Low carbon, high recoveryMarch 20, 2017
TOGY talks to Neri Askland, vice-president of the Middle East at Statoil, about the advantages of carbon capture and storage technology, Abu Dhabi’s oil production goals and natural gas needs, and the outlook for the hydrocarbons industry.
Present in Abu Dhabi since 2010, Statoil’s entrance into the market was focused on technology-aided recovery. Statoil has a strong focus on enhanced oil recovery and carbon capture and storage technologies (CCS). For Abu Dhabi, the application of CCS has two effects: reducing carbon dioxide emissions and conducting pilot projects to test whether carbon dioxide can be used to replace substantial volumes of natural gas injected into its wells.
• On market change: “The industry’s past model is not working anymore and oil and gas companies are taking steps to change their business models.”
• On recovery rates: “Statoil has an aspiration to reach a mean recovery factor of 60% from our operated NCS fields.”
• On demand: “Abu Dhabi has a lot of sour gas resources. The emirates can also import LNG. Another way to look at it is to focus on energy efficiency, which can have a tremendous effect on reducing the need for gas.”
• On 2017 goals: “The Middle East offers a lot of opportunities, and we are concentrating our efforts in Abu Dhabi to see if we can build mutually beneficial partnerships.”
Besides touching on these topics, TOGY talked at length to Neri Askland about his company’s activities in Abu Dhabi, efforts to reach higher recovery rates, the benefits of carbon capture and storage technology and meeting the growing demand for natural gas in Abu Dhabi. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Neri Askland below.
What is Statoil’s main area of focus in Abu Dhabi?
Our purpose is to find opportunities where we can use our toolbox to add value and at the same time to find the terms that make our portfolio competitive. Our company is ultimately competing for capital and business opportunities in this region for long-term co-operation. Statoil believes that it has competitive technology within four areas that will add value to Abu Dhabi.
First, its expertise in producing oil and gas in biologically sensitive areas, leaving a minimal footprint as a result of its activities. Also, being the second largest supplier of gas to Europe and providing a viable gas value chain. Thirdly, there is the strength of Statoil in carbon capture and storage (CCS). We are considered one of the lowest carbon dioxide emitting companies in the world and Statoil is extremely focused on low emission targets.
The fourth focus area that Statoil offers is an impressive track record in increased oil recovery (IOR), having produced more than two billion barrels of extra oil from its major offshore fields in Norway as a result of applying various technologies. Through its state-of-the-art technology, Statoil has been capable of oil recovery of up to 70% and extending the life of oilfields. Abu Dhabi has also set an ambitious recovery rate of 70%, and we believe that our methods could be applied in the emirate’s reservoirs.
How can Abu Dhabi achieve its 70% oil recovery rate?
A 70% recovery rate is quite high, but we have already started working on achieving that. Statoil has an aspiration to reach a mean recovery factor of 60% from our operated NCS fields. These rates are based on reservoir conditions. With some reservoirs, you would never be able to do it, while with others it is easier to get high recovery rates. You have to look at the average recovery rate of your portfolio, and some reservoirs are not economically viable for additional investment.
It is not impossible for Abu Dhabi to achieve the recovery rate targets, but they have to work systematically and test out each reservoir. There is not only one method because there are such dissimilar properties in different reservoirs, and you have to apply different methods to achieve it.
Statoil has built Norway’s biggest research centre for improved recovery in Trondheim to reach Statoil’s ambition in recovery rate. On the other hand, Abu Dhabi, through The Petroleum Institute, has built a state of the art IOR lab that will enhance the education and research environment in Abu Dhabi and hopefully provide new technology and new methods to help maximise production from their fields and reach their targets.
How can carbon capture help increase energy efficiency?
For several years now, we have been working hard at managing our energy use and improving energy efficiency on all our installations. CCS is regarded as an important technology to combat climate change and increase energy efficiency. We are among the lowest carbon dioxide (CO2)-emitting oil and gas companies in the world. It is a very important issue for us, and for our biggest shareholder [the Norwegian state]. We have also shown our commitment through our operations in the North Sea and other places.
The project we are executing at Snøhvit, Norway involves utilising carbon dioxide by capturing it from the LNG facility on Melkøya and storing it in the gasfield. If there is a way to agree on a proper price for CO2 and make it a product that has value, it could create opportunity for business. A price on carbon is probably the most efficient policy instrument to accelerate a change in the energy mix and to shift behaviour among both producers and consumers.
Statoil is extremely focused on low emission targets. For every project that is up and running, we have to measure how it contributes to our target, which is eight kilograms of CO2 emitted per barrel of oil by 2020.
What are the challenges faced when bringing this type of project to Abu Dhabi and the Middle East in general?
We are testing two CO2 capture technologies in Norway. [The first scenario involved] capturing CO2 in a gas stream under pressure. We are also doing post-combustion air capture, which captures CO2 in the exhaust from power generators. The last technology is a larger challenge, since it is a very costly process. The real challenge – is how to capture [carbon] at a low cost. It is cheaper if you can capture it from pressurised gas. One of the main challenges on the storage side, and that we have been working on in the North Sea, is how do we make sure that the CO2 stays in the reservoir? Here, we have been doing a lot of 3D seismic work to see how the CO2 behaves in the reservoir over time as more CO2 is injected.
Every other year, we do a seismic study of the field, such as the offshore gasfield Sleipner, and measure where the CO2 is located so that we can see on our models where it is moving in the reservoir, how much there is, how the congestion is and how it will be when it is more pressurised through the addition of more carbon dioxide. It is an important task that we have learned a lot about and an area where we can continue working.
Another challenge is that CO2 will be a product for which you would like to have the cheapest transportation cost possible. The more you pay in transportation costs, the more demanding it will be.
CO2 is very acidic and extremely corrosive, which makes it challenging to inject it in systems that do not have the materials designed for it.
ADNOC is already deploying CO2 for EOR and this is a very interesting and important project to follow. Statoil has long experience in dealing with CO2 value chains and we are ready to share any relevant learning with Abu Dhabi.
How can the emirate address growing demand for natural gas?
There are several ways to deal with this issue. One way is increasing the supply of gas, which can come from sour gas, as Abu Dhabi has a lot of sour gas resources. However, the development from such fields requires advanced technologies, and sour gas extraction is a costly process. Additionally, the emirates can also import LNG, or increase shipments from Qatar. More importantly is how Abu Dhabi will prioritise these options and when.
Another way to look at it is to focus on energy efficiency, which can have a tremendous effect on reducing the need for gas.
Energy efficiency is the best tool, and I think His Excellency Suhail Mohamed Faraj Al Mazrouei is doing a very good job on that side by removing subsidies. If energy is too cheap, there is no awareness. It is therefore necessary to create a responsible mind-set.
How are Abu Dhabi and Statoil adapting to ongoing changes in global energy markets?
Under the leadership of HE Dr Sultan Ahmed Al Jaber, we have seen a tremendous reshaping of ADNOC and its group. They are doing the right things and have started a journey that will be very interesting to follow. We would be pleased to contribute to this process.
The industry’s past model is not working anymore and oil and gas companies are taking steps to change their business models. We see that Abu Dhabi is working on a new model, to diversify income from fossil-fuel energy. The industry is going through a difficult period but will come out of it stronger and more competitive. The hydrocarbons industry will remain a strong pillar for many years, but at the same time we need to be focused on creating a low-carbon environment. At the global level, we will continue working to develop our business portfolio to generate high value with a low carbon footprint.
Renewables are growing as an investment market for us, it is an attractive pillar in our company and growing industry, especially wind. Due to the changes in global energy markets, our new strategy is to gradually complement our oil and gas portfolio with profitable renewable energy and other low-carbon solutions.
When do you expect the global oil and gas industry to recover from the current downturn?
What we see is that we are getting closer to the balance of supply and demand, but when this rebalancing will take place is uncertain. There are 600 million barrels of oil stored globally. There will be a period of time when these volumes will be released, and it will be interesting to see how long this period lasts.
However, new investments have stopped over the past three years. The challenge is that the rebalancing may happen fast and the industry should be able to respond to demand when it overtakes supply. There could be some surprises that add to the volatility.
How is Statoil reshaping its global presence as well as its Middle East presence?
We are developing our business portfolio to generate high value with a low carbon footprint to shape the future of energy. Our international expansion has enabled us to build strong positions for profitable growth. We will continue to develop and upgrade our international portfolio by deepening in core areas, such as Brazil and the US onshore, which offers a highly flexible development model. We also have the ambition to create a position for ourselves in new types of energy. Our renewables and low carbon activities are growing from a small base compared to our oil and gas activities, and will be the fastest growing part of Statoil in the coming years.
The Middle East also offers a lot of opportunities, and we are concentrating our efforts in Abu Dhabi to see if we can build mutually beneficial partnerships. We already have a partnership with Masdar. We believe that our expertise can be very applicable for Abu Dhabi and the region.
For more information on Statoil in Abu Dhabi, such as its work with carbon capture and storage, see our business intelligence platform, TOGYiN.
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