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Seven promising routes that reduce the carbon impact of oil and gas

The use of crude oil, natural gas and coal has been a primary driver of human progress. Unfortunately, now we know that the use of fossil resources is also a primary driver of anthropogenic climate change. What can be done in the short term?

 

Every tonne of carbon emitted counts

In 2050 and thereafter, cheap and abundant energy will still be of utmost importance for human progress. The big difference is that this energy will also have to be carbon neutral.

Until all of our energy is sourced carbon neutral, every ton of carbon (not) emitted counts. In the coming decades, it will be fairly easy to do without our most carbon intensive energy source: coal. Substituting oil and gas will however be far more difficult. In the short run, the use of gas may very well increase because of climate policy. Gas fired power plants pollute substantially less than coal fired power plants. Trends in oil consumption for the coming decades will be defined by slow but steady reductions in the ‘old’ economies, balanced at first by growing demand in emerging and evolving economies.

Given that oil and gas production, refining and transport will be facts of life for the coming decades, reducing the carbon intensity of oil and gas consumed will be just as important as substituting oil and gas with carbon free alternatives. Here are seven routes that substantially reduce the climate impact of the oil and gas industry.

Electrification of offshore platforms

Using 11 floating windturbines, Equinor will electrify 5 of it’s production platforms. Reducing gasturbine utilization by 35%, the project will cut carbon emissions by ±200,000 tonnes annually. Besides wind power, providing onshore power to offshore projects may also help cut emissions.

Old fashioned plumbing

Leaks in production and transport result in loss of revenue but are nevertheless common. New satellite and drone imagery simplifies the recognition of leaks. Solving leaks, especially methane leaks, reduces the climate impact while increasing the yield of energy companies.

Carbon capture in production

Raw natural gas and oil may contain large amounts of CO2 which have to be removed in order to comply to standards. This is often done directly at the point of extraction. Storing the separated CO2 underground, instead of just venting it into the air, is an effective climate policy.

Utilization of concentrated solar hear

Most of the easily recoverable oil has already been extracted. The remaining, more viscous crudes have to be heat treated before extraction is possible. Normally, steam for this process is produced by burning gas or oil. GlassPoint Solar enables solar heat to replace this fossil fuel consumption.

CCS at refineries

Oil refineries consume large amounts of hydrogen for removing sulphur and other contaminants from crude oil and to convert crude into refined fuels. This hydrogen is produced from natural gas, with CO2 as byproduct. Capture and storage of this pure stream of CO2 is rather easy.

Reduction of gas flaring

Flaring of gas at oil wells in itself is a climate measure, as CO2 from burned methane has a far lower climate impact than the methane itself. Still, routinely burning away gas on site that could just as well be used productively elsewhere should be prohibited as much as possible.

Abandoning unconventional reservoirs

Extraction and refining of oil from tar sands, in the arctic or from shale reservoirs by nature is more carbon intensive than production from more conventional fields. Given most of fossil resources should be kept underground anyway, it’s best to abandon unconventional fields first.

License to operate

At sufficient scale, most of the options mentioned above are not extremely expensive. Given that almost all oil majors have come to terms with the fact that fossil carbon is the prime source of anthropogenic climate change, implementation of measures that greatly reduce the climate impact of operations should be a no brainer.

Furthermore, if oil and gas producers are not yet intrinsically motivated, exposure to cap and trade programs, carbon taxes, shareholder pressure and eventually consumer boycots should help enforce the utilization of renewable energy in production and refineries, the capture and storage of carbon and the minimization of leaks and flaring.

If you are active in oil and gas, now is the time to take action.

Auteur: Thijs ten Brink, Photo: Zbynek Burival via Unsplash Public Domain

Tank Terminals in Europe – Key Figures

As a market research company specialized in the tank terminal business we truly value the FETSA and its members. Europe is our home base so this makes it even more logical to become a supplier partner. With this partnership we want to underline the long term commitment to FETSA members to improve their markets by providing insights and enabling intelligent decisions.

Patrick Kulsen, Managing Director of Insights Global

Download FETSA brochure that contains key figures on Tank Terminals in Europe

Tweedaagse Oil Academy

20 en 27 maart, 2020

Vergroot Je Waarde met Meer Kennis

Uit cijfers van EY (2015) bleek dat in Nederland ongeveer 16.000 mensen werkzaam waren in de olie en gasindustrie. In hetzelfde jaar in Amerika waren dat zelfs bijna 1.5 miljoen mensen! Hierbij zijn nog niet eens de dienstverlenende bedrijven meegeteld. Het is dus een immense sector!

Het is niet alleen groot qua omvang maar ook qua complexiteit. Veel bedrijven die we tegenkomen begrijpen slechts het onderdeel van de logistieke keten waarin zij actief zijn. Zij missen kennis van de gehele logistieke keten. Juist die andere ketenonderdelen hebben vaak directe impact op de winstgevendheid van hun business.

Een aantal van deze organisaties hebben bij ons de tweedaagse Oil Academy gevolgd. Na de training zijn zij zich beter bewust van hoe de gehele olie -en gas waardeketen functioneert. Zij begrijpen beter hoe de verschillende marktspelers en fundamentals werken. Al bijna 200 deelnemers gingen u voor en waardeerden deze training met meer dan een 8!

Voor meer informatie, vraag onze Oil Academy brochure aan door het onderstaande formulier in te vullen.

US Storage Market Structure and Outlook (NISTM)

Insights Global, owner of TankTerminals.com will join NISTM’s 12th Annual Aboveground Storage Tank Conference and Trade Show. This event will be held in The Woodlands (Texas, USA) on December 11 and 12.

Our colleague, Jacob van den Berge, active as IG’s Marketing and Sales Manager and oil market analyst will be representing our company in the States, birthground of the modern oil industry.

Especially for the NISTM visitors, Jacob will give a presentation about the US tank storage market focussing on storage players and market outlook. Every day of the conference at 11AM at his stand #814. After each presentation, participants are able to access the slides.

Learn something new by joining!

Register below:

    Proven Research Methodology

    IG’s conceptual model shows relations between market circumstances and a terminal’s commercial performance. In this model market fundamentals drive market dynamics. A terminal that has a good fit to these market dynamics will find that their storage rates are supported.

    Apart from this direct relation between tank terminal characteristics, market dynamics and storage rates, there is also a relation between market fundamentals and storage rates.

    The distinction between market fundamentals and market dynamics lies mostly in the difference in rate of change. Market fundamentals tend to be more stable compared to market dynamics.

    Market dynamics have a direct relation to operational activities at tank terminals. Main focus points are related to market fundamentals: logistics, forward curve outlook and competitive structure. Furthermore, expected impact on market dynamics and corresponding tank terminal operations will also be taken into consideration.

    Request Our Research Methodology

    Proven Track Record

    Since the beginning of 2000, Insights Global has been involved in numerous consultancy assignments.

    These ranged from market studies of specific sectors such as the chemical, wholesale and retail, tank storage, trading and shipping, and oil industry.

    Also, different regions have been covered such as Northwest Europe, Mediterranean, ARA, Singapore, and the US.

    Since 2014, Insights Global has been heavily involved in due diligence projects of storage assets, specifically commercial DD. Some of these were part of the winning bid.

    Register for Our Track Record

    Global tank terminal markets: current status and outlook

    To say that the global tank terminal business is large is an understatement. There are more than 4900 tank terminals comprising more than 1 billion cubic meters of storage capacity. The business has grown at a compounded annual growth rate of 3% since 2005 and in coming years another 10% will be added to global tank capacity. Some might argue that capacity has grown too fast and that we are approaching a situation where markets are ‘over-tanked’. But is this really the case? This is a very relevant question for many players. For instance, if you are a business development manager at a terminal operator you need to understand this because it can guide you in determining if and where to invest. Another example are investors. If you are an investor in infrastructure assets you need to understand this in order to decide on investing or divesting in and valuating terminal assets.

    So understanding the balance between supply and demand for terminal markets is very important for many people. One thing to keep in mind is that terminal markets are on the one hand very local in nature but on the other hand these markets are driven by global factors such as trade flows and commodity price dynamics. This makes these markets rather complex. Nevertheless in this article we will try to shed some light on this topic in order to unravel this complexity. We will take the approach to focus on how tank terminals are used by their clients and how this adds value to these clients. To support this approach we will use INSIGHTS© GLOBAL’s model on terminal functions.

    • Logistics/hub function
    • Trading platform
    • Strategic storage

    Every terminal essentially has a logistics or hub function. This is the prime function. Some terminals are also used as a trading platform by its clients. Physical commodity traders require terminals for their business model. The last function a terminal can have is to store crude or oil products as part of a country’s strategic petroleum reserves. This last function is interesting for a specific terminal operator but from an economic analysis point of view less relevant because it is dependent on specific policies defined by governments. We therefore leave this function outside of the scope of this article.

    So we will focus of the logistics and trading platform functions. After careful analysis of these functions and the value it can bring to clients of terminals we concluded that there are three key factors that act as business indicators for tank terminal markets:

    • Commodity price dynamics
    • Inventory levels
    • Trade flows

    If you are analyzing business at a specific terminal you need to look at these factors in the local context. However, for the purpose of this article we have looked at these factors on a global scale and we have focused on oil markets.

    Oil price dynamics

    Current oil price levels are low and rather volatile. The low price levels stimulates demand and the increased volatility creates trading opportunities. The forward curve is downward sloping (backwardation) which weighs on arbitrage opportunities. However, some institutions like the EIA are forecasting a slight oversupplied global crude market, which could soften the backwardation or even flip it to a contango, which would be good news for the terminal sector.

    Inventory levels

    Global crude and oil product inventories are on the lower end. This is related to the backwardation price structure. So tanks are slightly underutilized right now.

    Trade flows

    Global crude and oil products trade flows have been increasing at a steady rate in the last decade. This rate resembles the growth rate in tank capacity and thus signals that the balance between tank capacity and tank demand is more or less balanced. This is a very positive sign.

    The main conclusion from the above analysis is that the global market does not seem to be over-tanked and that the current situation is set to improve significantly after oil price dynamics change to fully support the terminal business. So the future is definitely bright for the terminal business!

    About the author

    Patrick Kulsen is Managing Director and Senior Consultant at INSIGHTS GLOBAL, a market research company specialized in oil and petrochemical markets. The company’s consultancy team has successfully helped clients with research and commercial due diligence projects for many years. For more information on our consultancy services please follow this link.