The law of the land is changing.
Methane emissions must come down from 2014 levels by 45 per cent by 2025 under Alberta’s new climate action plan, a plan that is being mirrored in B.C. and south of the border in the U.S.
With methane having an atmospheric impact 84 times higher than CO2 on a 20-year basis, according to the United Nations Environment Programme’s Climate & Clean Air Coalition, this comes as little surprise. Curbing methane emissions is a fast way to limit climate change.
Currently, legislation on emissions across western Canadian provinces is similar. Companies must capture gas when it is economically viable. Low gas prices, however, have lowered the bar on what that means.
If things continue as business as usual, methane emissions from oil and gas operations will grow to 124.8 bcf in 2020, from112.3 bcf in 2013, according to a study prepared by ICF International for the Environmental Defense Fund (EDF).
However, the study also says emissions can be cut without breaking the bank. Using gas prices at US$2/mcf, Canadian companies can cut 45 per cent of their methane emissions at a cost of a penny per mcf, claims the report.
This means 56 bcf of methane—or 27 million tonnes of CO2 equivalent— will not be released. EDF’s study says these cuts are in addition to voluntary measures already announced by companies.
“This would be a significant effort to cut Canada’s greenhouse emissions,” says Drew Nelson, a senior manager of natural gas with EDF focused on global methane emission reduction efforts He addes that oil and gas companies have many effective methods available to cut emissions from leaks and venting.
Starting with the low-hanging fruit
The report says the initial capital cost to cut 45 per cent of emissions across all the Canadian oil and gas sector is $726.3 million. Then, the annualized net cost for the industry would be $74.5 million/year.
“Everyone knows efficiency is cheap and easy, but it takes upfront capital that not all companies have,” says Nelson.
When presented with methane emission reduction measures as ways to save money, companies are more open to adopt them, says Soheil Asgarpour, president of the Petroleum Technology Alliance Canada.
“To cut emissions, we will start with the low-hanging fruit,” says Asgarpour He adds that companies would begin work on the 20 per cent of their operations where 80 per cent of the methane is emitted—repairing small leaks, cutting venting, and improving oil tanks and other equipment are a few of the possible measures.
The EDF report says that, by inspecting and repairing gas leaks more frequently across gas operations, producers can cut more tha 22.5 bcf of emissions. Also, if oil companies flared stranded gas, they can slash another 9.76 bcf.
Asgarpour says his goal is to see the day no emissions are produced when extracting a barrel of oil in Canada. However, he says the only way to achieve this is through practical and economical means.
“The provincial target to cut emissions by 45 per cent is practical and reasonable,” says Asgarpour.
Companies must be offered a wide range of technologies and techniques to implement, says Asgarpour. This will allow them to choose the technologies that best fit their circumstance.
Accelerating capital investment
The 45 per cent goal is ambitious, yet there are many areas where new technology can cut emissions, Brad Herald, vice-president of western Canada operations with the Canadian Association of Petroleum Producers (CAPP), says.
Cutting emissions means companies will accelerate capital investment, says Herald. They would need to replace equipment with many years of useful life left. CAPP would like the province to give financial assistance for replacing equipment to cut emissions.
“With the right mix of regulatory and financial incentives, it is possible to achieve the target,” says Herald.
Operators need to begin taking action on emissions sooner rather than later, according to Mark Taylor, vice-president of climate policy assurance at the Alberta Energy Regulator (AER).
“There is absolutely no chance that we are not going to achieve a 45 per cent reduction in methane,” says Taylor. “What that means is that, if there is no early action by 2020, which is when the regulations come into effect, then the AER has a much narrower bandwidth of what we could implement for regulations that will force everybody to make a 45 per cent reduction in the remaining five years.”
Technologies are already available to recover methane emissions, says Taylor, and industry already knows what to do with this valuable hydrocarbon. He believes there are opportunities for service providers and oil and gas companies to collaborate and achieve necessary reductions. “Let’s get the dialogue going, and let’s figure out how we start the action happening right now.”
He adds, “Collectively, the quicker we start to get our heads around what we could be doing today, starting with those small bites seems like the way to do it.”
Connecting tech developers with end users
Calgary Economic Development and Kinetica Ventures, an energy industry accelerator, recently hosted a speaker series event together, Innovate Straight: Methane Emission Reduction, in an effort to bridge technology developers with end users with the ultimate goal of increasing the success rate in which innovations are adopted by Alberta’s energy industry.
After implementing Directive 060: Upstream Petroleum Industry Flaring, Incinerating and Venting in 2002, Alberta became a world leader in conserving associated gas and now conserves 94–97 per cent of the gas, said Gerald Palanca, manager of regulatory effectiveness at the AER, at the event.
“That last three per cent of gas are very small volumes that are distributed over large areas, so it becomes a very complex problem” to conserve it, he told attendees. “That gas is not going to be economic to conserve, so the landscape is changing. We have a suite of directives that potentially could change, moving forward to address the methane policy.
“We don’t have a draft directive behind the scenes that we are going to impose on industry. I just want to be clear that the AER is actually proceeding with this regulatory development through a similar multi-stakeholder engagement process as that used to develop Directive 060, and so these solutions are going to be tabled at stakeholder advisory and technical committees and we have some time to develop a custom Alberta-based solution to the methane policy.”
The search for the right technologies is well underway
Representatives from producers Encana and Husky Energy said the search for new technologies to meet the new objective are well underway, but more work is needed.
“We have been very active in exploring the options for abatement technologies for methane, and we are piloting these technologies,” said Nadia Monaghan, manager of environmental policy at Encana. “Our two areas of focus have been on venting, pneumatics, controllers and pumps as well—and then our fugitives, our leak detection and repair programs.”
Over four years, Encana has invested $12 million to address emissions at more than 900 locations, including about 800 wellsites, as well as compressor stations and plants, she said. The work has included pneumatic controller and pump retrofits at wellsites, vent gas capture and instrument air installations and conversions.
“We have done over 60 compressor stations in southern Alberta, I believe, and that would have generated about 70,000 tonnes of CO2 reductions per year, so that was a major pilot,” she said. “On the fugitive side, across our operating areas we have been working with various models to improve leak detection and repair programs.
“We have been very active, but it’s very much been a learning, piloting phase for us in terms of the scale of what we have been doing and what we have been learning as we go. To complement that, we have been very engaged in working with the governments on the regulatory and policy landscape. We have been talking about the 40–45 per cent target and testing the viability of that and trying to understand what’s going to have to be done…. Going forward, we really need to move from this piloting/learning phase to a larger-scale implementation phase.”
Husky has a somewhat different production profile, with a large portion of its production tied up in heavy oil primary production where it has a lot of associated gas, said Matt Beck, sustainability and innovation coordinator at Husky. “In fact, the vast majority of our methane emissions profile is from that associated gas venting.”
“We have been working with Kinetica and other partners to look at technologies to solve that challenge, and it’s a big one. There are geographic challenges in that a lot of those batteries are far away from existing infrastructure, so traditional gas conservation solutions aren’t necessarily in the money,” Beck said.
“We have been spending a lot of time technology scouting and evaluating different options that may help us move that forward as well as addressing retrofits for pneumatics and pumps and improving our leak detection management system and doing all of those kinds of things.”
Like Encana, Husky is active in the same kind of government engagement work, both through industry associations and directly with government partners in the jurisdictions where it operates, he said.
“We have seen a lot of success in that across all of western Canada, in forming strong partnerships and building a shared understanding of what the issue is, and we are looking forward to continuing those conversations because the industry is really dependent on how well we can regulate it as a whole. Without a strong common understanding of the issues, we risk sticking our economy’s neck out, so to speak, in relation to other jurisdictions like the U.S. or other markets where we compete. It’s great to push everybody to improve our emissions profile, but if we are doing that in the absence of movement outside of where we operate, we get very exposed and the capital is going to fly,” he said.
Like this? Read more in the latest issue of Oilweek.