Due to increasing pressure from stakeholders, governments, communities and environmental groups to reduce greenhouse gas (GHG) emissions, oil and gas operators around the globe are turning to renewables to power their operations.
According to a new database and analysis by IHS Markit, oil and gas companies are starting to utilise alternative sources to reduce carbon emissions associated with their operations.
“There has been a striking pace of growth over the past few years and a dynamic commercial environment for delivering renewable energy to oil and gas operations,” detailed Judson Jacobs, executive director, upstream energy, IHS Markit.
“Energy efficiency efforts and reductions in flaring can only do so much to lower GHG emissions, so some companies are turning to zero-carbon sources to power their upstream, midstream and downstream operations.”
While the numbers are small, they have been growing rapidly over just the past couple of years.
While there were fewer than 15 of these renewable energy projects from the early 2000s (when the industry first deployed such technologies) through 2017, IHS Markit now tallies more than 45 announced projects in its Oil and Gas Field-based Renewable Energy database, with 13 announcements made in 2018 and 15 made in 2019.
Projects announced in 2018 and 2019 are expected to avert more than three million metric tonnes (MMT) of annual carbon dioxide (CO2) emissions combined. This will be a significant improvement, as projects just one year prior averted 0.3 MMT.
Deployments are happening in both new developments and existing assets, with solar the most prominent renewable technology, followed by hydropower and wind.
In July 2020, Chevron U.S.A. Inc., a wholly-owned subsidiary of Chevron Corporation, and Algonquin Power & Utilities Corp announced they will co-develop renewable power projects that will provide electricity to strategic assets across Chevron’s global portfolio. Under the four-year agreement, Chevron plans to generate more than 500 megawatts (MW) of its existing and future electricity demand from renewable sources.
The initial renewable power projects will be focused on Chevron operations in the U.S. Permian Basin (Texas and New Mexico), Argentina, Kazakhstan and Western Australia, with construction slated to commence in 2021.
In February 2020, Shell Australia announced it will build and operate its first industrial-scale solar electricity farm near Wandoan in central Queensland. The Gangarri solar farm will generate 120 MW of solar electricity from approximately 400,000 photovoltaic panels and is expected to be completed in early 2021.
Shell’s solar farm will help power the operations of its QGC project, located in Queensland in Eastern Australia, and will reduce carbon dioxide emissions by around 300,000 tonnes a year.
Furthermore, in July 2020 Eni New Energy, started power production from its new solar photovoltaic plant in Volpiano, Italy, with a total capacity of 18 MW.
The plant, built on an industrial area of approximately 32 hectares, is expected to generate over 27 GWh, 10 per cent of which will supply energy to Eni’s site, reducing the use of electricity from the national grid by more than 50 per cent.
The remaining energy will be supplied to the market, without benefiting from incentive mechanisms. The initiative is expected to prevent the emission of around 370,000 tonnes of CO2 over the service life of the plant.
Additionally, in 2020 Eni received authorisation for a 4.5 MW solar photovoltaic plant in Trecate in Italy, which will power Eni’s production site. Authorisation procedures are reportedly underway for further initiatives in Porto Marghera, Ravenna, Priolo, Gela and Porto Torres, also in Italy.
Mr Jacobs noted that several factors beyond emissions reduction are driving the growing interest for renewables in oil and gas operations. For example, the steeply declining costs for renewables and the industry’s growing familiarity and experience with these technologies.
“And there are tangible improvements to operational performance that go along with using them,” he said.
According to IHS Markit, field-based renewable installations are demonstrating reliability. And electrification – drawing renewable-generated power direct from the grid, as to offshore platforms in Norway – removes most energy generation equipment entirely, enabling fewer on-site personnel needed to operate it and smaller facility footprints. Additional benefits include reduced maintenance expenses and the elimination of fuel deliveries to site.
Minuri De Silva, research analyst, costs and technology, IHS Markit, said North America and Europe, where renewables deployments have been most prolific to date, are still increasing.
“Other conducive regions such as the Middle East, Latin America and Asia are also poised for greater adoption as they address technical and commercial issues. The growth potential is significant.”
Adoption by IOCS and NOCS
Likewise, the types of oil and gas companies utilising field-based renewables is widening.
International oil companies (IOCs) have been leading in this area, but the use of field-based renewables has expanded to national oil companies (NOCs), independent exploration and production firms and even oil field services firms in recent years.
Last year SONATRACH, the national state-owned oil company of Algeria, started to engage in the energy transition by actively solarising its facilities to cover 80 per cent of site needs – up to 1.3 GW solar power to supply all eligible sites.
The company has also signed a Memorandum of Understanding (MoU) with Eni and Total Solar, which covers the general aspects of solar development on production sites of SONATRACH (brownfield) and grid-connected (greenfield).
Norwegian state-owned energy company, Equinor, is taking the lead when it comes to renewables integration.
In October 2020, the company announced that construction had commenced on the Hywind Tampen, a floating offshore wind farm at Kværner Stord.
Located approximately 140 kilometres off the Norwegian coast, the Hywind Tampen Project will be the first floating offshore wind project to supply renewable power for oil and gas operations. The wind farm will have a total capacity of 88 MW, and is expected to cover about 35 per cent of the annual power needs on Equinor’s five platforms; Snorre A and B and Gullfaks A, B and C.
Hywind Tampen is forecast to reduce emissions from the Gullfaks and Snorre fields by more than 200,000 tonnes per year, which corresponds to annual emissions from 100,000 private vehicles.
Equinor has been a pioneer in floating offshore wind technology and has been working on this technology for nearly 20 years. When the Hywind Tampen Project is operational in 2022, the company will be operating one-third of the global floating offshore wind capacity.
While IHS Markit anticipates the number of field-based renewable energy projects to continue to accelerate in the coming years, several challenges must be overcome before further widespread adoption.
The company notes that cost relative to traditional energy generation sources, the development of supply chains in remote regions, and energy storage for intermittent renewable sources are all significant factors currently constraining growth.
“The activity in the oil and gas field-based renewable energy space is at what we call the ‘early adopter stage’. It is a dynamic and important trend to follow,” Mr Jacobs concluded.