May/June 2021 landman.org

APPROACHES FOR INTEGRATING RENEWABLE ENERGY TECHNOLOGIES IN OIL AND GAS OPERATIONS Read the technical report on page 38. Approaches for Integrating Renewable Energy Technologies in Oil and Gas Operations

This technical report was first published in January 2019 (NREL/TP-6A50-72842) by the Joint Institute for Strategic Energy Analysis, which is operated by the Alliance for Sustainable Energy LLC, on behalf of the U.S. Department of Energy’s National Renewable Energy Laboratory, the University of Colorado-Boulder, the Colorado School of Mines, the Colorado State University, the Massachusetts Institute of Technology and Stanford University. Reprinted with permission. LANDMAN.ORG

Petroleum — including both oil and gas — heats our homes, drives our transportation system, generates our electricity and makes modern life possible. Continued demand from developed countries along with growth from developing economies implies demand for oil and gas will likely continue to increase.1 Under current policies, global oil demand in 2040 is expected to be roughly 26 million barrels per day greater than in 2016.2 3 As demand is increasing, conventional oil and gas reserves are decreasing, leading to a shift in production to unconventional sources and a growing use of techniques. by/ JILL ENGEL-COX Production from unconventional reserves and the use of EOR raises the energy intensity of an already energy intensive industry. Nearly 10% of oil is used in the production, transportation and refining process.4 This number is even higher for many unconventional sources — it takes a quarter of a barrel of oil to produce a barrel of heavy oil.5 Energy used to produce, transport and refine oil represents major operation costs. Furthermore, many oil and gas companies have set goals or made corporate level commitments to reduce their greenhouse gas emissions, in part to address issues raised in national and global studies.6 The petroleum industry faces the difficult task of meeting growing demand and by/ SEAN ERICSON growing operational energy needs while reducing operations emissions. One way to meet growing energy demand and production energy intensity, while also meeting emissions targets, is to integrate renewable generation technologies into oil and gas operations. Incorporating renewable energy technologies and otherwise reducing the amount of fossil fuels used to produce, transport and refine petroleum can decrease both energy costs and emissions, as well as preserve oil and gas resources for their highest value uses. The oil and gas industry has several aspects that are conducive to integrating renewable energy technologies. Production facilities requiring large amounts of electricity that could be generated with by/ DOUG ARENT renewable sources — such as wind or solar — are often in remote locations. EOR and oil refining also

1 International Energy Agency 2017. 2 Id. 3 This represents a 27% increase from the average demand in 2016 of 96.2 million barrels per day. 4 Halabi, Al-Qattan and Al-Otaibi 2015. 5 Wesoff 2015. 6 USGCRP 2017, IPCC 2018.

\39 LANDMAN MAY/JUNE 2021 require large amounts of heat, which operations. A full version of the Depletion of High-Quality may be supplied by renewable original paper — including sections Oil Reserves thermal technologies, such as solar on midstream transportation and In the early days of the petroleum thermal or geothermal. Use of waste downstream refining processes industry, shallow oil and gas reserves heat or gas to run cogeneration along with detailed references — with ample reservoir pressure were facilities can, in some cases, also can be accessed at nrel.gov/docs/ in abundant supply. Today, easy- be economic. fy19osti/72842.pdf. Additional papers to-reach oil and gas resources are Renewable energy technologies on this and related topics can be found largely depleted. Remaining reserves are already integrated in some oil on JISEA’s website at jisea.org. are marked by deeper reservoirs, and gas operations. Furthermore, lower pressures and less quality. As the combination of increasing CURRENT TRENDS AND an example, Figure 1 displays the energy intensity in the petroleum GROWING OPPORTUNITIES increase in average water and well industry and dramatic decreases in Three parallel trends are depths in the Gulf of Mexico. Deeper costs for many renewable energy increasing the profitability of water and deeper wells increase technologies is shifting the economic renewable technology integration in both the complexity and the energy calculus in favor of more integration. oil and gas operations: intensity of operations. The trend toward production from lower- However, renewable energy 1. Depletion of higher-quality oil quality reserves may also be seen in technologies are not applicable reserves leading to an increased terms of the increased exploitation in all cases. Renewable energy energy intensity of petroleum of heavy oil and tar sands and the technologies must be both reliable operations. and economically competitive to be expanded use of EOR techniques — commercially viable. 2. Environmental leadership in the the injection of gas, heat or liquid to This article provides an overview of oil and gas industry. boost field recovery rate. where renewable energy technologies 3. Falling costs for renewable While sufficient petroleum can be integrated into oil and gas generation technologies. resources remain to meet demand for the foreseeable future, the shift toward marginal reserves increases FIGURE 1 the energy intensity of production. A 2017 study of five large petroleum Average water and drilling depth in the fields concludes that the net energy Gulf of Mexico over time. Data from Bureau of Ocean ratio — the ratio of energy produced to the energy used to produce it — and Energy Management. Accessed 2017.* for each field declined by 46% to 1,747 88% over the last four decades.7 An in-depth analysis of conventional production in Canada shows a similar trend, with the ratio of energy output to energy input falling by roughly half from 1993 to 1,224 2009.8 A combination of declining field production and rising energy 961 expenditures on enhanced recovery methods contributed to the drop 1,000 1,500 in NER.9 Lower-quality reserves lead to higher energy intensity in production, 526 transportation and refining of petroleum. This contributes to more 500

Average Water Depth (Meters) demand for energy in each stage of 336 316 the petroleum supply chain, which in

196 Average Drilling Vertical Depth (Meters) turn results in more possibilities for renewable technology integration to 0 9,000 10,000 11,000 12,000 7 Tripathi and Brandt 2017. 8 Freise 2011. 1980-1985 1985-1990 1990-1995 2010-2015 1995-2000 2005-2010

2000-2005 9 Id at 8. * boem.gov

40/ LANDMAN.ORG reduce energy costs. Along with cost FIGURE 2 savings, renewable technologies can reduce emissions, which is becoming Levelized cost of various utility-scale generation an increasingly important factor. technologies. Data from Lazard Levelized Cost of * Environmental Leadership in the Oil Energy reports from 2008-2017 and Gas Industry Industrial oil and gas practices Utility-Scale Solar (Unsubsidized) have continued to advance to meet 160 Onshore Wind (Unsubsidized) or exceed environmental regulations. Pulverized Coal (Lower Range) Adverse incidents are rare but CCGT (Lower Range) sometimes of high consequence. It 140 is well recognized that oil and gas operations emit pollutants, and 120 continuous or episodic activities or incidents may lead to environmental degradation. Improperly drilled 100 or completed wells can lead to oil spills, contaminated water spills and 80 methane leaks. Machinery such as compressors and diesel generators increase noise and air pollution. 60 Operations can lead to traffic Levelized Cost ($/MWh) congestion, and drilling processes can contaminate water supplies. 40 Finally, petroleum refining processes emit gases including carbon dioxide, 20 carbon monoxide, methane, organic compounds, nitrogen oxides, sulfur 2008 2010 2012 2014 2016 dioxide and hydrogen sulfide. Meeting environmental regulations *Bands for wind and solar represent low and high cost estimates. Because high cost estimates for coal and natural gas incorporate the cost of carbon sequestration, the can be costly, and a failure to meet figure uses low-cost estimates instead of midpoint estimates for these technologies to requirements may result in fines and better capture current production costs. Cost assumptions can be found in Lazard 2017. impact a firm’s social license to operate. Operations occurring in closer 13% between 2010 and 2015.10 and In 2009, the average levelized cost of proximity to urban centers and methane emissions from natural electricity from solar photovoltaics suburban developments, as well gas wells fell by 40% between 1999 was more than seven times the cost as a growing awareness of the and 2012.11 Furthermore, many in 2017. Figure 2 displays the steep environmental effects of operations oil companies have set goals for cost drop of electricity produced — both local consequences such as additional emissions reductions. from wind and solar. Whereas air pollution and induced seismicity Because of the falling costs, power from wind and solar used and global impacts such as climate renewable energy technologies could to be prohibitively expensive, it is change — are further intensifying become important tools for the now in some cases the lowest cost the importance of environmentally goals of meeting additional energy source of electricity. If expected sound production practices. demands and stricter emission continued future cost decreases The petroleum industry already standards while reducing fuel usage for electricity from wind and solar recognizes this fact and has been and operation costs. are realized, generation from these taking a leading role in reducing sources will become even more the environmental impact of Falling Renewable Energy Costs competitive in the coming years. operations. Due to industry action, Price declines in the last decade Furthermore, battery storage greenhouse gas emissions from the have revolutionized the economics of technology and technology for major private oil companies fell by renewable energy technologies. demand-side management, which

10 Hirtenstein 2017. 11 Bluestein, et al. 2015.

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generation technologies that do not receive the ITC. Several state and local policies further support renewable generation. Combined, Every road leads somewhere. these policies significantly increase the economics of renewable Make the right turn. generation projects. As renewable energy costs have fallen to the point where renewable prices are now in many cases competitive with other generation technologies, some production and ITCs have been steadily phased out. Further phaseouts are planned and expected in the coming years. However, while tax credits will likely be lower in the future, the economics of zero-emissions generation may become more compelling in the NORTH DAKOTA • MONTANA • WYOMING coming years if carbon emission ZŝŐŚƚͲŽĨͲtĂLJͮƵĞŝůŝŐĞŶĐĞͮďƐƚƌĂĐƚŝŶŐͮdŝƚůĞZĞƐĞĂƌĐŚͮ>ĞĂƐĞĐƋƵŝƐŝƚŝŽŶ pricing and emission-reduction 1-800-730-0361 www.bjkadrmasinc.com [email protected] regulations are further adopted. While renewable subsidies and emissions prices raise the value can compensate for generation Thus, renewable integration must of renewable integration, some variability, have also seen remarkable pass a test for cost-effectiveness. policies reduce the relative value of cost declines. However, the operating regulator renewable technologies. The most The result of renewable energy and fiscal environment — such as notable of such policies are subsidies cost declines is a paradigm shift tax codes — along with government on electricity, oil or natural gas. This in how renewable technology policies and social environment, can is important as many of the largest integration in oil and gas operations have direct impacts on profitability. oil-producing countries also have the can be viewed. Whereas 10 years Policies such as emission regulations largest fossil fuel subsidies. Figure 3 ago renewable technology was only can greatly enhance the value of displays countries with the highest applicable to cases where diesel or renewable technology integration, per capita fossil fuel and electricity gas turbines could not be readily while policies such as fuel subsidies subsidies. There is a clear correlation deployed, going forward renewable diminish their applicability. between petroleum-producing technology will, in a growing Almost every country has countries and countries with high number of cases, be the lowest-cost implemented policies supporting levels of such subsidies. solution. An understanding of where renewable generation technologies. Energy subsidies for traditional renewable generation is applicable Almost all countries have renewable fossil fuels reduce the costs of and may be integrated can lead to energy targets, and most have producing heat and electricity for both lower environmental impact and renewable investment and/or oil and gas operations, but they reduced operation costs. renewable production tax credits can also offer opportunities for along with public investment or loans renewable technologies.13 Fiscal GOVERNMENT POLICIES to support renewable energy.12 The costs of energy subsidies are Private oil companies have an United States, for example, provides leading to pressures for subsidy obligation to generate returns for a federal investment tax credit for reform.14 Energy subsidies generally their shareholders, and national oil qualifying renewable generation reduce investment in operation companies have an obligation to technologies and a production technologies, meaning operations generate revenue for their country. tax credit for many renewable in countries with energy subsidies

12 REN21 2017. 13 El-Katiri and Fattouh 2017. 14 Fattouh and El-Katiri 2012.

42/ LANDMAN.ORG are often inefficient.15 At the same FIGURE 3 time, subsidy reform can be politically and economically costly. Total energy subsidy by country, 2016. The Iranian subsidy reform in 2010 Figure adapted from International Energy Agency 2017. raised natural gas prices by over 700% and diesel prices tenfold.16 Renewable integration presents an Kuwait opportunity to increase operational efficiency and lower costs, thereby Turkmenistan dampening the cost shocks from subsidy reforms. Thus, while energy Saudi Arabia subsidies diminish the opportunities for renewable integration, they UAE present opportunities for countries attempting subsidy reform. Bahrain The three trends of declining reserve quality (and the resulting Venezuela increase in energy requirements), growing environmental awareness Trin. & Tob. and falling renewable generation costs are leading to an uptake of Qatar renewable technologies along the supply chain. Government and Iran industry policies are further helping to overcome integration challenges. Libya UPSTREAM: RENEWABLE INTEGRATION IN OIL AND Algeria GAS PRODUCTION The oil and gas industry has a Kazakhstan long history of integrating renewable energy in operations. One of the Brunei earliest commercial applications of solar PV panels was their use Russia in warning lights for offshore oil installations starting in the early Uzbekistan 1970s.17 Often remotely located and off-grid, oil and gas operations Azerbaijan primarily generate power by gas turbines or diesel generators, which Egypt can be expensive to operate and maintain. As production operations Iraq Oil Subsidy can have significant electricity Natural Gas Subsidy requirements, power generation can Ecuador be a substantial cost. For example, Electric Subsidy typical power requirements for an Ukraine Coal Subsidy offshore platform are between 20 and 35 MW.18 Renewable energy can be used 0 200 400 600 800 1,000 to reduce fuel use and maintenance costs in upstream operations. Per Capita Fuel Subsidy

15 Fattouh and El-Katiri 2012; Sovacool 2017. 16 Id at 20. 17 Id at 5. 18 Id at 15.

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fields, in the secondary and tertiary recovery phase, tend to have higher energy requirements than fields in the primary production phase. However, all phases in the production life cycle, along with drilling operations, offer opportunities for TITLE EXAMINATION renewable technologies to lower CURATIVE GUIDANCE AND SUPPORT costs and emissions. OPERATIONAL AND REGULATORY ADVISING MINERAL/ ROYALTY RECEIVERSHIPS Electrification of Drilling and ACQUISITIONS/ DUE DILIGENCE OIL & GAS TRANSACTIONS/ DOCUMENT PREPARATION Primary Recovery Drilling entails significant short- PRACTICING IN: TEXAS, NORTH DAKOTA, WYOMING, term energy requirements. A single OKLAHOMA, NEBRASKA, OHIO, AND NEW MEXICO. drilling rig can require more than 1 MW of power to operate.20 As drilling operations only last a 210.824.1934 / [email protected] / AOENERGYLAW.COM few weeks, these high-power 900 NE LOOP 410 • SUITE E107 • SAN ANTONIO, TEXAS 78209 requirements are only needed for a relatively short duration. Primary recovery operations, on the other hand, have relatively lower energy requirements that are sustained over Furthermore, renewable generation 3. Tertiary Recovery. Also known as several years. can reduce noise, decrease EOR, tertiary recovery consists of The energy for drilling and emissions and increase safety. For a variety of methods to stimulate primary recovery operations each stage in the life of an oil field, production. Examples include are often provided by diesel or different renewable technologies can hydraulic fracturing, steam natural gas generators. Diesel be deployed. The three production injection, in situ combustion and fuel requirements for drilling and stages are: chemical injection. An additional constructing a conventional oil well 20% of total initial reserves may 1. Primary Recovery. During typically range between 18,000 and be extracted during tertiary 21 primary recovery, there is 24,000 gallons. For shale gas wells, recovery. sufficient well pressure for oil fuel consumption is generally much and gas extraction. Artificial An individual field may not higher, often requiring more than lift methods such as electric experience all three production 50,000 gallons of diesel fuel per well submersible pumps and rod regimes, and separate wells and requiring more than 80,000 pumps are often used to increase within a field may be in different gallons in some plays.22 Renewable output. About 5% to 15% of regimes at any given period. generation can reduce or eliminate reserves are extracted during However, the separation is a useful the need for a generator, which can primary recovery (Abromova, construct for both understanding result in substantial fuel savings. et al. 2014). general production stages and When operations are sufficiently understanding where renewable close to electrical lines, the 2. Secondary Recovery. As well generation technologies may electricity grid can be used to power pressures fall, production moves be integrated. operations. Using electricity can into the secondary recovery Energy requirements vary reduce noise, emissions and traffic phase. Gas or injection fluids throughout the life of the field. congestion, which can be especially are used to increase reservoir Operation energy intensity tend to important when operations are pressure. An additional 10% to be low during the primary recovery close to urban centers. An electrical 20% of reserves can be extracted phase and then increase as well connection also allows for renewable from secondary recovery.19 pressure declines. Hence, older energy to be integrated into various

19 Veld and Phillips 2010. 20 Quinlan, et al. 2011. 21 Clark, et al. 2011. 22 Id.

44/ LANDMAN.ORG points of operations via a microgrid. commercial operation.26 Combined to decrease as the technology Microgrid solutions empower users with battery storage, matures. The average strike price to integrate distributed generation pumps could be applicable to off-grid for European offshore wind projects into a versatile, reliable and locations with sufficient sunlight. that come online between 2021 environmentally friendly operation. and 2025 is less than half the strike Oil operations are frequently Renewable-Energy-Powered price for similar projects between conducted in areas with available Secondary Recovery 2016 and 2020.29 As wind costs renewable energy resources. Oilfield Renewable generation can be fall, it will become economically and well pad equipment could be especially well suited to powering attractive to substitute power from converted to electric power and water injection pumps to stimulate oil diesel and gas generators with then connected via a microgrid with recovery because production from power from wind platforms. Finally, a controller that optimizes multiple water injection is not significantly wind integration reduces carbon clean power sources (see Figure 4). affected by injection variability.27 An emissions, which can be beneficial This approach has been successfully important potential application is to countries that are attempting to implemented at remote military using offshore wind power to power meet climate targets and in areas bases, off-grid communities, and water injection pumps. that price carbon emissions. islands. Power sources could consist By one analysis, offshore Wind-powered water injection of solar PV/wind systems, fuel cells, wind was found in 2012 to be an can provide water injection far from energy storage, hydrogen, field gas economic and environmentally the platform, which reduces the or even grid power. This approach sound option for supplying need for lengthy water injection reduces leaks and emissions, electricity to offshore oil and gas lines and can eliminate the need provides resiliency during outages 28 and optimizes for least cost. platforms in some cases. Costs for costly modifications for oil A notable example of where for offshore wind generation have platforms not initially designed for renewable technologies can be fallen significantly since then water injection. The Wind Powered integrated into upstream operations and are anticipated to continue Water Injection project completed is to power artificial lift pumps. When there is not enough well pressure for oil to flow to the surface, a rod FIGURE 4 beam artificial lift pump — often referred to as a sucker rod pump Schematic for a comprehensive approach to electrification or a jack pump — is used to assist of the well pad and platform via microgrids extraction.23 In many areas, rod beam pumps are used extensively. For example, more than 80% of oil production wells operating in the western United States are installed with a rod beam pump.24 Solar power, combined with a capacitor to store regenerative power during the rod downstroke, can be used to power a rod beam pump. Test cases have shown significant potential energy savings,25 and solar powered oil pumps are now beginning to see

23 For more information about sucker-rod lifts and beam-pumping systems, see http://petrowiki.org/Sucker-rod_lift. 24 Endurthy, Kialashaki and Gupta 2016. 25 Id. 26 Healing 2015. 27 Feller 2017. 28 Id at 15. 29 Musial, et al. 2017.

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than CSP for electricity generation PRACTICING IN: because solar thermal EOR does not Texas, New Mexico, Oklahoma, require a turbine to convert steam Ohio, Utah, Colorado, to electricity, which greatly reduces North Dakota and Mississippi project cost and complexity. While CSP capital costs are "Stand-Up" Courthouse significantly higher than for a Examination of Instruments comparable natural gas system, fuel Traditional In-Office Title cost savings have been found to make Examination solar thermal EOR competitive with Full Range of Title Opinions traditional natural gas EOR in some cases.35 The profitability of solar Title Curative Support thermal EOR relative to alternatives Operational Advising varies with natural gas prices, cost of capital and field characteristics, Regulatory & Administrative Law such as the amount of solar radiation Due Diligence and expected field lifetime. There is generally an alignment between 210.824.2188 oil reserves and solar potential, especially among countries in the www.mbb-legal.com Middle East. Estimates for solar thermal projects used for petroleum EOR could be economically viable and range from 19-44 GW.36 an initial testing phase in which viscosity of the oil. Natural gas is The technology for integrating it was shown that wind power used as an energy source to produce CSP into oil production is now commercially viable in some can provide water injection at steam, which is then injected locations. The first major project competitive prices.30 into the reservoir. Solar thermal to integrate CSP into oil production EOR substitutes natural gas with was in California through Concentrating Solar and Geothermal as the Chevron partnering with startup Heat for Tertiary Recovery energy source for producing steam.31 BrightSource.37 The pilot project Tertiary recovery, or EOR, presents Trough-shaped mirrors, sometimes began operation in 2011 and several opportunities for renewable housed in a protective greenhouse, operated for 4 four years. integration. Renewable technologies concentrate sunlight to generate More recently, the Miraah can both provide energy for and steam with temperatures up to project — a $600 million joint 32 generate energy from EOR processes. 640 degrees Fahrenheit. venture initiated in 2015 between Land and solar irradiance permitting, CSP technologies are well suited the government of Oman and the concentrated solar can be an for thermal EOR. There is significant company GlassPoint Solar — has economic means of generating steam overlap between regions with high begun producing solar steam for for EOR. Geothermal cogeneration solar radiation and large petroleum the Amal oilfield. Two phases of the can also produce electricity from reserves.33 Due to latent heat stored concentrated solar project were latent heat in wells. in the reservoir rock, oil recovery rates completed between 2018-2020, with Thermal EOR consists of injecting were found to not be greatly impacted a total capacity of 360 MW thermal, steam into the oil reservoir to by solar variability.34 Finally, solar but the full planned 1 GW plant has facilitate flow by reducing the thermal EOR has lower capital costs not proceeded in part due to sharp

30 Id at 33. 31 Zhong and Bazilian 2018. 32 Sandler, Fowler, et al. 2014. 33 Wang, O’Donnell and Brandt 2017. 34 Sandler, Fowler, et al. 2012. 35 Id at 38. 36 Id at 39. 37 Moritis 2011.

46/ LANDMAN.ORG decline in oil and gas prices in 2020. additional benefit of extending field among multiple contractors, Successful operation of the Miraah life. Extending a field’s lifetime delays operators and government agencies. project may prove the economic well abandonment costs, which Operations are capital intensive viability of solar thermal EOR at scale improves field economics. and require machines that operate but challenges remain in financing Steam injection and geothermal reliably. The industry is also very and launching similar projects in energy have important synergies. competitive, with constant pressure other locations.38 Steam injection leads to higher to reduce costs. For renewable Mature oil wells can produce up produced water temperatures than technologies to integrate into oil and to 50 barrels of water per barrel of for conventional fields.42 Additional gas operations, they must meet strict oil.39 Water extracted from a well has energy requirements for steam reliability and affordability metrics. naturally raised temperatures due to injection also lead to greater demand Cost has historically been the geothermal heating. While for most for the electricity and heat produced primary factor deterring renewable wells the heating is not significant — from geothermal generation.43 A integration and is still the most 80% of wells have temperatures trend toward deeper wells, which important factor in determining below 176 F (80 C) — in some produce higher water temperatures, whether a new technology can be instances, temperatures can exceed an expanded use of steam injection integrated. However, even in cases 400 F ( C).40 Steam can be used to EOR and an increase in the pricing where renewable generation is the generate electricity and provide field and regulation of carbon emissions lowest-cost solution, production heating as well as be reinjected for indicate a growing opportunity for variability and reliability concerns are EOR. While near-term prospects for geothermal cogeneration in the future. still significant barriers to overcome. geothermal cogeneration are limited, Operational considerations and in some cases they can provide CHALLENGES TO RENEWABLE differences in industry knowledge economic benefits.41 In addition INTEGRATION between oil and gas operations and to heat and electricity generated, Oil and gas operations are highly renewable energy operations place geothermal cogeneration has the intricate, requiring coordination an additional barrier to integration.

38 solarthermalworld.org/news/shareholders-force-glasspoint-liquidation pv-magazine-usa.com /2020/05/14/sources-shell-and-vc- funded-glasspoint/ 39 Xin, et al. 2012. 40 Augustine and Falkenstern 2012. 41 Id. 42 Ziabakhsh-Ganji, et al. 2018. 43 Id.

W&T Offshore, Inc. (”WTI” or the “Company”) is an independent oil and gas producer with operations offshore in the Gulf of Mexico. WTI is a significant operator on the Gulf of Mexico shelf. For 36 year, W&T has grown through acquisitions, exploration and development of properties on the continental shelf and in the deepwater across the Gulf of Mexico. The Company is well financed and has funds available for shelf and deepwater projects. WTI encourages any lease holder that has requirements for redevelopment activities (operated or non-operated) such as new drills, sidetracks, or recompletes to contact WTI directly. Companies seeking divestitures are also encouraged to contact us.

W&T Offshore, Inc. • 5718 Westheimer, Suite 700 • Houston, Texas 77057 • 713-626-8525 • www.wtoffshore.com (NYSE: WTI)

\47 LANDMAN MAY/JUNE 2021

Variability of Generation produced and then stored.44 Use cases from corrosion, employ solar power The effect of variability on where variability in generation does combined with battery storage.46 operations is a large determinant of not affect production have the highest whether renewable technology can potential for renewable integration. System Reliability be integrated. Many operations along While use cases where variability The petroleum industry requires the supply chain require continuous does not affect production are high levels of reliability. Gas pipelines, power. Oil rigs, pipeline compressors ideal, there are several methods for for example, have much higher and petroleum refineries operate mitigating the effects of variability. In reliability of operations than the 24/7, regardless of whether the sun some cases, fuel savings alone can electricity grid, which itself has a is shining or the wind is blowing. In make renewable generation viable. high standard of performance.47 these cases, renewable generation High diesel costs and low efficiencies While renewable generation is technologies can sometimes of natural gas reciprocating engines well proven and shown to be offer operational savings by being and single cycle turbines can lead reliable in a wide range of settings, configured into a high reliability hybrid to renewable integration being systems for integrating renewable system with backup diesel generators, cost effective even when backup energy technologies into oil and gas turbines or battery storage. generation capacity is required.45 gas operations often do not have However, this potentially increases Battery storage technologies can an equally proven track record. system costs and complexity. In other also provide a solution in some cases. Furthermore, reliability concerns cases, such as steam injection for EOR, Many oilfield operations, such as are compounded by renewable variability of generation has little effect powering well sensors and lights generation variability. Systems may on production since steam can be and cathodic protection of pipelines have to be designed to operate under

44 Sandler, Fowler, et al. 2014. 45 Korpas, et al. 2012. 46 Id at 5. 47 Greenblatt 2015; Liss and Rowley 2018.

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a wide range of weather scenarios. Petroleum operations are CONCLUSION Higher tolerance for extreme very complex. Systems that add As oil and gas production operating conditions and high additional complications may be shifts toward lower quality and reliability requirements — as well as unsuited for practical applications unconventional reserves, energy space or weight constraints in some even if they offer cost savings. use and emissions from operations instances — raise costs, implying Turnkey solutions that do not add are likely to grow in the future. a renewable-generation-based to operational complexities can Furthermore, oil and gas operations system may be uneconomic even if be most readily integrated. The are energy intensive, which can it can provide energy at the lowest ideal technology for integration in have negative environmental cost on average. More research and oil and gas operations is a system impacts. Integrating renewable pilot projects can bridge this gap that can be installed easily and energy technologies into oil and gas in understanding and substantiate operate cost-effectively with little operations offers a means of reducing that renewable systems can meet to no maintenance. fossil fuel use in the production of reliability standards. Lastly, petroleum engineering oil and gas, which can both lower is highly specialized and often operation costs and reduce emissions Operational Considerations requires a different skill set than that as well as conserve petroleum Oil and gas operations are required for operations of renewable production for higher value uses. In often subject to harsh conditions. generation technologies. Along with some cases, renewable integration Machinery must be able to withstand research to ensure reliability, work is can currently provide a cost-effective weather and temperature extremes required to bridge the gap in industry and environmentally beneficial as well as operate for several years knowledge between the petroleum way of meeting operation energy before replacement. For a technology and renewable energy industries, requirements. If costs of renewable to be scalable, it must be able to such as ensuring that oil and gas technology continue to fall, the operate under a variety of settings. operations personnel are trained benefits of renewable integration Technologies that are robust and in operational aspects of renewable would continue to increase. operate in a variety of settings are technologies as applied to oil and Renewable technologies can be therefore most easily integrated. gas operations. integrated in upstream oil and gas

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reasons for integrating renewable communications courses at Johns Skelton | Slusher energy technologies. Oil and gas Hopkins University Engineering for Barnhill | Watkins | Wells operators would be well served Professionals Program. PLLC by further analysis of where Attorneys at Law renewable technologies can be Sean Ericson is an environmental beneficially integrated and by and resource economist at the JUDI C. WELLS, J.D. working toward further integrating National Renewable Energy Laboratory, where he works at the Texas Board of Legal Specialization renewable technologies into Licensed in Texas and North Dakota current and future operations. intersection of energy markets and climate change. With NREL since Title Examination and ACKNOWLEDGMENTS 2017, he began as an intern with Clear, Readable Opinions The authors wish to the Joint Institute for Strategic acknowledge preliminary work on Analysis and more recently worked Mineral and Royalty this paper completed by Harshit as a researcher with the Integrated Receiverships Jayaswal and Andrew Larson, Applications Center. He has a both former interns with the Joint Litigation master’s degree in energy and Institute for Strategic Energy natural resource economics from the Analysis at the National Renewable 302 N. University Drive Colorado School of Mines and was set Energy Laboratory. Special thanks Nacogdoches, Texas 75961 to obtain his Ph.D. in economics from also go to the attendees at the the University of Colorado at Boulder (936) 559-7960 International Energy Agency Gas [email protected] & Oil Technology Collaboration in April. Programme event on “Nexus of Doug Arent is executive Oil & Gas and Renewables in the director of strategic public-private Energy Future,” conducted at NREL partnerships at the National Sept. 27-28, 2017, for their inspiring Renewable Energy Laboratory. He www.skeltonslusher.com presentations and discussion. has worked in research on energy and sustainability for more than ABOUT THE AUTHORS 30 years, publishing extensively Jill Engel-Cox is director of the Joint Institute for Strategic Energy on topics within clean energy, renewable energy, power systems, production. The primary applications Analysis at the National Renewable natural gas and the intersection identified are solar heating for EOR Energy Laboratory. Over her 30-year of science and public policy. In and other heating requirements, career, she has been an engineer, offshore wind to power offshore researcher, program manager and addition to his NREL responsibilities, operations, well pad electrification strategic planner for a diverse suite of Arent is senior visiting fellow from solar and wind, and geothermal renewable energy, clean technology at the Center for Strategic and cogeneration from oil fields. Solar and environmental programs in the International Studies. He serves on thermal generation for EOR and United States, Asia and the Middle the World Economic Forum Future well pad electrification are already East. Her first job was climbing of Electricity Working Group and seeing commercial operation. Wind smokestacks in Los Angeles, followed advisory boards for the Post Carbon power for offshore water injection by leading industrial pollution Transition Program at the Institute and geothermal energy production prevention programs for small for New Economic Thinking at Oxford are close to commercial operation as and midsize businesses and R&D University, U.K.; the Smart Electric well. Combined, these technologies laboratories in the United States and Power Association; and the Energy internationally. In the past decade, will be useful tools to reduce Academy of Europe, Netherlands. operation costs and emissions. Engel-Cox has led international In addition, he is a member of the While significant challenges strategic planning and technology Keystone Energy Board. Arent is the exist to integrating renewable assessments for renewable energy editor-in-chief of Renewable Energy energy technologies into oil and and environmental sustainability gas operations, there are also research programs, working Focus and associate editor of the significant economic opportunities extensively in Malaysia and Saudi journal Renewable and Sustainable for renewable technologies in the Arabia. She also teaches a course Energy Reviews. He received a petroleum industry. Falling costs in energy issues for the University Ph.D. from Princeton University, an and growing energy intensity of Colorado Denver Global Energy MBA from Regis University and a and environmental concerns are Management program and industrial bachelor’s degree from Harvey Mudd all leading to more compelling processes and environmental College in California.

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