APPROACHES for INTEGRATING RENEWABLE ENERGY TECHNOLOGIES in OIL and GAS OPERATIONS Read the Technical Report on Page 38
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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 enhanced oil recovery 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 natural gas 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