Low-cost methane emissions cuts offer green dividends

Image: JWN

Tackling methane venting, flaring and fugitive emissions using existing technology could reduce the oil and gas industry's greenhouse gas (GHG) emissions at a fraction of the cost of more high-profile methods like carbon capture and storage (CCS). But all too often, the technology is not being used, studies show.

A newly released analysis from ICF International suggests methane emissions from Canada's oil and gas sector, which account for about six per cent of Canada's GHG emissions, could be reduced by 45 per cent below projected 2020 levels at a net cost of just $2.76 per tonne of CO 2 equivalent (CO 2 e) reduced. That equates to $1.33/mcf methane reduced, or less than one cent per mcf of gas produced nationwide, taking into account savings that accrue to companies that implement reduction measures.

MARGINAL ABATEMENT COST CURVE FOR METHANE REDUCTIONS BY SOURCE

The value of the gas recovered, at a price of $5/mcf, would amount to $251 million per year. Annual methane emissions from oil and gas activities are projected to remain stable to 2020 at around 60.2 million tonnes CO 2 e (125 bcf of methane), says the study, which recommends regulations to nudge the industry to take action.

(Since this article was written, Alberta announced on November 22 it would implement a methane reduction strategy to reduce emissions by 45 per cent from 2014 levels by 2025.)

In an examination of venting among heavy oil and oilsands producers, which found some conserve a lot more than others, Bruce Peachey, president of New Paradigm Engineering, found the greatest differentiator was attitude. Heavy oil resources and operations differ by region with different results, but the greatest difference is in attitude of producers towards reducing venting, he told the Canadian Chemical Engineering Conference in Calgary in October.

In a presentation called Primary Heavy Oil and Oil SandsStill Venting After All These Years , Peachey said, mitigation is a lot cheaper than carbon capture and storage. A five megatonne CO 2 equivalent per year GHG reduction would improve the industry image. We could probably do that over three to four years.

Peachey looked at vent emissions in areas stretching from the Lloydminster region along the Alberta-Saskatchewan border to the Peace River area in northwestern Alberta and compared different approaches to venting among two producers in those areas.

In an initial focus on CHOPS (cold heavy oil production with sand) wells in the Bonnyville area representative of the thousands of such vertical wells typically spaced eight to 16 wells per square mile, with a gas-to-oil ratio (GOR) averaging about 60 cubic metres of gas per cubic metre of oil he found about 70 per cent of the gas was used for fuel, 29 per cent vented and one per cent flared.

In the Peace River area, where the GOR averages 107175 m 3 /m 3 , there is more gas per well pad and odours are often present (which precludes venting), 35 per cent was used for fuel, 50 per cent went to sales, 13 per cent was flared and just two per cent was vented.

Peachey found that one of the barriers to conservation of produced gas is the lack of measurement standards. He cited a number of problems with current measurement methods, such as operators changing pump rates and gas volumes not being matched to representative oil volumes, resulting in gas balances that are extremely uncertain and open to potential adjustments or bias, he said.

The errors are big enough to drive a Volkswagen van through, and that reference to Volkswagen is intentional [the company was recently found to be using software to cheat emissions testing of its diesel fueled vehicles]. There is a lot of potential for the numbers to be biased, for the numbers to not be what is actually being vented, and there is a lot of incentive for them not to get to where they would have to do anything about it.

The measurement is based on the estimation of fuel, produced gas and vent gas volumes, and everybody is using a different method, said Peachey. We did a [quantification project] and we showed a huge range in the numbers different companies were getting in the same pool that should have the same GOR, and different companies were getting two or three times the GOR of what others were getting.

Another barrier is attitudes. In an examination of some 170 options for dealing with vented gas, flaring was one of them, he says, but that is resisted in the field. Methane has a climate-forcing impact 25 times greater on a 100-year basis than that of CO 2 . Its impact is 72 times greater than CO 2 on a 20-year basis, which is how reductions could have real and tangible impacts on preventing climate change in the short term.

Flaring methane is like running [natural gas] in your furnace. It can reduce greenhouse gas emissions by a factor of eight or nine, so you could get a big reduction just by flaring, said Peachey. But the environmental industry has done such a good job of scaring people about flares that no farmer wants a flare in their area. [Vented] gas is just coming out of a little rubber hose from the side of a building it bothers nobody. There is no safety issue, no environmental issue besides greenhouse gas emissions and the loss of energy. But it is a big greenhouse gas impact, which impacts the impression on the whole industry.

Alberta's Directive 60 requires that all solution gas flares and vents releasing more than 900 cubic metres (31 mcf) per day of gas must be economically evaluated to see if gas conservation is viable. If the net present value of gas conservation at a crude battery is found to be greater than negative $55,000, the well or battery cannot be produced until the gas is conserved. But low natural gas prices and higher pipeline and compression costs challenge the economic viability of conservation under that formula.

And Peachey noted that by the time companies make an assessment, the evaluation period has already allowed much of the gas to escape. As a result, 40-50 per cent of gas is vented before conservation is implemented.

Since retrofits miss much of the produced gas, the province should require installation of capture systems before operations begin, which would also make it more economic. We could standardize the oil and gas measurement, require installation [of capture systems] before operations begin. We know they are going to be venting [initially], why not require installation before they start and capture that 50 per cent right from the start, he said. Conserving gas should be an integral part of responsible oil production.

COMPARE AND CONTRAST

Peachey contrasts a high vent township operated by Canadian Natural Resources Limited at Cold Lake with a low vent field, Shells Cliffdale operation. Canadian Naturals township 63-9W4, containing 370 directional wells with two to 14 wells per pad and eight to 52 wells per section, was found to be venting about 32,000 cubic metres per day, or 11.7 million cubic metres annually. Some 70 per cent of gas was used for fuel (royalty free under provincial regulation) and 29 per cent vented.

On these sites, they are importing about 50,000 cubic metres per day of gas as fuel, and yet they are still venting so they are not only still venting gas, they are still bringing in fuel.

By contrast, when Shell acquired Cliffdale and discovered vent volumes were higher than expected, it spent $40 million to capture casing vents, tank top vents and even truck loading vents, Peachey says. Most of the gas is now used in boilers to generate steam, with the excess stored in the Three Creeks reservoir.

They first went to flare instead of venting, and then they went to gathering and storage. They said, we are not going to produce if we have to vent. They integrated their primary terminal operations in Peace River that needs fuel, so they move the fuel from Cliffdale to their terminal, and anything left over they put into storage. They are not venting anything.

So if you have the motivation, you can do itShell has shown you can, and it didn't cost them that much. So what does that mean? It really means that you have to include the vent gas capture as part of the total economics of the oil production. And thats what Shell does. They say, we are not going to produce oil unless we are cleaning up our mess at the same time. Its not a matter of technology, its totally based on motivation.

Peachey further contrasted methane capture with CCS. In November, Shell officially opened its Quest CCS facility that captures more than one million tonnes of CO 2 from its Edmonton-area bitumen upgrader and buries it in a saline aquifer.

The cost of putting carbon capture and storage on their upgrader is about $1,000 a tonne of CO 2 equivalent. It only cost them $80 per tonne of CO 2 emissions prevented at Cliffdale. And Cliffdale was self-funded, while Quest was 70 per cent funded by taxpayers, he said. So it is a much cheaper way to get rid of greenhouse gas emissions than doing carbon capture and storage.

FURTHER REDUCTIONS

According to Economic Analysis of Methane Emission Reduction Opportunities in the Canadian Oil and Natural Gas Industries , commissioned by the Environmental Defense Fund (EDF), achieving a 45 per cent reduction in methane emissions across Canada by 2020 would enable the recovery and potential sale of otherwise lost natural gas that equates to eliminating 27 million metric tonnes of CO 2 e emissions.

Reductions would provide the same climate benefit as taking every passenger car off the road in B.C. and Alberta, assuming a cost of $2.76 per tonne of CO 2 e. Analyzing reduction opportunities in both provinces, which together account for nearly 70 per cent of Canada's total methane emissions, ICF determined Alberta could reduce its methane emissions by 45 per cent for $2.57 per tonne of CO 2 e, while B.C. could reduce its emissions by 37 per cent at $1.69 per tonne.

Even with the regulations on the book, and even with the voluntary actions, there are still a lot of reductions out there that could be achieved very cost effectively, and I think that is a very important point, Drew Nelson, senior manager at EDF, notes. This is kind of a no-brainer, because the reductions are so cheap. It is not going to solve the problem, but it is certainly going to go a long way towards reducing the impact and contribution of this sector.

The $726-million initial investment needed to achieve the 45 per cent reduction in emissions represents about one per cent of industry's annual capital expenditure, which is less than one cent per mcf of gas produced.

In order to get all companies to initiate these emission-reduction changes, Nelson says it requires a bit of an external stimulus, including government intervention through regulations. He notes EDF, which partnered with the Pembina Institute in developing and disseminating the ICF report, made its findings available to the climate change policy review panel currently composing recommendations to the Alberta government.

The largest abatement opportunities in the report include stranded gas venting from oil wells, which if tackled could see 78 per cent emissions reductions with installed flares. Tackling gathering and station fugitives through leak detection and repair (LDAR) could see 60 per cent emissions reductions. By replacing gas-driven pumps with a non-natural-gas-driven variety, industry could reduce chemical injection pump emissions by 60 per cent.

Industry could reduce emissions by 22 per cent on reciprocating compressor rod packing seals by replacing rod packing at a higher frequency, while LDAR implementation for fugitives from centrifugal compressors could reduce emissions by 60 per cent.

The ICF assessment does not account for all possible methane emissions from oilsands production, though, but only those related to flared and vented volumes and tank emissions from SAGD. Due to the limited data on other sources (e.g., mining, tailings ponds, bitumen production), other oilsands sources are excluded from the analysis.

I think it is something that would require further study, and if it were included, then emissions would probably be going up, which means there would be more reductions that could be achieved. However, because we just didn't have the good data to do it, we were not able to do so, Nelson says.

The measures called for in the report are in line with the U.S. goal of a 4045 per cent reduction and would align with regulations in jurisdictions such as Colorado, Ohio and Wyoming, the ICF notes. It says a recent analysis of Colorado and Wyoming found no negative impact from such regulations, with production and industry jobs up one year after implementation.

Even during these challenging economic conditions, methane reductions are one of the lowest-cost, highest-value ways to tackle climate change in the energy business today, Nelson says.


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