Transcript A sectoral sustainable development study

A sectoral sustainable development study
of the UK offshore oil and gas sector
Professor Paul Ekins
Robin Vanner
Policy Studies Institute
James Firebrace
JFA
Stakeholder Forum
Tuesday 19th April 2005
Church House, London
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Objectives
To develop a generic sectoral sustainable
development methodology
To deliver useful insights into important
issues for the oil and gas industry
sector
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The UKOOA-PSI Study
• Two year programme
– April 2003 to March 2005
• Funding
– PSI externally funded by EPSRC grant under DTI
Sustainable Technologies Initiative
– Much of UKOOA contribution in kind through data
provision and industry analytical input
• Staffing
– One researcher + UKOOA and PSI Leads
• Governance
– Joint UKOOA-PSI Management Group, including
representation from four companies
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Project design
• Development of a generic sustainable development
methodology
– Applicable to the oil and gas industry
– And to other sectors, thus of wider public benefit
• The application of this to four topical industry
issues
– Produced water (OSPAR 2006 target and potential
further tightening)
– Energy Use (EU emissions trading 2005)
– Decommissioning (derogation of footings, future of drill
cuttings /pipelines)
– Social issues during transitions (key concern of some
stakeholders)
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Process
Link to UKOOA Sustainability work (Striking a
Balance)
Issue Leads
– Industry expert in the area
– Follows the work and give guidance when discussed at MG
Interest Groups
– Each met once towards end of main research phase, when
first draft produced
Independent peer reviews of Working Papers
– Expertise from outside the industry
DTI (+OSPAR)
– Understanding of regulatory pressures
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Outputs
• Final project seminar for industry in
Aberdeen in March
• Working papers completed on produced
water, decommissioning, nearly completed on
offshore energy use, social issues during
transitions, in preparation on methodology.
• Journal articles submitted on produced
water, decommissioning. Further articles to be
submitted on energy use, methodology
• SPE article on produced water accepted, to
be presented in September at Offshore Europe
conference
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Methodology
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Sustainable development
• Core of agreement, widespread differences in
interpretation
• Environmental, economic, social dimensions
• Jacobs (1999) core:
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environment-economy integration
environmental protection
futurity
equity
quality of life
participation
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A Sectoral Sustainable
Development Methodology
Methodology to enable businesses and
industrial sectors:
– To gauge whether or not they are using natural
resources and the environment sustainably, the extent
of their wider contribution to society; and
– To find ways of improving their environmental and
social performance that are most likely also to improve
economic performance.
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Methodology
•Material flow analysis (environmental)
•Energy flow analysis (environmental)
•Value chain analysis (economic)
•Relationship analysis (social)
•Case studies (decommissioning, produced water,
offshore energy use, initiatives related to transitions
[especially in terms of employment])
•No attempt to value/weight and
aggregate different impacts
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Decommissioning
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Introduction
• Issue context:
– 266 structures on the UKCS
– 33 large fixed structures (topside, jacket, footings, drill cuttings,
pipelines)
– OSPAR presumption of removal of structure, possible
derogation of footings > 10,000 tonnes; no ruling on drill
cuttings, pipelines
– Estimated total real term costs of £8.8 billion (UKOOA in
2002)
– UK tax payer to pay between 30% and 70% of these costs via
offset revenues (assumed to be 50% in report)
• Study objective:
– ‘Develop an understanding of the relationship between
decommissioning options, costs and full cycle
environmental impacts’
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Stakeholders
• Seven kinds of decommissioning consideration
• Rank order depends on stakeholder perceptions,
preferences and priorities
• No objectively right solution
Political
environment
Technical
feasibility
Reputation
Safety
Regulatory
framework
Environmental
impacts
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Cost
Approach
• Compare the various decommissioning solutions
against a hypothetical ‘do nothing and monitor’
reference
• Capture all of the various material and energy flows
with their associated financial expenditures
• Qualitatively assess the non-financial outcomes (- - / +++):
– (1) clear seabed, (2) health and safety, (3) UK employment, (4)
marine environmental impacts, (5) conservation of stocks of nonrenewable resources, (6) the impacts of resource extraction, (7)
impacts of landfill, (9) impacts on the fishing industry, (10) and
impacts on fish
• Generate implicit valuations for non-financial
outcomes
• Results under journal peer review
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Produced water
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Introduction
• Issue context:
– Discharges of OIW are projected to increase in coming years
– OSPAR recommends an OIW limit of 30mg/l and an absolute
reduction of 15% by 2006
– Esbjerg Declaration (endorsed by OSPAR) envisages:
• ‘continuously reducing discharges, emissions and losses of
hazardous substances from all sources, and endeavours to
move towards the target of cessation of by the year 2020’
• The latter is interpreted to imply the injection of all produced
water throughout the North Sea by 2020
• Study objective:
– ‘Develop an understanding of the relation between reduction goals,
costs and environmental impact, and an understanding of the
practical meaning of ‘no harm’ and ‘precautionary action’
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Risk and the policy-making process
Policy makers
(OSPAR & DTI)
Regulatory
response
Manufacturers
of equipment
Oil & gas
Industry
Abatement
response
Public, NGOs
& scientists
Marine
discharges
Materials, energy
& money
Waste & emission
impacts
Material flow
Information flow (Thickness of arrow relative to level of information)
Risk perception filter (personal or institutional)
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Public, NGOs &
scientists
Evidence of harm
• Components of concern are polycyclic aromatic
hydrocarbons (PAHs) and alkylphenols
• Field studies have not identified any negative
environmental effects from any components of
produced water discharges
• Assessments of risk based on modelling PEC:PNEC
ratios suggest that no adverse or chronic effects on
marine organisms would be expected from PAHs or
alkylphenols found in produced water, except for
areas very close to the discharge points
• Outstanding concern for reef populations of fish
around structures - needs to be better understood
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Approach
• Assessment in terms of material, energy and financial
flows of different technologies
– Filtration
– Produced water reinjection (PWR): into existing nonproductive well, as pressure support for production, into
new well
– C Tour
– Epcon
• Only PWR can prevent all components of oil-inwater from entering the marine environment
• PWR (unless used as pressure support) is most
expensive option, and most energy-intensive option
(with associated emissions)
• Detailed results under journal peer review
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Three precautionary approaches
to produced water management
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2.
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3.
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Maintain current standards of produced water management
with additional targeted actions
Implementation of the 30mg/l limit, continued substitution of
introduced chemicals with additional monitoring and research
Maintain the current regulatory approach of reducing
permissible discharges on an ongoing basis
Provides theoretical reductions in risk, does not allow industry
to plan their investments and the partial nature may not satisfy
concerned stakeholders
Reduce discharges of produced water to zero over the long
term
Would provide a clear message to the industry and satisfy
concerned stakeholders
Most expensive approach
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Energy Use Offshore
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Introduction
• Issue context:
– Emissions trading schemes place explicit financial value on
gas fuel use
– Falling levels of production require energy-intensive
production support activities and techniques
– Therefore, the Energy Intensity (EI) of oil and gas
production can be expected to increase as the North Sea
matures
• Study objective:
– ‘Develop an understanding of the industry’s use of energy at
the various stages of the operational lifecycle and thereby
generate insights into potential efficiency measures and
performance indicators’
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Key parameters
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Process issues
System operating pressure
Systems throughput
Topsides process stability
Equipment issues
Compressors, turbines, motors
Electric submersible pumps
Water injection
Gas lift
Equipment redundancy/reserve
Facility modifications
Sophisticated controls systems for turbines and compressors
Operator focus
‘Real-time’ surveillance of energy use data
Energy use as a performance target
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Data and approach
• 15 Shell facility case study datasets were compiled:
– Only operational offshore energy use considered
– Uncertainty about the accuracy of the energy use data before mid
1990’s and beyond 5-year business planning timeframe
• Datasets were re-base-lined and combined, so that all data
could be plotted from ‘first year of production’
• Trend in Energy Intensity (GJ/GJ) were plotted by field type
Product
Life phase of field
Oil
Early
-
Mid
1
Late
5+1
Oil and gas
2
2+2
2+1
Gas
-
3
-
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Headline results
16%
Oil & Gas
Gas
All Case studies
Oil - 0.7 to 2.7% (mean = 1.6%)
14%
12%
Oil/Gas - 1.4 to 3.7% (mean = 2.0%)
10%
Gas - 2.3 to 6.5% (mean = 4.7%)
8%
6%
4%
2%
Year of production
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49
46
43
40
37
34
31
28
25
22
19
16
13
10
7
4
0%
1
% EI (GJ/GJ)l
Oil
Energy Intensity % (EI)
(Excludes vent and flaring)
LIFE OF FIELD
Historical data (oil)
6.0%
5.0%
B
C
4.0%
M
3.0%
N
O
2.0%
P
Oil
1.0%
Year of production
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35
33
31
29
27
25
23
21
19
17
15
13
11
9
7
5
3
0.0%
1
EI %
L
Energy management staircase
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Social Issues in Transition
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Introduction
• Study Objective
– Review small number of company initiatives in the
context of a mature industry in transition, and seek
to better understand stakeholder issues relating to
these transitions
• Issue context
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Peak UKCS production for oil and gas
Past structural change (e.g. fabrication yards)
Potential future synergies (e.g. offshore renewables)
Corporate social responsibility (CSR) debates
Integrating social with economic/environment into
single SD methodology
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Case study 1: The Post-Shearwater
initiatives
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Shell (+ExxonMobil/BP) in Tyne/Teeside in 2000
30,000 employed in NE England at its peak
Seen as last of the large UKCS structures
Partnership (NOF, PNE, ONE)
Two dimensions:
– Support for local companies (major
contractors + SMEs) towards export business
and showcasing of region’s capability
worldwide
– Support for workforce via resource centres etc
• Major leverage on ~£300k
• Yard won further large Shell contract (Bonga)
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Case Study 2: My Future’s in Falkirk
• Grangemouth, Scotland’s largest industrial site
– 80 years old
• 2001 restructuring to ensure sustainable future
– loss of 1000 jobs
• MFiF set up to support economic diversification of
surrounding region
– 3 year partnership BP +Falkirk Council +Scottish
Enterprise Forth Valley
• Move from charity to focused outcome model
– BP’s contribution conditional on leverage (£2m generates
£14m public money +private investment)
– Intellectual contribution seen as more important than the
funds
– Emphasis on education, training and skills
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Case Study 3: Beatrice Windfarm
Demonstrator
• Talisman operated platform in Moray Firth with
existing power cable to shore
• Potential beginning of new generation of offshore
windfarms in medium depth water (40m)
• 2 turbine Demonstrator (Talisman + Scottish and
Southern Energy) as learning for potential 200
turbine (1GW) windfarm
• Public co-funding from EU, DTI, Scottish Executive
• Social implications for skills and regional
employment / economic impact
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Methodology and Findings
• Understanding corporate social actions in
terms of relationships and mutuality
• Sustainable development benefits to society
– Shearwater: further contracts, skills diversification, lower
unemployment, participation/social cohesion
– MFiF: regeneration/business opportunity, skills transfer, local
economic development experience
– Beatrice: energy transition (new industry/skills/
employment, need to local participation)
• Benefits to the business
– ‘Licence to operate’, reputation (global, national, local),
regulator relationships, potential competitive advantage from
heightened morale, employee commitment, understanding of
social concerns and expectations
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More general conclusions
• Expectation management needed on extent of role
industry can play in transitions
• Potentially important contribution as
– Challenger of assumptions, market realism, data
– Contributor of focus, discipline, innovation, impetus and
leadership
• Doesn’t need large amounts of funds
– High leverage possible
– Could involve senior staff time
• Needs understanding of other realities (supply chain,
local communities, environmental/social concern)
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Issues for
Discussion
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Issues for discussion
• Feedback on methodology used
• Feedback on results/assessment where
available
• Implications of the conclusions for
stakeholders (industry, regulator, local
communities, NGOs)
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