written by Stephanie Ng & Safina Jivraj
introduction
Since George H. Bussell and Edwin L. Drake made the first successful use of a drilling rig on a well drilled specially to produce oil, (Oil Creek near Titusville, Pennsylvania, 1859), the industry has learnt about the environmental consequences of oil and gas extraction. Over time, governments have worked alongside the extractive industry to limit its impact to our environment. But with the world wide web and access to digital information, like never before in our history, gaining a “social licence” to operate has had an important part to play in oil companies raising their game as far as their environmental and social performance. All facets of the production life cycle from exploration, drilling, field development, production and decommissioning (at one time or another), has been under the scrutiny of non-regulatory stakeholders. And, on occasion, incidents have led to bad press which has been extremely damaging, not least to the “brand image” of oil companies but to the industry as a whole. However, the demands for affordable oil and gas continue to increase and oil producers respond, by extracting these consumables from ever more difficult locations, which has its challenges and takes extreme levels of dedication, commitment and perseverance by all engineers involved. Although safety is never compromised, there often is a thin balance between operator’s economic success and cost to the environment.
This article hopes to tip the balance in favour of the environmental and social viewpoint and asks, “at what cost?”. It starts by taking a specific look at environmental targets for associated gas and is the first article from io on this subject which aims to frame the problem with an upcoming second article, which intends to focus on the current and near future technologies in response to such challenges.
the problem with associated gas
Associated gas appears to be where the industry is aligning its current cross hairs but what is associated gas and why should this now be the target? Oil production involves the processing of petroleum before subsequent processing and onward transportation / shipment to market. Gas is often found either dissolved within petroleum or as a ‘gas cap’ situated above petroleum, hence the term ‘associated gas’.
Traditionally associated gas was often seen as a waste or by-product. Operators would settle this ‘thorn in the side’ problem in the easiest way possible – it was sent to flare and burnt. Flaring however, not only wastes energy, it releases contaminants into the atmosphere including toxic volatile organic compounds (VOCs), smog forming nitrogen oxides and particulate matter, namely black soot, a rather potent climate warmer. In addition, flaring of associated gas massively contributes to increases in the greenhouse gas, such as CO2.
Environmental impact is only one side of this problematic coin. The loss in a potential feedstock to the world’s energy needs is also amiss. Especially at a time when fossil fuels are becoming increasingly more difficult, not only to find but, to extract and process. Solutions for projects should seek to tackle both the environmental and energy supply problems. This article seeks to outline the current size of our associated gas problem and ways in which we can and should tackle its 150-year-old practice of ‘flare & forget’!
the size of the problem
In 2015, the National Oceanic and Atmospheric Administration (NOAA) of the United States used satellite data and undertook a study to build, what was termed, the most comprehensive global gas flaring picture to date [1]. Figure 1 demonstrates of the volume of gas burned through flaring in 2012.
fig 1: gas flaring, 2012, courtesy of National Geographic[2]
Within the NOAA study over 7,400 sites were identified with a total flared gas volume estimate of more than 140 billion cubic meters (BCM) annually. The study showed that of the total gas flared, 90% could be attributed to upstream production areas, 8% to refineries and 2% to liquefied natural gas (LNG) terminals. The exact figure of how much gas was being lost is however uncertain. This is in part due to operators only having to release such data on a voluntary basis. Additionally, it is unlikely that any such reporting would include gas lost due to inefficiencies or leaks. A degree of further inaccuracy also appears within the NOAA study due to the difficulty in capturing cold flaring volumes. Rather than being flared, methane, the primary component in natural gas, is vented directly to the atmosphere. Although methane currently only accounts for between 10% – 15% of overall emissions globally it traps up to 72 times more heat than CO2 over a 20 year period [3].
The NOAA study is further supported by earlier studies which estimated global gas flaring to be in the range of 140 – 170 BCM per year from 1994 – 2008 [4] The World Bank estimates that for around 150 BCM of flared gas every year this causes around 400 million tons of CO2 in annual emissions. Or to put it another way, this flared gas is enough to provide about 750 billion kWh of electricity; or more than the entire African continent’s current annual electricity consumption [5]
current commitments & initiatives
It is without question that one of our greatest challenges and most pressing current needs is how best we tackle climate change whilst also allowing access to affordable and reliable energy to sustain the world’s current use and future growth. Meeting this challenge requires action from all.
A number of global agreements have tried to move countries onto a path of emission reduction and sustainable development. A key summit was that of Kyoto, where an international treaty was agreed and signed. This ultimately extended the 1992 United Nations Framework Convention on
Climate Change which committed parties to reduce greenhouse gas emissions.
Nations ultimately took these agreements and converted them into law developing both regulation and policy, thereby creating both technical requirements in setting standards for performance and economic policy to incentivise industry to reduce emissions.
In Figure 2, of the oil producing countries that are signatories to the Kyoto Protocol, only 18 have set overall emission targets, with only a further three having developed policy guidelines and / or specific emission targets for gas flaring and venting.
fig 2: Flaring and / or Venting Targets by Country [6]
There are a number of ways to reduce flared emissions. One way is by direct regulation, e.g Norway has an enforced policy of zero flaring in place via the Norwegian Petroleum Directorate, 2013 whereby gas flaring, other than volumes necessary for safety reasons during normal operation, is not permitted. In North Dakota oil producers are required to meet gas capture targets or face having their oil production rates capped [7].
The World Bank recognises that associated gas can be used in several productive ways or conserved (re-injection). As such it launched the ‘Zero Routine Flaring by 2030’ initiative which aims to bring together governments, oil companies and development institutions who recognise the current global flaring situation and agree to cooperate to eliminate routine flaring no later than 2030. Currently there are 76 endorsers of this initiative (Figure 3) including 27 governments, 34 oil companies and 15 development institutions.
fig 3: endorsers of the zero routine flaring by 2030 (ZRF) [8]
The initiative pertains to flaring for safety reasons, which nevertheless should be minimised. It further relates to outline that venting is not an acceptable substitute for flaring. The initiative emphasises the need for a coordinated approach amongst governments, the private sector and the international community for substantive impact in reducing associated gas flaring.
As the World Bank initiative gains traction it will, in io’s view, become part of the private investment Equator Principles guidelines. In essence these guidelines form a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in project finance. When this happens private investment funding for new projects will become extremely difficult, if not impossible, to obtain unless associated gas flaring meets the World Bank initiative.
when associated gas becomes an asset
For any new project, or indeed existing asset, economic consideration is typically the driving factor to investment. The very essence that associated gas is predominantly being flared globally, suggests that, at least in some instances, flaring is more commercially viable than consuming or exporting it. However, io believes that reducing flaring from associated gas goes far deeper than economics alone. Any new project or facility that is undertaken typically undergoes an initial due diligence study. This would involve an analysis and understanding of four key principle areas (figure 4), without which the true risk profile of the project would not be fully understood and a decision to proceed would be more uncertain.
fig 4: associated gas flaring reduction – the four key areas
While economics is the main force for a commercially driven operator to decide whether to flare associated gas or put it to commercial use, a large part of this is derived from the actual technological solution put in place. Firstly, oil and natural gas require separate technologies and equipment for production and processing, secondly the end use of associated gas will ultimately determine which technology is required. One initiative to aid in determining final commercialisation and technology selection would be to, where possible, cluster small and medium associated gas flaring sites. Using economies of scale to justify investment is often a key trick adopted to finalise investment.
An area that is often overlooked with respect to associated gas is the legal and regulatory framework that an operator will find themselves in. It is easy to argue that making associated gas commercially attractive is reason enough to ensure a reduction in flaring. Investment opportunities rarely turn into profitable investments automatically and often many hurdles need to be overcome. The role of both a fair and predictable legal and regulatory environment is key to ensure a successful step towards continued associated gas flaring reductions.
Operators will first fully need to understand the amount of associated gas that will be available to them during all phases of operation. If the field has small or limited amounts of associated gas, then creative ways of use may be required. This may be internal consumption within the facility via power generation; or re-injection to aid recovery; or onward sale directly as raw gas for onward processing by a third-party processor. Determining the best technical option will require considerable investment and understanding of markets, infrastructure requirements and economics before a final decision can be made. Indeed, it is entirely possible that a combination of solutions may be the most commercially attractive. Either way, respective due diligence will be required. For further discussion on technology adoption and market forces with regards to associated gas and gas monetisation, we refer you to two io powerful thinking articles [9] and [10].
embrace powerful thinking
This article demonstrates that early engagement and identification of the value critical environmental and social issues is a key contributing factor to finding the best solution by an integrated multi discipline team. In response to this, io has environmental consultancy services led by Safina Jivraj, comprising environmental engineering; GIS; social performance; environmental modelling; ESIA management; environmental and social due diligence, screening and advisory.
references
[2] “The World is Haemorrhaging Methane, and Now We Can See, National Geographic Energy”, 13 January 2016, Christina Nunez, National Geographic, https://news.nationalgeographic.com/energy/2016/01/150113-methane-aliso-canyon-leak-noaa-flaring-map/
[3] “Methane vs. CO2 Global Warming Potential”, Anthony R. Ingraffea, https://olis.leg.state.or.us/liz/2015R1/Downloads/CommitteeMeetingDocument/56962
[4] “A fifteen year record of global natural gas flaring derived from satellite data”, 2009, Christopher D. Elvidge et al., Energies, ISSN 1996-1073, mdpi.com/1996-1073/2/3/595/pdf
[5] “New data reveals uptick in global gas flaring”, 12 December 2016, http://www.worldbank.org/en/news/press-release/2016/12/12/new-data-reveals-uptick-in-global-gas-flaring
[6] “Regulation of associated gas flaring and venting: A Global Overview and Lessons”, World Bank Group, 29554, http://documents.worldbank.org/curated/en/590561468765565919/pdf/295540Regulati1aring0no10301public1.pdf
[7] “The Reduction of Upstream Greenhouse Gas Emissions from Flaring and Venting”, 2014, European Commission Directorate – General for Climate Action, https://ec.europa.eu/clima/sites/clima/files/transport/fuel/docs/studies_ghg_venting_flaring_en.pdf
[8] “Zero Routine Flaring by 2030”, http://www.worldbank.org/en/programs/zero-routine-flaring-by-2030
[9] “stranded oil and small marginal pools – what do we do with the gas?”, io insights article
[10] “part II: gas monetisation, external economic and non-technical factors”, io insights article