Oil and gas industry should act now to reduce greenhouse gas emissions, not wait for regulations, CERI symposium hears

Author: Mark Lowey

Source: http://envirolinenews.ca

Publish Date: Sunday, March 19, 2017



(First of three stories from the CERI symposium, by EnviroLine. The second story, which reports on carbon management options for the oil and gas industry, will be posted on March 24. The third story which covers an “executive panel discussion” at the CERI symposium,” will be posted on March 28).

Alberta’s oil and gas industry should act now in reducing greenhouse gas emissions and not wait for impending regulations, the Canadian Energy Research Institute’s (CERI) 2017 Oil & Gas Symposiumin Calgary heard.

The Alberta and federal governments and much of the world remain committed to targets to reduce carbon dioxide, methane and other greenhouse gas (GHG) emissions, despite the Trump administration eliminating or backing away from climate change actions in the United States, experts told the symposium.

“The time to act is now. Do not put this thing off,” said David Sealock, vice-president of research and development at Petroleum Technology Alliance Canada, in a panel session titled “Carbon Management Options.”

“Today is a great time to do it,” agreed fellow panelist Jackson Hegland, president of Modern West Advisory Inc. and executive director of the Methane Emissions Leadership Alliance (MELA) in Alberta. Launched in September 2016, MELA, a partner to government, industry and other key stakeholders, provides data, services and solutions for methane emissions management in Canada.

New regulations are coming within the next one to five years, and will fall in line with government policies already released, Hegland said. “There is a very short timeline to get a handle on this within each of your organization. Don’t wait. It’s a very intense process to go through and understand where your opportunities and risks are and ultimately what you’re going to do from an actionable perspective and what projects you’re going to pursue.”

The federal Liberal government pledged, as part of the international Paris Agreement reached in December 2015, to cut greenhouse gas (GHG) emissions by 30 per cent below 2005 levels by 2030. The Paris climate accord entered into force (although it is non-binding) in November last year, after being ratified by a sufficient number of signatory countries – including Canada and the U.S. – accounting for at least 55 per cent of global emissions.

As part of a pan-Canadian framework on climate change, Ottawa has set a national carbon price starting at $10 per tonne in 2018, rising by $10 per year to $50 per tonne by 2022. The federal government also has committed to reduce methane emissions from the industry by 40 to 45 per cent by 2020.

The Alberta government has committed to reduce emissions of carbon dioxide equivalent to 50 megatonnes below “business as usual” (i.e. what emissions would be if no action were taken) by 2020, and 50 per cent below projected business as usual emissions by 2050.

Large emitters in the province now pay a carbon levy of $20 per tonne, which will increase to $30 per tonne by 2017. By 2017, large emitters will be required to reduce their GHG emissions by 20 per cent from the 12-per-cent target in 2015. The provincial government also has also has capped GHG emissions from the oilsands sector at an annual maximum of 100 megatonnes per year.

Alberta’s climate plan also includes a carbon levy on emitting fuels used for transportation and heating. It starts at $20 per tonne in 2017 and increases to $30 per tonne in 2018. The government also has set a target to reduce methane emissions from the oil and gas industry by 45 per cent from 2014 levels by 2025.

The plethora of different climate policies across Canada “happens to be a real rat’s nest right now,” Hegland said. However, there has been “very inclusive” consultation and collaboration with multiple stakeholder groups by both the Alberta and federal governments on their methane emissions-reduction policies, he added.

The key challenge now is to develop regulations based on currently available data, while the key outcome is to achieve the lowest-cost emission reductions, Hegland said. The focus for the oil and gas industry is to implement scientifically sound data collection on various kinds of emissions, such as methane leaking from compressors, pneumatic devices and other equipment. Companies will need to have strong data to build their business cases for investors, he said.

 Hegland said that to achieve compliance, the six main regulatory impacts on an organization are: operating costs, capital cost/allocation, revenue, planning, regulatory risk mitigation, and acquisition and divestiture. Companies should develop a methane management strategy by completing a policy impact assessment, evaluating liabilities and project opportunities, and reviewing funding mechanisms, he said.

Hegland recommended that a detailed methane management strategy should include:

  • modelling carbon levy impacts;

  • building internal data management systems;

  • implementing a best-practice leak-detection program;

  • collecting an inventory of pneumatic devices and pumps; and

  • building carbon into economic needs.

Companies need to have someone within the company who understands the impacts of the coming regulatory requirements, agreed PTAC’s Sealock. PTAC has a working group focused on reducing fugitive emissions, and commissioned a report by Greenpath Energy Ltd., titled “Historical Canadian Fugitive Emission Management Program Assessment.”

Many Canadian companies have developed technologies aimed at reducing or eliminating and sometimes utilizing carbon emissions, such as Questor Technology, Berg Chilling Systems, Alberta Mobile Combustion, Triangle Fluid Controls, Spartan Controls, REM Technology Inc., Total Combustion, Sirius Instrumentation & Controls, Hifi Engineering, Clearstone Engineering, Calscan Solutions, TCB Welding and Construction, and others.

Tools and technologies to monitor and reduce GHG emissions include:

  • solar-powered chemical injection;

  • optical imaging;

  • fugitive emissions leak detection;

  • abatement cost analysis;

  • surface casing vent measurement;

  • dry seal technology for compressors;

  • vent gas capture for compressors;

  • zero-emission separator package;

  • clean incineration/combustion;

  • gas refrigeration and hydrocarbon liquids recovery; and

  • emerging clean technologies.

Sealock noted that one PTAC-supported technology, REMVue Slipstream, now has more than 400 units deployed, keeping more than 900,000 tons of CO2 out of the atmosphere and creating $15 million per year in value. The technology captures methane and light hydrocarbon emissions from oil tanks, condensate tanks, compressors and other processing vessels. The captured methane is used onsite as fuel, and reduces energy consumption by $28 million annually.

Hegland said that emission sources for both the Alberta and federal governments are the same: compressors, fugitive/leak detection and repair, pneumatic devices and venting. Emissions from flaring are less than from the other sources identified, he said. However, he added that he is a strong proponent of clean incineration/combustion technology that can eliminate flaring.


Flaring still an issue for oil and gas industry

The oil and gas industry is the single biggest emitter of methane in Canada, including in Alberta where the sector accounts for 70 per cent or 31.4 million tonnes CO2 equivalent (CO2e). The biggest problem is the venting of unburned methane from oilfield facilities and equipment – along with so-called fugitive emissions or leaks. Venting and leaks from compressors, dehydrator units, pneumatic devices, storage tanks, valves and pumps account for 94 per cent of the methane, with the remaining six per cent from flaring or other sources. Across western Canada, small but cumulative amounts of methane are leaking through wellbores from tens of thousands of oil and gas wells.

The petroleum industry still uses flaring to burn uneconomic solution gas found along with oil, test new wells, and produce oil and gas. However, Mark Taylor, vice-president of the Alberta Energy Regulator’s (AER) climate policy assurance team, said in an interview with EnviroLine separate from the CERI symposium that the agency is recognized by the World Bank as an international leader in conserving solution gas and reducing flaring (by more than 63 per cent) and venting emissions (by more than 39 per cent) over the last two decades.

Nevertheless, the combined volume of flared and vented solution gas in Alberta increased 2.3 per cent in 2014 from the previous year, to 920 million cubic metres, according to the AER’s most recent report. In B.C., flaring levels overall rose 22 per cent in 2014 from the previous year, to about 236 million cubic metres – mainly due to increased exploratory drilling and well testing, according to the BC Oil and Gas Commission.

Such increases run counter to a World Bank initiative to end routine flaring by 2030. Thousands of gas flares at oil production sites around the world burn approximately 140 billion cubic metres of natural gas annually, causing more than 300 million tons of CO2 to be emitted to the atmosphere.

Flaring converts the methane to carbon dioxide, a much less potent greenhouse gas over the short term. But despite improvements in flaring regulations, “flares are not 100-per-cent efficient. There’s still methane being emitted by these flares,” says Maurice Dusseaut, professor of engineering geology at the University of Waterloo.

 While regulators in Canada inspect flaring equipment and check for smoke emissions, there is no explicit standard here for flare combustion efficiency – unlike in some U.S. states. No technology exists to directly measure the substances – potentially including toxic hydrocarbons and harmful particulates – emitted by a flare, according to Matthew Johnson, Canada Research Chair and professor of mechanical and aerospace engineering at Carleton University.

“Focusing on methane is one of the easiest ways to really have an impact on reducing greenhouse gas emissions,” says chemical engineer Audrey Mascarenhas, president and CEO of Calgary-based Questor Technology, whose high-efficiency gas incinerators destroy all noxious or toxic hydrocarbon gases – unlike less efficient flaring. “By cleaning combusting methane rather than simply venting it or letting it escape to the air, you would actually reduce the tonnage of CO2 equivalent nine-fold,” she told EnviroLine.


Don Berggren, president of Toronto-based Berg Chilling Systems, whose mobile refrigeration technology (developed with Montana partner GTUIT) eliminates flared or vented gas while recovering valuable hydrocarbon liquids, said in an interview: “In the world we live in now, there really isn’t a good reason to flare unless there’s an upset [operating condition].”


Carbon capture and storage still too expensive

At the CERI symposium, panelist Andrew McGoey-Smith, owner of and principal consultant at Green Analysis Ltd., said when it comes to reducing GHG emissions, the cost of carbon capture and storage – particularly the cost of capture and compression – is still prohibitive.

The purity of captured CO2 in Canada is an issue, he said, because the presence of impurities drives up costs because it increases the size of the plume area of sequestered CO2 in underground geological reservoirs. This results in a bigger area to monitor for potential leaks, especially where there are existing oil and gas wells through which CO2 could migrate, he said.

Even with using CO2 for enhanced oil recovery, the cost per tonne for CCS ranges from $50 to $70 per tonne, McGoey-Smith noted. Revenue from enhanced oil recovery typically offsets only about 40 per cent of the cost of capturing CO2. The price of carbon will need to be much higher to make CCS economic, McGoey-Smith added.  

Alberta’s price on carbon is scheduled to increase to $50 per tonne by 2022. However, Hegland said that his group looked at six different carbon capture technologies and found that even with enhanced oil recovery to offset costs, CCS would still cost more than $50 per tonne. However, the economics of CCS will depend on the future price of oil as well as the future carbon price, he said.

Hegland said he feels “very optimistic” about the oil and gas industry being a leader in technological development in Canada, and that people are working to make the industry very successful in a low-carbon economy and to capitalize on the new opportunities.

Sealock agreed, saying that the Canadian hydrocarbons sector has always overcome challenges and the sector’s innovation and ingenuity are what attract investors to Alberta. What the industry needs, he added, is policy driven by sustainable development rather than by public polls and that enables industry to compete at a global level.

Given what’s happening with the Trump administration in the U.S., the panelists were asked what would happen if the Alberta or federal government changes and a new government is less keen on climate-related policies. Trump has said in the past that climate change or global warming was just a Chinese hoax. After just three months in office, the President plans to:

  • pull the U.S. out of the Paris climate accord;

  • scrap “burdensome regulations on our energy industry,” including the Climate Action Plan;

  • cut the Environmental Protection Agency’s (EPA) budget by 31 per cent and eliminate 3,200 EPA employees, ending its climate change programs and trimming back core initiatives aimed at protecting air and water; and

  • roll back carbon pollution standards for vehicles.

Since Trump came to office, the U.S. Congress has also repealed an Obama-era initiative to reduce methane emissions from the oil and gas industry by 45 per cent from 2012 levels by 2025.

But Hegland told the CERI symposium that in Canada, the federal policy on climate change is being developed under the Canadian Environmental Protection Act, and that regulations under that legislation are difficult to overturn, as are provincial directives. In Alberta, the Opposition Wild Rose party has vowed if elected to scrap the NDP government’s carbon tax and climate-related policies.

Natural Resources Minister Jim Carr told the CERAWeek conference held in Houston in early March that the federal government needs to stick with a long-term strategy on energy and climate policy, according to a story in The Globe and Mail. Carr said ensuring economic growth – including healthy oil and gas industry – is consistent with climate policy.

Environment Minister Catherine McKenna, following a talk in early March to the Calgary Chamber of Commerce, told reporters that the federal government remains committed to curbing methane emissions from the oil and gas industry, according to a story in the Calgary Herald. McKenna said the government believes new limits on methane emissions, along with other efforts to tackle climate change – including carbon pricing and investments in clean technology – are a competitive advantage for Canada.

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