The energy challenge

By Rebecca Goozee, Deputy Editor

The oil and gas industry faces new challenges everyday: the economic climate; heavier and more complex crudes; increased safety and environmental legislation; erosion of expertise with the exodus of experienced workforce members; and constant pressure for innovative new products to raise the game. But with these challenges comes opportunity, and by drawing on extensive global operating expertise, Shell Global Solutions is leveraging technology, expertise and experience to do just that.

O&G. World energy demand is expected to increase by 57 percent by 2030. What role will oil and gas play in helping to meet that demand? And what are the challenges in order for oil and gas to remain a significant part of the energy mix?
In light of the world’s growing long-term demand for energy, the world will need to produce diverse energy from all possible sources. Of course a much higher share of the world's energy must come from non-hydrocarbon fuels in the future, but Shell’s own scenarios planning work makes it clear that oil and gas will continue to be the world’s primary source of energy for decades to come.

Even if a period of economic slowdown moderates demand growth, there is a major gap to meet. And we have to win that new production from increasingly difficult resources – smaller accumulations, in more complex geology or harsher conditions, that are more difficult to produce or get to market – all requiring new technologies, better capabilities and greater investment.

Getting increased production from mature conventional fields and difficult unconventional fields, will both put upward pressure on the energy-intensity of operations. The future of the industry depends on our efforts to both increase efficiency and reduce our environmental footprint. We will need new technologies, skilled people, lean processes and huge financial resources.

As long as hydrocarbons are needed to meet the world’s energy needs, we will need to produce, process and distribute oil and gas effectively, efficiently and responsibly, using the skills and capabilities of all industry players. By combining the best of our technologies and skills through value driven partnerships between national oil companies (NOCs) and international oil companies (IOCs), the oil and gas industry can achieve a higher production peak in the future, and push the peak back by years or decades.

O&G. How much pressure have the booming economies of China and India, as well as the West’s dependency on oil, placed on E&P companies to locate and extract new reserves? And, how are you going about locating and extracting new reserves at Shell?
That is the energy challenge is a nutshell. Meeting accelerating energy demand will require producing increasingly difficult resources everywhere, applying greater understanding and new tools in complex project. Many of the world’s future resources are located in the Arctic, or offshore in deep water. And much is in the form of oil shale and oil sands – so-called ‘unconventional’ oil.

Shell is delivering major new resources where technology, integration and scale are key factors – from the North Sea to the Gulf of Mexico, from mining oil sands to tight gas drilling, and from standalone oil developments to integrated gas projects. To make sure we achieve this, Shell technology is extending the lives of wells and maximising our existing resources through enhanced oil recovery (EOR), sophisticated new digital programmes and clever drilling techniques.

In the 1960’s Shell used steam injection, which has proved to be one of the most successful ways of boosting oil recovery, in the large and complex Tulare reservoir of the South Belridge field in California, USA. We continue to pioneer EOR – with Petroleum Development Oman we are working on a number of pilot projects. At Qarn Alam, steam injection assists the gravity drainage system already in place by heating the oil to reduce viscosity. At Marmul, injected chemicals are expected to boost production by around 10 percent. And gas injection is used at Harweel to free trapped oil. Injected oils produce a flooding effect, increasing the pressure in the well, helping to push the hydrocarbons to the surface.

Shell’s Smart Fields provide both knowledge and control by integrating digital information technology with the latest drilling, seismic and reservoir monitoring techniques. Combined with the experience of geologists, engineers and others, Smart Fields can help increase the total amount of oil recovered from a field by 10 percent and gas recovery by five percent, while also boosting the rate of production.

New platform designs and approaches to planning wells such as our ‘Drilling the Limit’ methodology have reduced the time it takes to drill wells, the energy used to drill them and the costs involved. With each advance in well design and drilling, more of these valuable deposits can now be accessed. Shell’s ability to conquer the challenging deepwater environment provides access to oil and gas that lies deeper, in dispersed reservoirs or is difficult to produce. Thousands of technologies are developed and used to meet these challenges, from large, complex production systems to smart chemical treatments to help the oil and gas flow.

O&G. How have drilling and completion techniques evolved over the last few years? And how is technology helping drive advances in this area?
In 2005, my colleagues in Shell Exploration and Production took 60 days to drill a 13,500 foot well in a tight gas field. Now it's a little over three weeks, with technologies like rotary steerables and under-balanced drilling (UBD). Meanwhile, the wells are producing three to four times more than in 2005, due to technology improvements in areas like fracturing. So a drilling rig in 2009 can put 10 times as many hydrocarbon molecules in the pipeline as it did in 2005.
 
Shell has also found a way to adapt UBD, called pressurised mud cap drilling. This technique facilitates accurate kick monitoring on wells with total loss of mud returns, reduces safety risks and dramatically reduces the fluid volumes required for safe annular feed. This can save $1 million per well by reducing non-productive time.
 
In addition, we've developed a riserless mud recovery system that eliminates lost time on wells susceptible to seabed flow at depths up to 5000 feet. That has resulted in average mud and logistics savings of $1 million per well. Shell has also pioneered a surface blow-out preventer system for moored rigs, first used last year offshore Brazil. Not putting the BOP on the seafloor eliminates the need for long and heavy risers. This, in turn, allows us to use older semi-submersible rigs or drill ships that cost much less.

Energy projects are becoming increasingly technologically challenging. Take the Sakhalin II project, for example, that centres on some of the largest oil and gas reserves in the world. Can you explain the challenges specific to this project and how you have dealt with them?
Sakhalin II is one of the world’s largest integrated, export-oriented oil and gas project as well as Russia’s first offshore gas project. When the Sakhalin II project is fully on stream, it will supply around five percent of the world’s liquefied natural gas (LNG) and make a significant contribution to strengthening global energy security. The Sakhalin II Project is developing two oil and gas fields (Piltun-Astokhskoye and Lunskoye) offshore north-east Sakhalin for production and export of crude oil and LNG.

Sakhalin II has introduced the Russian Federation to a range of innovative technologies, from LNG production to offshore development of hydrocarbon fields.  It has brought together Russian and international expertise to overcome formidable challenges and provides a potential model for similar collaboration in unlocking much-needed reserves in Arctic regions. Sakhalin II is the equivalent in size of five world-scale projects, located in a hostile sub-arctic environment, and covers a vast area in a region with almost no existing infrastructure. The float-over installation of the topsides for the PA-B platform set a world record at some 28,000 tonnes. The previous record was held by the Lunskoye-A platform at 22,000 tonnes.

There are also environmental, ecological and social sensitivities to be tackled. Two 800-kilometre pipelines, which bring oil and gas from the fields in the north of the island to the ice-free export terminal in the south, traverse mountainous terrain in an earthquake zone and cross more than 1000 watercourses, many of which are ecologically sensitive. In all, the project adopted more than 800 additional environmental, safety and social commitments. As one of the early economic benefits, there are more than 25,000 jobs on the project – 70 percent of them filled by Russian citizens.

O&G. What kind of work has Shell Global Solutions been doing with clients in the Russian Federation?
Recent projects in the Russian Federation have included the licensing of key technologies to Moscow-based OJSC Alliance Oil Company, owner of OJSC Khabarovsk Refinery, for its refinery expansion. The technologies are designed to increase its conversion capacity and distillation performance including soaker visbreaking technology and deep flash high-vacuum distillation technology. Shell and its catalyst business, Criterion, have already provided licensing technology and catalysts for hydrocracking and diesel hydrotreating. The gasoline production facilities are also being revamped using Criterion’s expertise and catalysts to produce high quality automotive fuel.

We also worked with Alliance on a two-year integrated business improvement programme that had four key themes – retail marketing, organisational effectiveness, transport and logistics and health, safety and environment. The project involved cross-disciplinary teams across retail, refining, finance and marketing in a search for efficiency improvements.

We are also supporting Mariisky NPZ LLC with its plans to upgrade and expand its refinery in Mari El Republic, Russian Federation as they seek to increase production, generate more value-added products and meet stricter European Union fuel specifications. After the completion of a feasibility study, we were awarded the contract for the supply of basic design packages and licences for the refinery process units – combined crude distillation/high vacuum plus hydrocracking, hydrodesulphurisation and sulphur recovery/amine treating. 

O&G. Shell launched an initiative several years ago to improve the energy efficiency of its refineries and chemical plants. Can you explain more about this initiative and the impact it has had on improving efficiency at Shell?
Improvements at our downstream facilities are already delivering CO2 emissions reductions of about one million tons per annum. We have deployed a wide range of techniques for cost-effective carbon and energy management across our operations for a number of years. We identify opportunities for energy-efficiency improvements, changes in feedstock or power generation, catalyst optimisation, carbon-capture technologies and CO2 sales.

Shell Global Solutions has an award-winning carbon and energy management consultancy that integrates technology and expertise from across the Shell Group gained in reducing Shell’s own carbon footprint, to benefit other companies facing the same challenges. Shell has been active in deploying technology across three key areas in order to reduce emissions: improving energy efficiency – such as energy optimisation and operational-excellence; generating energy cleanly – introducing renewable energy sources or switching to less carbon-intensive fuels; and mitigation of emissions – preventing the release of CO2 into the environment by capturing it for sale to industrial users or for underground storage. We assess a client’s energy use and CO2 production and compare its current position with optimum operating practices. Strategies for mitigation are then proposed, which may include energy-efficiency or operational improvement programmes, carbon-abatement technologies, fuel-switching options, CO2 sales and carbon allowance trading and offsets. Energy cost savings are typically achieved through the intelligent application of technology and by modifying behaviours and processes. Programmes can be structured around minimal capital expenditure for rapid payback.

O&G. What other steps does Shell take to minimise the environmental and social impact of its activities?
For Shell, sustainable development means helping meet the world’s growing need for energy in economically, socially and environmentally responsible ways. Through our portfolio and products, we deliver benefits by providing the modern energy that people need to prosper, and help reduce energy’s impacts by offering cleaner products like natural gas, improved biofuels, and petrol and diesel that help customers drive fuel more efficiently. Our operations look to create lasting social benefits, whether that is through employing local people or using local contractors and suppliers. We work to reduce environmental and social impacts at our operations by: safeguarding the health and safety of our employees and neighbours; reducing disruptions to the community; reducing our impact on biodiversity; and using less energy, water and other resources when producing energy.

We have been working hard to reduce the emissions of local pollutants – nitrous oxide (NOx), sulphur dioxide (SO2) and volatile organic compounds (VOCs) – from our operations. This has involved a wide range of investments to upgrade facilities, install cleaner-burning equipment and SO2 capture technology. Since 1998 we have reduced our SO2 emissions from our operations more than 20 percent; reduced our NOx emissions by more than 30 percent, even though we are now using much more energy to refine cleaner lower sulphur fuel, and reduced our VOC emissions from our operations by almost 65 percent since 1998. Contributing to sustainable development in this way requires a particular mindset or a different way of thinking about our day-to-day business. This means balancing our short and long-term interests, and integrating social and environmental concerns into our decision-making.

O&G. Shell Global Solutions has acquired Cansolv, a firm specialising in the development of emission capture systems. How do you expect this acquisition to impact the business? How do you hope to utilise the technology?
As global energy demand grows and the availability of easy oil and gas diminishes, strong gas treating capabilities will be required when unlocking new resources such as sour natural gas or clean coal energy. Cansolv Technologies Inc. develops ‘scrubbing’ technologies to capture industrial gas emissions. It offers multi-emission technology for the control of sulphur dioxide (SO2) and other contaminants and a carbon dioxide (CO2) capture process for greenhouse gas reductions. The CANSOLV SO2 Scrubbing System is a regenerable amine technology for the removal of SO2 from combustion gases and it has been demonstrated in a variety of applications including oil refineries, chemical plants, utilities and non-ferrous smelters.

We want to further develop technology that has the potential to clean up contaminated gases and flue gases – predominantly SO2 solutions in the first instance. With the addition of Cansolv’s technology to our portfolio, we have enhanced our capability for the treatment of various compositions for syngas – from coal gasification, contaminated natural gas and refinery streams – and further differentiated our technology. Cansolv’s promising capabilities in SO2 capture will also allow us to further explore post-combustion carbon capture technology and solutions. We must ‘learn by doing’ in order to reduce costs, accelerate technology development and ultimately make carbon capture and storage (CCS) commercially viable on the back of emissions trading schemes.

O&G. What technologies are key to transforming E&P operations at your organisation? Are there any technical developments you are particularly excited about?
Technology has delivered many positive surprises in the past and will surely do so in the future. New technology will help us achieve a higher production peak for hydrocarbons, push the timing of that peak back by years or decades, and to slow down the production decline that will take place later.

Simple technology breakthroughs have transformed the value of oil and gas resources in recent years such as our Smart Fields technology. The Champion West field in Brunei contains hundreds of small accumulations, with thin reservoirs. Discovered in 1975, the field lay untapped for almost 30 years, because we could not identify how to develop it economically. The eventual solution in 2005 was to drill smart wells that snake vertically and horizontally through several accumulations at once, with the ability to measure and control flow from up to seven separate sections. In 2006 Champion West contributed up to 50,000 barrels a day to Brunei Shell and we are only at the dawn of the impact of smart field technology.

‘Time-lapse’ seismic, or 4D seismic technology is another breakthrough. A study by CERA estimated that 4D Seismic has the potential to deliver an additional 50-60 billion barrels – twice the known reserves of the USA. Use of 4D seismic in Shell has generated an extra half a billion dollars net income over the past 10 years in Europe alone.

The application of new technology can significantly shift the global energy equilibrium by opening up huge unconventional oil and gas resources. A few years ago, the US National Petroleum Council warned that it would be hard to maintain US gas production and that large scale LNG imports would become necessary to meet domestic demand. But advances industry-wide could open some 500 trillion cubic feet of untapped unconventional gas resources in North America, possibly considerably more. That would supply current US consumption for at least two decades.

Sakhalin II. Sakhalin is a project of many ‘firsts’: the offshore oil platform Molikpaq was the first to be installed on the Russian shelf. The Lunskoye-A and Piltun-Astokhkoye-B (PA-B) platforms are also the first of their type to be installed on the shelf. And Russia’s first LNG plant will provide the first-ever Russian gas supplies to markets in the Asia Pacific region and North America.

Champion West. Located 90 kilometres off the coast of Brunei in the South China Sea is Shell’s flagship Smart Fields project, Champion West. After laying dormant for almost 30 years, Smart Fields technology and new drilling techniques have turned Champion West into one of the world’s most advanced oil and gas fields.

Ormen Lange. Ormen Lange was developed with sea-floor installations at depths of between 850 and 1100 metres. Following processing onshore, gas is transported 1200 kilometres through the world’s longest subsea pipeline to Easington on the east coast of Britain.

Greg Lewin was appointed as President of Shell Global Solutions International BV in 2003. Lewin joined the Shell Group in his native Australia working in operations at the Geelong and Clyde refineries and in retail and he also held senior positions in manufacturing, supply and distribution for Shell and strategy, portfolio and environment for oil products. Lewin is a past president of the Institution of Chemical Engineers.