A sectoral sustainable development study of the UK offshore oil and gas sector

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A sectoral sustainable development studyof 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
• 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 gt 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

Technical feasibility
Political environment
Reputation
Safety
Regulatory framework
Cost
Environmental impacts
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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 non-renewable
  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
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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 PECPNEC
  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
  non-productive well, as pressure support for
  production, into new well
• C Tour
• Epcon
• Only PWR can prevent all components of
  oil-in-water 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

• 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 industrys 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

• 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 1990s 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

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Headline results
LIFE OF FIELD Oil - 0.7 to 2.7 (mean
1.6) Oil/Gas - 1.4 to 3.7 (mean 2.0) Gas -
2.3 to 6.5 (mean 4.7)
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Historical data (oil)
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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
• 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

• 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
  regions 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 Futures in Falkirk

• Grangemouth, Scotlands 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
• BPs 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
• Doesnt 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)