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Great expectations, Part 2

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Oilfield Technology,


Oilfield Technology Correspondent Gordon Cope shows us how North America’s oil and gas sector faces tumult as it responds to huge opportunities and huge challenges.

 

Troubles

 

Around the world, oil and gas producers face significant opposition due to the association of petroleum production and consumption with greenhouse gases (GHGs), which have been linked with climate change. Climate change, in turn, could lead to glacial melting, sea rises, species extinction and worsening weather. Canada’s petroleum industry faces extra odium due to oilsands production, which requires the use of energy to coax the heavy bitumen out of the ground and upgrade it to higher quality crude. This extra processing is considered ‘dirty oil’, and various jurisdictions, including California and the EU, have tried to have it banned. As previously mentioned, opponents are turning to pipeline battles in order to thwart oilsands production.

Concerns over hydraulic fracturing (also known as fracking), have arisen; some of the chemicals used in the procedure could contaminate local drinking supplies, and several jurisdictions have banned it until more is known. If opposition grows and more bans ensue, however, the midstream sector would be adversely impacted as the growth in gas production slows, or reverses.

Producing unconventional resources also requires a great deal of water. In the oilsands, it takes approximately 11 bbls of water to produce one bbl of bitumen. In in-situ operations (where steam is injected underground to heat the bitumen sufficiently for it to flow to surface), it takes 2 - 3 bbls of water for each barrel of oil. In shale plays, a single stage of fracturing can use 1 million gal., and 10 stages per well uses a total of 10 million gal., or the equivalent of what a typical farm in Texas uses in 10 years. Regulations regarding recycling and the restricted use of fresh water already exist in the oilsands, and shale gas intensive regions such as Pennsylvania are eyeing similar legislation.

The Persistently low price of gas is also an issue. The glut due to shale gas production has placed a significant downward pressure on gas prices. Henry hub gateway prices have dropped from a high of US$ 9.15 per million BTUs in 2008 to under US$ 3 in 2012. Although they have recovered to US$ 3.50 in early 2013, the forecast is for the price to remain low for several years.

Industry participants in North America generally agree that the oil and gas sector must work to improve its social licence to operate. Operators are working to reduce GHG emissions during drilling and production. Pipeline companies are investing more in the upkeep of the transportation infrastructure. Refiners are investigation ways to isolate GHGs through carbon capture and sequestration (CCS). Industry groups are communicating more effectively between the industry and public.

Most health concerns regarding fracturing chemicals centre around diesel fluid, which can degrade into benzene. This aromatic compound has been associated with a wide variety of cancers. Chesapeake Energy is experimenting with fracturing fluids composed solely of environmentally benign components. Various mixtures of the 100% green fluids are being field tested in wells throughout the US. Research is also underway to reduce the amount of water needed for a fracturing. Halliburton recently announced the launch of the RapidFrac system, which uses a ball to open multiple sleeves per production interval. NEXT Legacy Technology, an Alberta-based service company, has come up with a system that uses only a tiny amount of water and benign organic compounds. Approximately one bbl of organic compound is mixed with 40 l of water. The mix is then placed into the reservoir zone at low pressure. The compound reacts with the reservoir rock, increasing permeability through exothermic (heating) and kinetic (mechanical) action.

The shift from coal to natural gas as fuel for electricity generation shows promise in bolstering the price of gas. Formerly, coal accounted for 49% of all electricity generation in the US, and natural gas stood at 19%, primarily for peakload generation. In 2012, the EIA noted that both stood at 32%. While gas is now losing some market share back to cheaper coal, the use of natural gas reduces GHG emissions.

There are also concerted efforts underway to increase gas exports. Cheniere Partners, which owns an LNG import terminal in Sabine Pass, Louisiana, has plans to develop six liquefaction trains, each with a 4.5 million tpa capacity. Construction has already commenced on the first two trains, with two more expected to start this year. The gas will be exported to higher priced markets in Europe and Asia. In Canada, regulators in British Columbia have approved the C$ 5.6 billion Kitimat LNG project, capable of liquefying 5 million tpa.

Royal Dutch Shell recently announced it plans to build LNG Canada, a 12 million tpa plant, in partnership with Mitsubishi Corp., Korea Gas Corp. and PetroChina. First shipments to Asia are expected by late 2015 or early 2016.

 

 

 

Part 1 of this article can be reached here.

Part 3 of this article can be reached here.

 

 

 

Adapted by David Bizley

Read the article online at: https://www.oilfieldtechnology.com/exploration/18102013/great_expectations_part_2/

 

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