Abstract Considering the dramatic increase of greenhouse gases concentration in the atmosphere, especially carbon dioxide, reduction of these gases seems necessary to combat global warming. Fossil fuel power plants are one of the main sources of CO2 emission and several methods are under development to capture CO2 from power plants. In this paper, CO2 capture from a natural gas fired steam cycle power plant using oxy-fuel combustion technology is studied. Oxy-fuel combustion is an interesting option since CO2 concentration in the flue gas is highly increased. The Integrated Environmental Control Model (IECM) developed by Carnegie Mellon University (USA) is used to evaluate the effect of this capture technology on the plant efficiency and economic parameters of the system. The IECM uses regression models based on other studies to evaluate the required energy for oxygen production unit (air separation unit) and CO2 purification and compression unit. In this work, these two units are simulated using the Aspen Plus software in parallel with the IECM, and the results are compared with the results of the IECM. This comparison verified that the power requirement evaluations from the IECM performance model and the Aspen Plus software are approximately the same. Since CO2 capture and transport are cost and energy intensive, the cost of electricity (COE) in capture plants increases significantly. According to the assumptions in this study, the cost of electricity for both the base plant and the capture plant are calculated using the IECM cost model. The cost of electricity for the base plant is equal to 66.8 $/MWh while the cost of electricity for the capture plant is 123.7 $/MWh. In addition, cost of CO2 avoided can be calculated by using the cost of electricity and CO2 emission rate in the base and capture plants. If CO2 storage cost or CO2 benefit is not considered, the cost of CO2 avoided is about 104 $/ton CO2 for a 237 MW power plant. However, it is shown in this study that if the captured CO2 is used for Enhanced Oil Recovery (EOR) in the nearby oil fields (assuming 100 km distance), the revenue gained can compensate for the extra cost of electricity produced by the oxy-fuel combustion natural gas steam cycle and consequently reduces the cost of CO2 avoided. A rule of thumb is used to evaluate the amount of EOR revenues. According to this rule of thumb, 0.25 ton of crude oil is recovered per ton of CO2 injected. A relation between gas and oil price is therefore required to consider an integrated natural gas fired steam power plant, CO2 pipeline and oil field as an overall system. Assuming that natural gas price is a function of oil price, a rough estimation of oil price in which Carbon Capture and Storage (CCS) is economically feasible can be found. In this study, the relationship between oil and gas price is based on a polynomial function. This function is determined according to the time series information of natural gas and oil price in recent years (1997–2008) in the United States. The prices of these fuels in Iran were not used because the prices are heavily subsidized. The results show that at high oil prices, about $60/bbl, all the costs of CO2 capture and transport to oil field can be compensated by EOR revenues which makes the integrated power plant and CCS with EOR economically feasible.