Future-proofing the offshore industry

Oil and gas as a source of energy is a significant fraction of the 2050 energy mix, despite many opinions in the popular press to the contrary. Limiting global warming to 1.5°C will require ambitious, internationally cooperative policy environments that transform both supply and demand, and in turn, this will put pressure on oil and gas.

By 2050, in the latest International Renewable Energy Agency Renewable Energy Roadmap reference case, fossil fuel use for energy would fall to one-third of today’s levels. Oil and coal would decline most, by 70% and 85% respectively. Natural gas use would peak around 2027 and would be the largest source of fossil fuel by 2050, however with production declining by 30% from the present level. Undoubtedly, oil and gas will be around for a while.

Is future-proofing possible?

It seems, in current months, oil and gas assets and developments face a continuous stream of emerging risks – some old and some new. Facing a full range of emerging risks and the pressures from climate change, how can the industry design future oil and gas developments, and is future-proofing realistically possible? We see the major risks facing the industry as follows:

• The pressure to reduce methane emissions – according to researchers from the US University of Rochester, methane’s effect on global warming has been underestimated by 40%
• The availability of, and competition for, capital – with the emergence of shale gas, where investment tranches are smaller in size and shorter in tenor, with increased investor appetite for a quicker payback 
• Carbon lobby groups applying pressure to avoid the development of higher carbon- intensive resources – such as heavy oil, tar sands, and so on.
• The volatility of oil and gas prices – for example the recent oil price crash stimulated by COVID-19 and the unpredictable nature of geopolitics related to energy
• Government pressure for the oil and gas industry to pioneer new decarbonisation technology, such as carbon capture and storage (CCS) and hydrogen production.

The old ways of designing and operating oil and gas assets need to change

Mitigating risks

These present an almost existential threat to the industry; how can current assets and future oil and gas developments reduce these risks in field development design?

io tracks the value drivers that companies set for developments, and we have observed the following additional requirements emerging:

• Flare reduction – Many countries now insist on significantly reduced flare gas tolerances, and public-private partnerships such as The Global Gas Flaring Reduction partnership are committed to zero routine flaring. However, from the fossil-fuel company participation perspective, only a few of the majors and national oil companies have signed up. io believes that zero routine flaring will emerge as a mandatory requirement for oil developments. The technology is available to capture small scale gas streams such as flaring, and while not as cost-effective as main oil production, this should now be a mandatory design consideration. A range of technologies – including compressed natural gas, micro liquefied natural gas and mini gas-to- liquids – can be applied in a modular configuration to address the flaring issue.
   
• Continuous improvement in GHG emissions reduction – We live in an age when industry’s greenhouse gas (GHG) emissions are a subject of public concern and significant scrutiny, with national, legally binding targets and commitments. Guidelines on financial disclosure, such as the Task Force on Climate-related Financial Disclosure’s recommendations, have been formulated to advise oil and gas companies on how to measure and report GHG emissions. However, io sees a need for:
   
• Changes to operational management systems and plant operating philosophies. These should embrace continuous improvement in GHG emissions reduction – treating GHG emissions as production loss management – where teams record GHG emissions and the root causes of them, and thus focus on managing the plant and engineering modifications to continuously and progressively reduce emissions.
• Active GHG monitoring and measurement. Future assets will need to include more instrumentation to detect actual GHG emissions. The Oil and Gas Climate Initiative appears to have invested heavily in methane and GHG detection. Future oil and gas assets will need to include more sensors, and potentially drones, to commit to methane detection.
• Global benchmarking of GHG emissions by asset and collaboration in continuous improvement. Operators need to see the benefits in comparing GHG emissions from assets, and in collaborating to achieve best practice. Cooperation is in everyone’s mutual interest. Best practice can extend not only to day-to-day operational management, but also to the engineering for the production plant. For example, a reduction in the number of flanged connections and potential leak paths for methane, and less complex processing facilities, may combine in the future to achieve a technical limit for fugitive emissions.

The above should lead to insights into oil and gas development design principles, and an evidence-based approach to adjusting facilities and modular designs.

• Descoping and electrification – We believed the digital revolution would help to remove personnel from platforms. However, we still see a lack of consideration given to de-manning platforms, and what the minimum required facilities are.
  
  In a recent study, we looked critically at the facilities that would be necessary on a gas production platform if it was converted to a normally unmanned installation. We were able to reduce weight by 60%, CAPEX by 50% and OPEX by 30% while maintaining the required production output. Reducing the offshore facilities requirements reduces power consumption and enables integration with renewables or electrification from shore. It also reduces overall capital requirements and delivers improved investment returns. In the current climate, focus on the minimum viable product for offshore development concept is a necessity.
   
• Integration with other systems – In the future-proofing of offshore oil and gas developments, one emerging trend is to be mindful of additional opportunities in geographic proximity to the development:
• Renewables. In recent years, certain offshore oil and gas developments have gained a new neighbour – offshore wind. This provides an opportunity to remove the gas turbine used for power production from the platform. If the platform is descoped sufficiently, could it be powered from the nearby wind array? If this is viewed unfavourably by the array’s owners, can the oil and gas operator build an array to power the platform?
• Gas-to-Wire. This involves converting gas to electricity and exporting through a neighbouring offshore wind array. This may prove economically advantageous to the oil and gas developer if agreed by the owners of the array, and may be a source of revenue if the platform has excess power generating capacity.
• CCS. Designing for the future may require consideration of the offshore platform’s tail-end-life. Should oil and gas companies design future platforms for conversion to CCS service? Companies could consider gaining experience by using CO2 enhanced oil recovery to gain expertise in CO2 service and the first step in CO2 sequestration.
   
• Increase technology development and de-risking – It seems that only major oil and gas companies are investing in de-risking technologies, and the age of independents developing new technologies appears to be over. However, several new technologies will soon have a significant effect on the success of future oil and gas developments, and collaborative models should be explored:
• Carbon capture technology – amines and others
• Hydrogen generation – hydrolysis, membranes
• Energy storage and electrification – we have noticed in recent years the vertical integration strategies of major oil companies not only generating electrical power, but also involved in energy storage and energy trading
• Hydrogen-burning gas turbines – a range of turbines that burn up to 100% hydrogen, which could be used to develop the uptake of hydrogen as a carrier fluid by providing off-takers with the means to consume hydrogen for power generation.

A new age for oil and gas

Pressure on the oil and gas industry in the era of decarbonisation can only increase. Consequently, the old ways of designing and operating oil and gas assets need to change. This must be addressed at an operational and fundamental design level for oil and gas companies to join the 2050 net-zero global commitment. Start with the end in mind, but consider the new endings that are possible!

By Mark Dickson, VP Energy Transition, io consulting

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