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Decarbonizing entire sectors of the economy is one of the key
responses to the threat of climate change. In the oil and gas
sector, there is a growing consensus that oil companies can
contribute to this decarbonization effort.
Within the energy sector, oil companies can gain a competitive
advantage by reducing their carbon footprint. In this article and
the accompanying video presentation, members of our GEPS Africa
research team discuss the results of their recent study into the
potential benefits of decarbonizing hydrocarbon production in North
Africa. The full report is available to
GEPS customers. View the accompanying video interview:
CO2 emissions in the E&P industry
To tackle global warming, one of the most efficient actions is
to reduce or eliminate emissions of CO2 which is a potent
greenhouse gas.
A system of emissions scopes was put in place worldwide to
standardize reporting, improve transparency and, ultimately, help
companies achieve goals by providing metrics and benchmarks.
In a nutshell, here are the three scopes with reference to the
E&P industry.
Scope 1: methane leaks and gas flaring.
Scope 2: exploration and production wells, central production
facilities.
Scope 3: oil and gas sold to clients.
Scopes 1 and 2 are the most relevant for upstream companies. We
chose to investigate scope 2 as it is less publicized than scope 1
but represents around 1/3 of total upstream emissions. The basic
idea is to replace the thermal energy sources currently used for
scope 2 activities with renewable energy.
First, we defined criteria to select hydrocarbon fields which
would most benefit from decarbonization. These criteria are:
Hydrocarbon type: focus on oil fields since oil well fluids
require more energy in handling than gas well fluids.
Field maturity: mature fields provide more opportunities for
emission reduction as the water cut increases with declining oil
production.
Remaining reserves: these should be large enough to justify the
cost of power switching.
Based on these criteria, we selected 12 fields as candidates for
decarbonization.
The energy model
Next, we created a simplified energy model of an oil field. The
model is based on the premise that the main power requirement in
conventional oil production is lifting (pumping) the oil from
reservoir to surface. In addition to the lifting energy, we took
into account two other power requirements. First: water or gas
injection to sustain oil production. Second: processing to prepare
the oil for shipment to market. The last two power requirements
were derived from the first on a pro-rata basis.
The output of the energy model was the basis to determine the
size of the renewable power plant.
Concerning the renewable energy to be used, only photovoltaic
(PV) was retained for modelling purposes. It is the most evenly
distributed and abundant source of renewable energy in the
investigated region. We considered geothermal potential, but this
is not as well suited since temperature gradients are not high
enough in the region to directly produce steam for electricity
generation. Regarding the wind potential, it was deemed inefficient
as it is too irregular over the region.
Discussion
The result of our investigation is that in North Africa, PV is a
realistic option to supply power for oil field operations. Pilot
projects completed by Eni in Algeria and Tunisia have demonstrated
the feasibility of power switching from thermal to PV.
The data used in our investigation are mostly from IHS Markit's
georeferenced database. This allows us to easily produce maps. The
figure below shows three data layers: first, the fields selected
for this investigation, then, all other hydrocarbon fields and
finally all operational renewable power plants.
The map shows that the candidates for decarbonization are evenly
distributed over the investigated countries. There is not a basin
or a geographic zone which is better suited for decarbonization
than another. Even offshore fields can be considered.
Remote desert locations at sub-tropical latitudes provide the
best places worldwide to deploy PV power plants and it is a great
benefit for the North African hydrocarbon industry that the most
prolific petroleum basins are in these locations. This is a
competitive advantage which should not be underestimated. Low
carbon barrels may soon attract a price premium in key markets like
the European Union (EU) as the Carbon Border Adjustment Mechanism
comes into force.
Outlook
E&P companies can use power switching in their own
operations as an initial step. Building on this, these companies
can develop a renewables business in its own right to supply power
to third parties. The development of large PV power hubs in Saharan
Africa such as the pioneering Benban project in Egypt will enable
the emergence of large green hydrogen production units. This is
another opportunity for which North African E&P companies are
ideally positioned. A ready market with exponential growth
potential for green hydrogen exists on North Africa's doorstep: the
EU.
Conclusion
In conclusion, it can be said that electrification/power
switching in North African oil fields will be a key step to secure
the existence of the local hydrocarbon industry through the energy
transition. In addition, power switching to renewables will enable
E&P companies to gain the required expertise to evolve from
simply a hydrocarbon provider to an energy provider. With this in
mind, starting to install a few solar panels in the middle of
nowhere to power a pump or a compressor, is much more important
than it seems and goes potentially far beyond scope 2 emissions
reduction.
Figure 1: Saharan Africa renewable energy and hydrocarbon
resource
Posted 13 December 2021 by Cyril Ruchonnet, Technical Research Associate Director, S&P Global Commodity Insights and
Eric Schmid, Associate Director, Upstream Energy, S&P Global Commodity Insights
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