time to acquire the C02 leases.

CO2 has multiple applications and therefore Highlands will commence discussions in du course with a range of potential end users with a view to funding drilling activity. Producers are often able to negotiate take or pay contracts and pricing floors to ensure recovery of their investment in CO2 supply sources.

Of most immediate relevance to Highlands, CO2 is used in the oil and gas industry to extract in-place oil from pressure depleted wells. Importantly, the United States Department of Energy estimates that there are up to 83 billion barrels of technically recoverable oil in the United States Lower 48 states via CO2 enhanced oil recovery.

Robert Price, Highlands’ Chairman and CEO, said, “Highlands has a growing portfolio of assets which have the potential to significantly enhance well productivity. This is an exciting project in an area identified by one of the region’s leading producers as being prospective for CO2 and we look forward to evaluating it further. In the meantime, we remain focused on increasing our cash flow through completion of the six additional wells currently being developed at our East Denver project, and on commercialising DT Ultravert through the acquisition of assets which have the potential to lower the cost for end users.”