OPEC : Carbon capture and storage, CO2 for enhanced oil recovery, and gas flaring reduction

Carbon capture and storage, CO2 for enhanced oil recovery, and gas flaring reduction

This is the official report on the Joint Workshop held on the above subject by OPEC and the World Petroleum Congress at the OPEC Secretariat in Vienna, Austria, on 8–9 June 2004

Big reductions in carbon dioxide emissions are possible with the continued use of petroleum, through the application of a technology that is being developed today, CO2 capture and sequestration.

This was the overriding message to emerge from a workshop held in OPEC’s Secretariat in Vienna, Austria, on 8–9 July. However, it was acknowledged that there was a need to reduce the cost of applying this technology, before it was able to realise its full potential.

The two-day workshop was organised jointly by OPEC and the World Petroleum Congress, and its theme was carbon capture and storage, CO2 for enhanced oil recovery, and gas flaring reduction.

Carbon dioxide emissions from power plants and stationary industrial sources account for more than 60 per cent of global greenhouse gas emissions. However, this CO2 can be captured and stored, and, if injected into depleting oil reservoirs, can increase recovery through an “enhanced oil recovery” (EOR) process. Thus, CO2 capture and storage and EOR present opportunities for the oil industry to participate in activities that will substantially reduce emissions, and, in the case of EOR, increase the recovery from oil fields.

Gas flaring, another source of greenhouse gas emissions, can be practically eliminated in oil field operations by utilisation of the gas for re-injection, as fuel for power generation, and/or for poverty reduction programmes that are focused on bringing modern energy supplies to the least developed areas of the world, consistent with the principles of sustainable development.

The emphasis in the workshop was on the application of the latest technology towards meeting these carbon-based challenges. The overall objective of the meeting was to bring added value to oil and gas operations in oil-producing countries, while presenting a proactive response to environmental concerns.

The workshop brought together international energy experts from government, intergovernmental organisations, industry, academia, research institutes and regulatory bodies, as well as OPEC’s own Member Countries.

“Today, we find ourselves having to operate in an industry that is increasingly subject to carbon constraints, in the light of the longstanding United Nations-sponsored climate change negotiations,” said Dr Maizar Rahman, Acting for the OPEC Secretary General.

He was referring to the Kyoto Protocol to the UN Framework Convention on Climate Change. Under the Protocol, which has yet to be ratified, 38 developed countries agreed to collectively cut back their greenhouse gas emissions, including carbon dioxide and methane, by a total of 5.2 per cent between 2008 and 2012 from 1990 levels. It authorised three “Kyoto mechanisms” to be used to meet binding quantitative emissions reductions targets — the “clean development mechanism”, “emissions trading” and “joint implementation”.

“We must, therefore, envisage (the evolving situation) as presenting a new set of challenges to all those involved in running the oil industry,” continued Dr Rahman, who is also Indonesia’s Governor for OPEC. “This must be integrated into the way we handle what may be considered as the overriding challenge facing the industry, which is to meet, in a timely and effective manner, the rising level of oil demand that has been forecast for the 21st century.”

A new scenario is unfolding, in the shape of a world that requires its energy to be cleaner, safer and, as far as possible, environmentally benign — and yet, at the same time, wants its energy to be as cheap as possible and to reap the full benefit of any other economies that may be within its reach.

“The industry must ensure that it continues its efforts to address environmental problems in the future,” Dr Rahman said. “This process involves the constant willingness to reappraise our outlook, our targets, our methodologies and our practices and procedures at all stages of our operations. To carry this out effectively, a collective approach is essential that extends right across the industry.” That was why the workshop was being held, to explore possible avenues for cooperation.

The WPC President, Dr Eivald Røren, noted how the aims of the workshop equated to the Congress’s central objective of “promoting the management of the world’s petroleum resources. It aims to encourage the application of scientific and technological advances and the study of economic, financial, management, environmental and social issues relating to the petroleum industry.” He stressed the importance of “good housekeeping” within the industry and the need for producers to be able to say to their children and their grandchildren: “We have done our best.”

He said it was in the “enlightened self-interest” of producers to ensure the capture, storage and use of CO2, as well as to avoid wastage with flaring gas. Sustainable practices were essential.

As the opening session of the meeting got under way, the first speaker emphasised that the industry must actively promote such practices.

Bob Card, President of the USA-based consultancy, The Card Group, observed that — from an American perspective — since certain groups wanted to eliminate the use of fossil fuels altogether, this could be countered: “By credibly pursuing, and then implementing, carbon capture and storage technology, producers can counter this trend, thereby protecting their market and product returns.”

He stressed the importance of producers of doing everything they could to get this point across to policy-makers, by ensuring that they had “a seat at the table” whenever significant new legislation affecting the petroleum industry was under consideration, so that the interests of the industry could be properly addressed and articulated.

It was pointed out that, even though carbon capture and storage technology was available today, the costs were relatively high. In response to this, large-scale international research and development ventures were already underway, to help enhance the technology and bring down costs.

A series of presentations on commercial-scale demonstration projects illustrated this.

They began with two case studies on the injection of captured CO2 into saline aquifers, the In Salah Project in Algeria and the Sleipner Project in Norway. In both projects, participants heard that the CO2 that was removed from a natural gas sales stream was being injected into saline aquifers, rather than being vented to the atmosphere.

Case studies on CO2 enhanced oil recovery featured the Weyburn demonstration project in Canada, which used captured CO2 from a gasification plant, and the West Texas Permian Basin projects, which relied upon naturally occurring CO2 from reservoirs. It was stated that, with the Weyburn project, the field response to the CO2 injection was so positive that the project was economic on its own at a price of US $18 a barrel. In West Texas, where CO2 enhanced oil recovery projects had been conducted for more than 30 years, EOR now accounted for 20 per cent of total oil production and some fields would achieve ultimate recoveries of nearly 70 per cent.

Discussions of the policy and regulatory issues revealed that legal frameworks still had to be developed for CO2 capture and storage, in particular concerning the long-term safety and monitoring of CO2 capture. The use of the Kyoto Clean Development Mechanism had been discussed and a methodology for a North Sea CO2 capture and storage project was presented as a first step.

In the ensuing round table discussion, under the chairmanship of OPEC’s Director of Research, Dr Adnan Shihab-Eldin, it was emphasised that a good and thorough understanding of the technology and the costs was essential before policy decisions could be made.

Also, carbon dioxide had to be “given a price”. It should not be considered as being free. Consumers had to be prepared to take a share of the burden of paying for carbon-mitigation measures.

It was pointed out that the potential for commercial-scale EOR provided the incentive for oil producers to become involved in CO2 capture. Many had already recognised that it was a “win-win” situation for them.

For mature fields in the USA, CO2 enhanced oil recovery had been so successful that producers were considering the use of anthropogenic CO2 to expand this process to other fields.

Indeed, the present high oil prices had encouraged some commercial banks to consider financing EOR projects in the USA. It was noted in the discussions that enhanced oil recovery was economic at a technically feasible cost of $22/tonne of CO2, when the price of West Texas Intermediate crude was $40/barrel.

During the second day of the workshop, participants focused their attention on gas flaring, which presented another set of challenges for the oil industry, both on economic grounds and due to its polluting impact on local communities. However, the pace and extent of developments varied significantly among oil-producing regions.

The Abu Dhabi National Oil Company had achieved dramatic reductions in gas flaring, from about 1,500 million cubic feet per day (mcf/d) in the early 1980s to less than 200 mcf/d today. This had reduced air pollution and increased gas availability for export or internal use.

In Alaska, gas flaring was illegal, and so all produced gas had been re-injected. In the Prudhoe Bay field, gas re-injection projects had increased reserves by 5.5 billion barrels of oil, participants heard, and today gas cap liquids constituted 50 per cent of production. The re-injection of produced gas had also contributed to the 36 trillion cubic feet of gas that was now available for export.

Algeria had spent $600 million on gas flaring reduction projects since 1973, reducing gas flaring from 84 per cent of associated gas production to about 11 per cent today. The national oil company, Sonatrach, planned to reduce this to zero by 2010, primarily through re-injection.

In Nigeria, 42 per cent of the associated gas was flared, down from the 62 per cent in 2000. The Italian oil company, ENI, was developing a gas-gathering system and an independent power plant. Since the power plant will burn associated gas that might otherwise be flared, it was being considered for credit as a Clean Development Mechanism project.

However, in spite of all these developments, it was made clear, in the round table discussions that concluded the two-day meeting, that there were remaining hurdles to be overcome.

Many of these were economic or financial in scope and included differences between internal and export gas prices, the lack of gas-gathering systems for small volumes of gas and the remote locations of some of the fields.

Moreover, there was the social dimension, participants heard. In some areas, it was recognised that reducing or eradicating flaring could provide much-needed access to energy for local communities, as well as providing them with a healthier environment in which to live. There was also the view that regional cooperation is essential. As an example, Nigeria and Algeria are discussing cooperation on a trans-African pipeline to take associated gas to the European market.

Dr. Sascha Djumena from the World Bank outlined the bank’s active involvement in helping to reduce flaring and the Global Gas Flaring Reduction Public Private Partnership (GGFR). Many OPEC Member Countries are already part of the GGFR.

He said the GGFR and the World Bank were committed to developing an efficient regulatory framework and adequate fiscal incentives, as well as providing advice on implementing standards, on the potential role of carbon credits and on the commercialisation of associated gas.

As the workshop drew to a close, speakers emphasised the importance of continuing “the spirit of cooperation generated by the workshop when we return to our home countries”, to contribute positively to the “achievement of objectives discussed in this room”.

Dr Rahman closed the workshop with the following comment: “What we have now is the understanding that, regarding CO2 sequestration, storage and use, as well as gas flaring, all parties, in fact, have the same interests and objectives. There is also an understanding that cooperation and synergy between all parties are necessary to realise those objectives.”