ISSUE 32 SUMMER 2018
F RO M T H E E N E RGY I N D U S T R I E S C O U N C I L
VIEW FROM THE TOP BP VP Group Strategic Planning Dominic Emery talks low-carbon ambitions
ENERGY TRANSITION How the industry is adapting to the challenges of a decarbonised world
POWER Carbon capture plans reignite as UK puts CCS back on the agenda
NUCLEAR Brexiting Euratom: How can we keep new build developments on track?
Powering the world sustainably How can the energy industry meet rising demand in a low-carbon world?
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Contents ISSUE 32 SUMMER 2018
FROM THE EIC
OIL AND GAS
24 An integrated energy mix
Graham Bennett, VP UK and West Africa, DNV GL – Oil & Gas
From the Chief Executive
6 View from the top
27 Mexico shifts to shale
Dominic Emery, VP Group Strategic Planning, BP Updates from the EIC
14 The big question
We ask members: How are energy companies adapting to a lower-carbon world?
16 Special report: Securing a low-carbon future
34 UK takes lead in CCS Brad Page, CEO, Global Carbon Capture and Storage Institute
36 New technology holds key to reaching carbon emissions targets
A low-carbon future
Hector Rocha, Oil and Gas Partner and Deputy Leader, and Christian Bravo, Oil and Gas Market Intelligence Director, EY Mexico
10 News and events
Mark Stacey, MD, Crown International
28 Specialists boost North Sea prospects
Nicholas Newman on the transition to a low-carbon economy
NUCLEAR 38 Making nuclear affordable
Andrew Hockey, CEO, Independent Oil and Gas
20 Oil and gas in a decarbonised world
Professor Andrew Sherry, Chief Scientist, National Nuclear Laboratory
30 ONS 2018
Industry gears up for 2018
Jeremy Bowden on how oil and gas companies are preparing for the future
41 Leaving Euratom
Tom Greatrex, CEO, Nuclear Industry Association
50 My business
Andrew Robinson, Arc Energy Resources
Integrated energy mix
RENEWABLES 45 Sustainable energy for all
Energy Focus on renewable energy mini-grids
Making nuclear affordable
46 The heat is on
Professor Robert Lowe, Deputy Director, UCL Energy Institute
The Energy Industries Council 89 Albert Embankment, London SE1 7TP Tel +44 (0)20 7091 8600 Email firstname.lastname@example.org Chief executive: Stuart Broadley Should you wish to send your views, please email: email@example.com
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For sales and advertising please contact Tim Cariss +44(0)7759 463456 firstname.lastname@example.org Energy Focus is online at energyfocus.the-eic.com ISSN 0957 4883 © 2018 The Energy Industries Council
Energy Focus is the official magazine of the Energy Industries Council (EIC). Views expressed by contributors or advertisers are not necessarily those of the EIC or the editorial team. The EIC will accept no responsibility for any loss occasioned to any person acting or refraining from action as a result of the material included in this publication.
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Foreword Stuart Broadley CEO
From the Chief Executive: In this edition of Energy Focus we take a look at how the world is transitioning to a low-carbon future and what the consequences may be for the energy industries Future energy scenarios are coming thick and fast, and while they offer contrasting opinions on whether or not we’ll be able to meet the climate change targets we’ve set ourselves, one thing is sure – the world will rely on a diverse energy mix for some time to come. So, what does our energy future look like? While it’s impossible to predict completely and views vary, one of the best authorities on the matter is EIC member company DNV GL, a world-leading independent provider of technical advisory services with an equal standing in both oil and gas and renewables. On page 24 Graham Bennett, Vice President, UK and West Africa, DNV GL – Oil and Gas, provides an excellent outlook to 2050, predicting that by then oil and gas, while down from current levels, will still account for 44% of the world’s energy supply. The stage is set for gas to become the largest single source of energy, playing a key role alongside renewables while adding much needed flexibility to power systems. Today’s oil and gas companies are faced with continuously falling renewables costs and expanding market share, along with increased emissions legislation. Our specially commissioned article on page 20 explores the challenges and opportunities a lower carbon future presents, as well as the pathways being taken by some companies as they navigate this new energy landscape. Talking of oil and gas companies, they don’t come any bigger than BP. The British supermajor was way ahead of the game when it launched its Beyond Petroleum campaign during Lord Browne’s leadership, and while a lot of the initiatives launched have since been shelved, its understanding of the way
the world was moving was spot on. Its wind and biofuel portfolios – among the largest of the big players – date back to that time, making it one of the first majors to invest in these areas. We were lucky enough to catch up with BP’s Vice President of Group Strategic Planning Dominic Emery, who talked about some of the lessons the company learnt from the Beyond Petroleum campaign, how it aims to keep its operational emissions at zero net growth to 2025, and its plans to invest US$200m to foster new low-carbon businesses. The view from the top interview with Dominic on page 6 is a frank and open conversation about how BP is making its own energy transition and what it thinks the world needs to do to hit emissions targets. For all the projected energy scenarios, name changes and portfolio restructuring, is a decarbonised world possible? And if so, how do we manage to meet the world’s energy needs sustainably? Another commissioned article (page 16) explores the different routes to a decarbonised world, making the case for the role gas will play – as well as how hydrogen could be a key ingredient, possibly managing to decarbonise our heating systems where it seems all other technologies have failed. One essential technology will be carbon capture and storage (CCS), which is very much back on the agenda in the UK. On page 34 we take a look at some of the exciting projects taking place around the country and look at how CCS could produce a low-carbon UK economy worth billions of pounds, employing hundreds of thousands of people – talk about a win-win. Another technology vital to the UK’s efforts to hit its climate change targets is nuclear. And
an exciting time to be in the industry it is too, with the government signalling its backing of the industry having recently unveiled its £200m sector deal and entering into talks to take a big chunk of the Wylfa project. However, there are challenges ahead. Nuclear new build has to get its costs down if it’s going to be competitive in the new world energy order. On page 38, Professor Andrew Sherry, Chief Scientist, National Nuclear Laboratory, explains how cross industry collaboration will be vital to achieve this. Of course, our roadmaps for a decarbonised planet are all well and good, but the real world has a way of altering the best laid plans. Brexit and its removal of the UK from the Euratom treaty is a case in point. On page 41, CEO of the Nuclear Industry Association, Tom Greatrex, provides an update on the government’s implementation of its Euratom strategy and what needs to happen next to ensure business as usual. While it’s clear that we are undergoing an energy transition with complex challenges and far from certain outcomes, it’s also become apparent that the only way the world will hit its emissions targets is if all sectors of the energy industry work in partnership. Imagine what we can achieve together – now that is an exciting outlook.
Stuart Broadley EIC CEO firstname.lastname@example.org
www.the-eic.com | energyfocus
From the EIC Q&A Dominic Emery
Instead of saying weâ€™re going to invest so much, we are going to invest wisely across a range of technologies, and then choose which to scale
View from the top Q&A: Dominic Emery BPâ€™s Vice President of Group Strategic Planning
6 energyfocus | www.the-eic.com
Q&A Dominic Emery: From the EIC
Dominic Emery, BP’s Vice President of Group Strategic Planning, talks to Energy Focus about the company’s commitment to a low-carbon future and the massive challenge decarbonisation presents What lessons did BP learn from the Beyond Petroleum campaign launched under Lord Browne’s leadership? The Beyond Petroleum campaign was rather ahead of its time. It galvanised the organisation into a new way of thinking about energy and was pretty exciting. At the same time, we were bringing together several companies under the new BP Helios branding, and started to grow our investment in renewables, culminating in the creation of Alternative Energy in late 2005. We learnt a number of lessons from our investment in Alternative Energy. The biggest was that we invested too early, in anticipation of policy development. Of the businesses that we invested in, we have a couple left, including our Brazilian biofuel and US wind businesses. The two businesses that we exited several years back were carbon capture and storage (CCS), known as Hydrogen Energy, and solar. On CCS, we were anticipating a carbon price that was much, much higher than it has since turned out to be. We were expecting governments to drive carbon pricing more progressively. In a sense, we created a strategy on an expectation of a policy regime that failed to materialise, so we put CCS on the back burner for a period of time, but it has since revived following the recent US tax rules and the UK government’s clean growth plan support. With solar, the lesson we learnt is that manufacturing equipment is not BP’s strength, particularly when it comes to scaling manufacturing up at the speed that China did. We had our manufacturing facilities in the US, Australia and Spain and we couldn’t keep up with the China’s pace and cost reductions. We have come back into solar through our investment in LightSource BP, but we are participating as a project developer rather than a panel manufacturer, which gives us more flexibility as we can be selective about our choice of panels and projects. Another lesson that we learnt is that setting a financial investment target – we set a target of US$8bn over 10 years – is actually not a smart metric. Spending money is easy. Spending it wisely is a different thing all together, which is why now we have more modest investment plans as we develop our way forward into the energy transition. Instead of saying we’re going to invest so much, we are
going to invest wisely across a range of technologies, and then choose which to scale, because it’s not yet obvious which is going to be the winning technology –hence the broad-based approach we’re taking. BP is aiming for zero-net growth in operational emissions to 2025. How will you go about achieving this? This is an ambitious target because we are keeping our operational emissions flat on a net basis, yet we are still growing production. We’ve committed to grow our production roughly 5% year-on-year until 2021, because we recognise the dual challenge of growing energy and keeping emissions down. The way we plan to keep emissions down will be primarily through operational and engineering solutions. There are three main focus areas – energy efficiency, flaring and methane management* – and these can apply across most of our businesses. There’s also a strong focus on how we engineer and build our new facilities, as this is a key opportunity to deliver lower carbon outcomes. All new final investment decisions build in energy efficiency. In operations, many of our operators, maintenance crews and technicians see plenty of low-hanging fruit opportunities to make intervention. The other important point here is this zero-net growth. If we can’t achieve what we want to achieve through operational and engineering interventions, we will use offsets. These will largely be land carbon-based offsets, which will be an essential part of meeting the Paris climate goals. We are actually one of the biggest traders of offsets globally, so we understand the market well. BP has set out its commitment to help incubate and grow low-carbon solutions. How will it do this, and how can new innovators engage with BP? At BP, there’s a desire to create new businesses, and that’s why we are planning to spend roughly US$200m a year on incubating new businesses. This isn’t CAPEX spend on big new projects. This is purely a way of investing in start-up businesses, proofs-of-concepts and pilots. We have identified five new business model areas to target.
About Dominic Emery Dominic is a geology graduate and has worked for BP since 1986. He has held positions in BP’s Exploration and Production Division, in Asia and the Middle East, and also in the UK North Sea. Dominic has led Gas and Power business development in the UK and Northern Europe, as well as running power and utility assets at BP industrial sites. He joined BP Alternative Energy in 2007, ran Emerging Business & Corporate Ventures in 2012 and moved to his current role in 2013. As Vice President of Group Strategic Planning, Dominic helped develop BP’s RIC strategy – Reduce, Improve, Create. This is aimed at reducing BP’s own emissions improving its products to help customers reduce their emissions and creating low carbon businesses.
www.the-eic.com | energyfocus
From the EIC: Q&A Dominic Emery
One is around carbon management, which includes CCS and carbon trading. Another one is bio-products, which includes taking bio-mass and turning it into energy and energy products. A good example of that is turning waste to bio-jet fuel, which is what Fulcrum, a company we invested in, is currently developing. The first Fulcrum plant recently broke ground in the US. The next area is low carbon power and storage, where, for example, we are trialling Tesla batteries to help manage intermittency at some of our US wind farms. We’re also targeting advanced mobility technology, with a focus on electrification, autonomy and new mobility models. We recently invested in an advanced battery company called StoreDot. The fifth area is digital transformation. This is aimed at longer-term digital opportunities such as blockchain and cognitive computing, the most advanced form of artificial intelligence. We recently made an investment in a company called Beyond Limits, which works in this area. In addition, we are examining quantum computing – the next generation of computing beyond binary. New innovators can engage with BP through our Venturing team. We get in excess of 1,000 opportunities coming across the desks of the ventures team every year. Some are screened out rather quickly and others we take forward and invest in. We’re very open to new ideas, particularly in the five areas described above. What role does BP see for carbon capture, usage and storage (CCUS) in the future? CCUS has definitely had something of a rebirth in the last couple of years. We’ve seen a greater enthusiasm for it by several host governments. The US has introduced a new tax code, 45Q, which encourages CCUS both for the permanent storage of CO2 as well as the use of CO2 in enhanced oil recovery. We are seeing the same appetite in the UK, and also the Netherlands with the Port of Rotterdam project, which is designed to take CO2 from industrial facilities around Rotterdam and bury it in former gas fields in the Southern North Sea. We see CCUS as mission critical to the energy transition and to the Paris Agreement. I think without CCUS it’s going to be near impossible to achieve those ambitions. BP has invested in a company called Solidia, which takes CO2 and actually uses it as part of the curing process for concrete. By doing so it reduces CO2 emissions by between 30% to 70% and reduces the use of the water by 80%, so it’s really quite an impressive technology. Applying some of these ‘U’ technologies is going to be important, but the big deal will actually be large scale CCS. We need to bury not just a few million tonnes, but hundreds of millions of tonnes of CO2 every year. I think CCUS in the future must be scaled and scaled rapidly. It’s had a very stop-start approach so far, but I think more governments support it and the wider industry is starting to realise it’s mission critical.
8 energyfocus | www.the-eic.com
What is needed from the government, the oil and gas industry and its supply chain to create the confidence to invest in and grow low-carbon businesses at scale? At a very macro scale, we think the introduction of an economy-wide carbon price is the key, because it will incentivise the most cost-effective opportunities, which is the right thing to do. What the UK has done is set a floor price for emissions, take the European emissions trading scheme’s prevailing price on the day and add that to the floor price. That’s been really helpful and has encouraged the replacement of coal with gas in the system. A recent Nature science paper has shown that emissions in the UK power sector have come down by 47% in five years through renewable generation and, most significantly, coal-to-gas switching. As a result, the UK’s ability to reduce CO2 has been impressive. The next step is to ensure global development of carbon pricing. Whether it’s a trading scheme or a carbon tax, either will create confidence, which will translate into action and investment. We also need to be creating innovative business models to enable CCS. For example, the transportation and storage of CO2 could be treated as a common good. Creating an infrastructure or rate-based approach to that will be very important and we are seeing signs that governments is interested in doing that. Governments also need to continue to provide transitional incentives for new technologies for a period of time. The important word is transitional because they shouldn’t be there forever. The transitional incentives provided for solar, wind and even offshore wind are starting to be withdrawn because these technologies have come down the cost curve so quickly. Having those incentives make a lot of sense. Add to that a carbon price and you have two appropriate regimes, which allow lower carbon technologies to penetrate. Is a completely decarbonised oil industry possible? If so, how? It’s extremely challenging. The EU has done some fascinating work looking at a fully electrified European energy system versus an energy system that combines electrification with decarbonised gas. Interestingly, if you do the electrification and decarbonised gas scenario it’s about ¤1tn cheaper than full electrification. The oil and gas industry, supported by CCUS and decarbonised gas, can actually start to make significant in-roads in providing new technologies to achieve that goal. I think complete decarbonisation is massively challenging, but there are some big opportunities for developing the industry of the future. *To find out more about BP’s plans to reduce the methane content of its gas operations and to read the full unabridged version of this interview please visit: https://energyfocus.the-eic.com
About BP Starting in 1908 with the discovery of oil in Persia, BP’s story has always been about transitions – from coal to oil, from oil to gas, from onshore to deepwater, and now onwards towards a new mix of energy sources as the world moves into a lower-carbon future.
Advancing low carbon
of CO2 equivalent avoided through renewables business in 2017
Ethanol production avoided emissions equal to 260,000 fewer European cars on the road in a year
BIOPOWER 70% of biopower generated at biofuels sites goes to the local electricity grid
US$200m investment over three years in Europe’s largest solar development company
The net generating capacity from BP’s portfolio is enough to power almost 400,000 homes
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U P DAT E S F RO M T H E E N E RGY I N D U S T R I E S C O U N C I L
news&events members to regional energy markets and their major players.
Worldwide business support
About the EIC Established in 1943, the EIC is the leading trade association for companies working in the global energy industries. Our member companies, who supply goods and services across the oil and gas, power, nuclear and renewables sectors, have the experience and expertise that operators and contractors require. As a not-for-profit organisation with offices in key international locations, the EICâ€™s role is to help members maximise commercial opportunities worldwide. We do this in a variety of ways: 10 energyfocus | www.the-eic.com
Enabling members to expand into markets across the globe
Helping members to track global energy projects and assets Our projects database, EICDataStream, provides extensive information on over 7,500 active and future projects in all energy sectors. By tracking full project lifecycles from feasibility to construction and then completion, it helps members to identify opportunities and plan their business development strategies. Our operations and maintenance database, EICAssetMap, puts the details of every major UK and Norwegian energy asset at your fingertips.
High-profile international events Connecting members with buyers and partners
The EIC hosts flagship industry events that bring together UK supply chain companies with global energy contractors and operators, and bespoke events that keep members informed about projects, sector developments and markets. Our overseas trade delegations and EIC-run pavilions at international exhibitions introduce
Member companies who want to do business outside the UK can rely on our global network of offices to provide regional market knowledge, one-to-one advice and practical support. We also provide virtual and rental offices, and facilities for hotdesking, meetings, conferences and corporate events.
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We help our members to stay connected with the world of energy through informative online news, e-bulletins, market reports and industry publications. Our comprehensive directory of member supplier services is also a useful resource for operators and contractors.
Enhancing membersâ€™ skills and knowledge Our quality courses, which can be delivered off-site or in-house, are led by highly experienced trainers with industry backgrounds. We tailor our training to suit a variety of levels and also work with member companies to run programmes, some of which include tours to manufacturing companies.
From the EIC News and events
EIC 600-mile charity cycle ride raises £10,000 A team of seven EIC riders completed a cycle challenge which took them the length of the UK, raising over £10,000 for Cancer Research UK and The Ocean Cleanup. Starting from our Aberdeen office on 7 June, they arrived at our London HQ six days later on 12 June, cycling over 130 miles on some of the days – more than the average Tour de France stage. EIC staff who took on the gruelling challenge were OPEX Analyst Tom Bacon, Senior Energy Analyst Oliver Barnes, Head of Oil and Gas and Business Development Neil Golding, Energy Research Assistant Lara Juergens, Digital Marketing Manager Mark Risley, Overseas Membership Manager Andrew Scutter and Power, Nuclear and Renewables Energy Analyst Richard Vale. The team decided to attempt the challenge to
celebrate the EIC’s 75th anniversary, and in doing so supported the two charities chosen by the EIC. So far, they’ve managed to raise over £10,000, however, donations can still be made; please give whatever you can to help these two great organisations: www.gofundme.com/the-eic-charity-cycle-challenge Special thanks to our EIC charity cycle ride sponsors Sterling Quality Services, world leaders in providing independent inspection, expediting services and quality assurance services.
years with our members As regular Energy Focus readers will know, 2018 marks our 75th anniversary. To celebrate this milestone, we’re carrying out events throughout the year and are pleased to say that two long standing member companies, Emerson and Costain, have decided to join in the fun and host events at their own locations. Emerson held a networking event, a conference on transformational technology and a guided tour of its Solutions Centre in Aberdeen on 20 June, while Costain will hold a special round table on the challenges of decarbonisation in September in Manchester.
To find out more about all the EIC’s 75th celebration events taking place please visit: www.the-eic.com/Events/ FullEventsDiary.aspx
EIC Survive & Thrive Insight Report Volume II
EW REN P COMORT SOOING N
A big thank you to all our 75th anniversary sponsors:
The first ever EIC Survive and Thrive Insight Report was released in 2017. It was received to great acclaim from an industry keen to learn about the proven business development strategies the report contained, and the government, which used the recommendations from suppliers across all sectors to feed into its ongoing industrial strategy work. Volume II again provides key government recommendations from an industry point of view and identifies the strategies being put in place by EIC member companies to grow and prosper, as well as describing how they are dealing with the fallout from Brexit and their approach to exports in a post-EU UK. To download your copy of the EIC Survive & Thrive Insight Report Volume II please visit: www.the-eic.com/Publications/MarketIntelligenceReports.aspx
www.the-eic.com | energyfocus
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From the EIC News and events
EVENTS COMING UP
EIC overseas delegations Our overseas delegations are a great way to meet a country’s key players, make contacts and find local partners, in a supportive environment with the logistics and agenda all taken care of for you. We’ve got connections all over the world, and will be visiting 15 countries over the next 12 months – why not join us and find a new country for your product or service?
Mapping Norway’s OPEX market Launched just over a year ago, EICAssetMap made headlines across the industry as the only database to map all major UK facilities across all energy sectors. We’ve now extended its reach into Norway just in time for ONS 2018 in Stavanger. The upgraded EICAssetMap now puts the details of over 800 Norwegian and 2,000 UK assets at your fingertips. With contact details for each site, this bespoke, tablet-friendly product allows you to make the right connections at each facility. And with unlimited access per company, your entire sales force can make EICAssetMap work for them. We’re currently working on extending EICAssetMap to every corner of the globe with our next stop being the UAE – watch this space.
Upcoming delegations include: September 2018 • Mozambique and South Africa October 2018 • Argentina • Kazakhstan and Azerbaijan • Uganda and Kenya December 2018 • Kuwait
For the full list of EIC overseas delegations please visit: www.the-eic.com/Events/OverseasDelegations.aspx
Training: Understanding practical contract terms and conditions
When: 8 November 2018 Where: EIC London, 89 Albert Embankment, London, SE1 7TP Why attend? This course will give you the necessary skills to understand fundamental contractual concepts. You’ll enhance your ability to read and negotiate product and services contracts used in the energy industries; learn the major differences between commercial and legal sides of the contracts; and master
the ability to structure your work within the contract. For more information, please visit: www.the-eic.com/Training/ AboutEICTraining.aspx www.the-eic.com | energyfocus
From the EIC Members’ comment
How are energy companies adapting to a lower-carbon world?
Energy Focus asks four member companies about the challenges and opportunities presented by the transition to a decarbonised energy landscape
Dave Quelch Business Development Manager at ABLE Instruments & Controls As the world rises to the challenge of lowering emissions, the oil and gas industry is also growing conscious of the need to tackle climate change and is passing legislation to tax production platform carbon emissions. However, these taxes are based on flare emissions – notoriously difficult to report accurately. Understanding the common failings of ultrasonic flare gas meters, and contributory factors such as density distorting gas compositions and the inability to take reliable measurements during events such as stack blowdown, ABLE came up with FlareMaster, which enables oil and gas companies to accurately measure flare gas. FlareMaster harvests the myriad signals generated by conventional sensors that aren’t typically visible to a standard data processing device. It supplies full gas density inputs to the meter in order to negate the effects of density distorting gas compositions, and is able to manage flow velocities up to 1,000m/sec. Consequently, FlareMaster not only ensures sustainability of measurement during challenging process upsets, but also provides a significant
14 energyfocus | www.the-eic.com
reduction in measurement uncertainty. Deploying FlareMaster to an existing flare line is simple and extremely cost effective, with no shut down necessary. Furthermore, the primary flare gas meter can be interrupted for service and maintenance without loss of measurement.
ABLE Instruments & Controls manufactures and supplies an extensive range of process and laboratory instrumentation for the measurement of flow, level, pressure, temperature, density, humidity, light and gas and liquid analysis. The company also offers a multiple instrument vendor package procurement and project management service, as well as bespoke equipment cabinet and panel manufacture.
Dr Xavier Amils Global Business Development at Bridon-Bekaert Ropes Group Over the past couple of years, the renewables segment has become an important part of our portfolio, complementing our traditional offering. Our focus on renewables began quite a few years ago. During the last decade, we have provided solutions for heavy lift and installation of bottom fixed turbines in the North Atlantic and Baltic Sea.
Additionally, we have been supplying steel wire rope and synthetic fibre rope products, including tailored slings, as well as maintenance services for installation (crane) vessels. We are beginning to see an important turning point and breakthrough in the UK market for floating offshore wind (FOW) turbines. FOW provides a good opportunity for existing off-shelf mooring solutions (spiral strand and synthetic ropes), as a kind of spin-off from oil and gas platform mooring solutions. However, we believe that innovating and co-creating with clients is key to supplying customised and effective products to this market. Today, tidal, wave and current are still in the development stage, but are gradually emerging for two reasons: the support of EU funding, in particular the Horizon 2020 initiative, which is crucial for these developments, and an increase in the power these resources can generate. We see these sectors as complementary to FOW in the future, particularly for more remote locations. We have already supplied these sectors with some interesting solutions, such as bespoke buoys.
Bridon-Bekaert Ropes Group is the world’s premier supplier of mission-critical advanced cords and ropes. As a leading innovator, developer and producer of the best performing ropes and advanced cords globally, the group provides superior-value solutions to the oil and gas, mining, crane, elevator and other industrial sectors. It has
Members’ comment: From the EIC
a global manufacturing footprint and employs approximately 2,500 people worldwide.
Nick Nooren COO for WTS Energy and Board Member of the Sniffers Over the past two decades, the oil and gas and petrochemicals industry has been very successful in driving down greenhouse gas (GHG) emissions. Leak detection and repair (LDAR) programmes became mandatory and were implemented at sites worldwide. The industry in Europe, for example, reduced GHG emissions by more than 70% with LDAR. The COP21 Paris Climate Change Conference in 2015 emphasised the need to reduce methane emissions. Methane in the atmosphere has a global warming potential approximately 30 times higher than carbon dioxide. As an industry, we need to do more to reduce our emissions and actively contribute to a more sustainable future for our planet. Emissions sources can be either fugitive, canalised or diffuse. Reliable and credible measuring methods are readily available, and when executed by accredited third parties, the detailed source emission data can be correlated with remote sensing data from satellites, drones and laser technology. Through this correlation, we gain insight into emission performance over time. What you measure improves. Through understanding how each site performs among its peers, real opportunities for improvement are revealed. Learning from each other, and from the best available techniques, drives any improvement plan. By intelligently using emission data and turning it into knowledge, the oil and gas industry can position itself at a sustainable level for all stakeholders.
and maintain the integrity of pipeline networks. In all projects, the Sniffers’ advice helps to reduce emissions, save energy and prolong the lifetime of assets.
Andrew Mitchell Strategic Development Director at ENGIE Fabricom Global warming and climate change have left us with no alternative but to rethink the energy landscape. The urgent need to reduce environmental impact means implementing a more decarbonised, decentralised and energy-efficient system to support the global demand. In response to this demand for change, ENGIE is accelerating its own transformation to lead the energy transition. The group is focusing efforts on energy efficiency, renewables, digital technology and new business, which for UK subsidiary ENGIE Fabricom is providing an opportunity for growth. ENGIE Fabricom is supporting its clients in operating and maintaining their offshore
wind assets, providing end-to-end solutions in the energy-from-waste sector and assisting in decommissioning clients’ existing oil and gas assets. This has been achieved by using our historical oil and gas experience and capability to provide our established client base with effective solutions, and help new clients in new sectors achieve their goals. ENGIE Fabricom’s strategy is to deliver end-to-end solutions to our clients, and the changing environment we live in today is providing the perfect platform to achieve this goal.
ENGIE Fabricom, part of ENGIE, is uniquely positioned within the engineering, procurement and construction market to provide end-to-end solutions to its clients. This is achieved by combining high level engineering skills with a wealth of construction expertise across UK sectors including oil, gas, power, chemical, energy-from-waste and renewables.
THE GREENING OF THE WORLD’S ELECTRICITY SYSTEM
Historical world power generation mix
Future world power generation mix
40% 30% 20%
The Sniffers is part of WTS Energy and enables customers to measure emissions into the atmosphere, detect and quantify energy leaks,
29% fossil fuels by 2050
10% 0% 1970
48% solar and wind
Source: Bloomberg NEF’s New Energy Outlook 2018, IEA
www.the-eic.com | energyfocus
Special report Decarbonising energy
The transition to a low-carbon economy is underway and accelerating globally â€“ but much more needs to be done, writes Nicholas Newman 16 energyfocus | www.the-eic.com
Decarbonising energy: Special report
low-carbon future A
chieving a low-carbon future principally requires advances in energy, transport and storage technology, and a framework of government regulations designed to limit greenhouse gas emissions sufficiently to prevent average global temperatures from rising more than two degrees Celsius while meeting increased demand for energy. According to the University of California at Irvine’s Drivers of the US CO2 Emissions 1997–2013 report, the recent decline in US emissions was due to the 2007–12 recession. On this evidence, policymakers face a difficult trade-off between effectively tackling climate change while maintaining economic growth and living standards. Furthermore, at a time of economic uncertainty, it is problematic for policymakers to fit decarbonisation policies within the priority of other political and economic challenges such as wages, taxes and regulation, argues Carey W King, Assistant Director, Energy Institute, Jackson School of Geosciences University of Texas.
How close is a low-carbon future? Current opinion about the world’s ability to achieve low-carbon economies ranges across the spectrum, from optimism to downright
The hydrogen energy economy Hydrogen has an exciting role to play in a low-carbon economy but needs to be cheaper and more widely available to live up to its potential. Hydrogen could play four potential roles in the energy system: transport, provision of heat, electricity grid services and in niche markets. The extent to which hydrogen is used will be determined by the development of a suitable transportation infrastructure, large-scale storage facilities and, most importantly, the environmental and social impacts of providing the primary energy. The availability of low-carbon electricity and carbon capture and storage will be critical.
pessimism. Jeremy Bentham of Royal Dutch Shell, writing on the company’s website this year, states that ‘a low-carbon, high-energy future is possible… It will not be easy, but it is necessary and urgent.’ Shaping Energy Transitions 2018, an Energy Transitions Commission paper, argues that the transition is technically and economically possible and would offer new economic opportunities, while an analysis by Carbon Disclosure Project and GreenBiz notes that companies using new technologies to tackle climate change are becoming a distinct investment class. In fact,
King argues, to get even close to low-carbon, ‘you’d have to electrify as much as possible so you can use solar and wind power directly and to power any liquid fuel production (from base molecules in the air and water)’. One thing is clear: much more effort in low-carbon energy use must be made than has been announced already. On a pessimistic note, King anticipates that carbon-neutral will involve natural resources such as food and energy becoming so expensive that citizens will not willingly go there. To put it bluntly, ‘if you are asking are we doing enough to get to < 20% of GHG emissions relative to 1990, the answer is no’, says King.
What are the key challenges? There are key obstacles to creating a low-carbon world: technology, policy making and investment. Both Germany and Denmark are good examples of long-term policy making. This is being achieved by working in www.the-eic.com | energyfocus
Special report: Decarbonising energy
cooperation with all sectors of the economy, plus a proactive environment – investing in new technologies has helped both these countries to make not only economic but also environmental gains. Europe’s energy sector and energy users are benefiting from these advances through, for example, development of new offshore wind farms, improved power grids, energy storage and electrification of the transport sector. Given current renewable and storage technology, the cost of switching to total reliance on renewable energy would be prohibitive. Stanford University Professor, Mark Jacobson estimates that this would cost some US$14tn for the US alone.
Innovation and technological advances are essential Technological advances for both wind and solar energy have increased productivity and reduced costs, so much so that there are a growing number of subsidy-free winds and solar projects coming to market. In the US, technical advances in fracking and drill rigs have caused a significant reduction in US emissions, despite an industrial renaissance, through rising production of cheap gas which encouraged a major switch from coal to gas power generation. Widespread application of 3D printing is likely to encourage reshoring of manufacturing close to customers, thereby reducing the need for shipping of goods across long distances and consequently reducing emissions from marine transport.
How can a low-carbon future be achieved? A recent Pöyry report, Fully Decarbonising Europe’s Energy System by 2050, outlines two possible ways to achieve a low-carbon high-energy future: the zero-carbon gas and the all-electric pathway.
Zero-carbon gas pathway Decarbonisation can be achieved in a variety of ways, according to particular sectors. The production of heat gas as a bridging fuel could be used in district heating schemes in conjunction with heat pumps and, in the not- toodistant future, with carbon capture and storage. In transport, decarbonisation
18 energyfocus | www.the-eic.com
Global opportunities for UK manufacturing UK low-carbon economy could grow from 2% of UK total output in 2015 to up to around 8% by 2030 and 13% by 2050 UK low-carbon economy market size of
£230–640bn in 2030 and £510–1,400bn in 2050
High growth technologies needed to deliver the commitments made in the Paris Agreement include: Electric vehicles Transport telematics Offshore wind Solar PV Smart grids Energy storage Biofuels
Technologies that will be need to be fully deployed by 2050 include:
Advanced materials and manufacturing, including design for re-use and waste recovery Low-carbon chemical processes using bioprocessing, catalysts and membrane technology
There are significant opportunities for the UK services sector to establish itself as a financial hub for green finance and gain a sizable share of the financial services associated with the estimated capital investment of US$1.5–6tn per year needed to deliver the global low-carbon economy. Source: Ricardo Energy & Environment for the Committee on Climate Change
One thing is clear, much more effort in low-carbon energy use must be made than has been announced already can be achieved by increasing the use of hydrogen in freight vehicles and electricity in passenger cars. Electrification of vehicles, Pöyry estimates, could raise electricity demand in Europe by 60% by the middle of the century, of which solar and wind could provide the required 150% capacity increase. This will be widely distributed as interconnector capacity grows. Pöyry sees nuclear capacity falling over time as wind and solar becomes cheaper. The generation mix by the mid- century would be dominated by renewables as the cheapest form of zero-carbon generation.
All-electric pathway The alternative path to decarbonisation involves a massive expansion of the power generation sector. In this scenario, heat pumps would become common in urban areas and biomass would satisfy rural power needs. By meeting the needs of heating and transport, Pöyry expects demand for electricity to rise by 180% between 2022–50, of which renewables would provide 80% by the mid-century. In this case, countries with nuclear reactor programmes would build extra capacity to meet their own needs – and possibly their neighbours’ needs. European-wide interconnection capacity is expected to double to more than 300GW by 2050 in order to ensure energy security. Pöyry concludes that the best option for achieving a high-energy future is to adopt a zero-carbon gas pathway since it is a more feasible and flexible choice for policy makers than the all-electric pathway.
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Feature Energy transition
Oil and gas in a decarbonised world With the growing momentum behind the transition to a lowcarbon economy, oil and gas companies are taking bold steps to refashion themselves as the low-carbon energy companies of the future, says Jeremy Bowden
There is plenty of experience and knowledge in the offshore oil and gas sector that the burgeoning wind sector is keen to utilise 20 energyfocus | www.the-eic.com
Energy transition: Feature
aced with continuously falling renewables’ costs and expanding market share, along with growing determination among some nations to clamp down on carbon emissions, major European oil companies – and many smaller ones, too – are increasingly looking to invest in lower-carbon and non-fossil fuel areas of the energy sector. Efforts to clamp down on emissions are particularly strong in power generation, but even in transportation, many countries – including the UK and France – are setting time limits on combustion engines, beyond which they can no longer be sold. There are already restrictions on diesel use in many cities. Car manufacturers are switching investment to electric vehicles, so oil companies need to be prepared to provide alternative fuels and charging infrastructure. And in the heating sector, hydrogen could soon be a major component, along with greater electrification. ‘Oil companies are looking at a range of areas, some for commercial and some for
operational reasons – including supplying energy to their own facilities,’ says Gilein Steensma, Regional Director of New Energy at Advisian, part of the WorleyParsons group. ‘They have seen the societal drivers and regulations coming to curb climate change and try to work in the areas where they feel comfortable – such as offshore and in the process side of the energy business. So offshore wind is big, along with energy storage components such as batteries or hydrogen.’ Shell, for example, is investing in wind and hydrogen production, and is installing hydrogen refuelling and electric vehicle charging points at its petrol stations. It recently
bought electric vehicle charging company NewMotion, along with its 30,000 charging stations. And in late May, BP invested in StoreDot, the developer of an ultra-fast charging battery system. BP Ventures says the investment is part of a push to tap into the growth in electric vehicle technologies and infrastructure. BP will continue to invest in emerging new businesses and technologies to ensure that the company ‘stays at the forefront of changing global needs in the energy transition,’ said CEO Bob Dudley in his Q4 2017 results conference call in March. ‘It's not a race to renewables, it’s a race to lower greenhouse gas emissions,’ he added. Overall, BP says it will spend about US$0.5bn/year on clean energy.
Top investors Shell plans to spend more – US$1-2bn/year – on clean energy by 2020. It also aims to reduce the net carbon footprint of its operations and energy products by 50% by 2050 through a shift to gas, biofuels and green electricity – along with developing
www.the-eic.com | energyfocus
Feature: Energy transition
It’s not a race to renewables, it’s a race to lower greenhouse gas emissions carbon capture and storage capacity. Many of Shell’s investments assume governmentimposed carbon prices, which Shell considers essential for reducing emissions. Elsewhere in Europe, Norway’s Equinor (formerly Statoil) has moved into offshore wind, including Hywind, the world’s first floating wind farm, and is heavily involved in other renewable projects. Total is aiming highest among the majors, with a 20% renewables target, prompting a number of recent purchases, including a stake in renewable energy firm Eren and French battery maker Saft Groupe. Like Shell – the world’s biggest liquefied natural gas (LNG) supplier – Total has also been expanding its (relatively) low-carbon gas investments, including purchasing LNG assets from ENGIE last year. ‘In oil companies there is a realisation that because renewable power is variable, there needs to be a transition until storage is developed, which means gas needs to be used as a transition fuel – they have gas and renewables departments,’ says Steensma. Some oil companies have gone even further and moved out of oil and gas altogether. Ørsted, previously DONG (Danish Oil and Natural Gas) Energy, sold off its oil and gas business last year to become a renewable energy company focused on offshore wind.
A role for all Steensma is positive about the role smaller companies can play in the transition: ‘A lot of the innovation happens in the smaller companies. They have the flexibility that larger companies don’t and can pick a niche and develop that – such as optimisation of
22 energyfocus | www.the-eic.com
While wind, solar and other renewables are making good progress in decarbonising the power sector, and electric cars have the potential to deal with transport, there has been little progress so far on decarbonising heat. Hydrogen could be a solution, with a number of projects underway or on the drawing board. These include the HyDeploy project in north-west England, which is designed to replace natural gas supply to industry and residential consumers. If successful, it could be the first of many, providing a far cheaper means of decarbonising heating systems than electrification. The developer, Cadent (formerly National Grid Gas Distribution), believes as much as 20% hydrogen can be added to the gas grid without harming domestic boilers and cooking equipment, and research at Keele University aims to make hydrogen use safer at higher concentrations. The plant plans to use methane as feedstock, and waste carbon would be stored in the depleted Hamilton gas field under the Irish Sea. Other parts of the UK exploring hydrogen for heating include Leeds, where Northern Gas Networks is aiming to convert the existing natural gas supply.
hydrogen can be added to the gas grid without harming domestic boilers and cooking equipment
particular process or operation. Service companies have an understanding of larger oil and gas companies, and can provide sustainable solutions for these companies, depending on location.’ One such company is Petrofac, which signed an agreement in May with Transmission Capital to provide engineering services to six UK wind projects. Petrofac has already secured subsea engineering work at Lincs and Robin Rigg’s offshore wind farms, and said the latest deal was part of a wider shift into the offshore wind engineering sector. Another offshore services company getting into renewables is Saipem; the Sapiem-7000 crane is now being used to helped manoeuvre and install wind turbines on the Hornsea One and Hywind projects in the North Sea. After Hornsea One, the vessel will complete decommissioning at BP’s nearby Miller Platform, and then Repsol’s Varg platform – illustrating its flexibility. The company says the expertise required by the two industries is broadly similar, and there is plenty of experience and knowledge in the offshore oil and gas sector that the burgeoning wind sector is keen to utilise. Other types of company that now straddle the two industries include those providing support and facilities for offshore workers. One example, Attollo Offshore, provides accommodation rigs to both hydrocarbon and renewable offshore projects. However, Managing Director Ben Moore, is more cautious about the ease of switching from one sector to the other: ‘Offshore wind is an important sector for any growing offshore service company; projects are becoming larger, more ambitious and more technically challenging. Even though there are transferable skills, any company that feels it can directly import its services from oil and gas will find it difficult to compete. It’s a different industry – it wants to develop its own robust supply chain that can deliver on its priorities, and its goal to drive down the cost of wind energy.’ If the trend to lower carbon investments continues even as oil prices rise again, then those service companies that have not already sought a fresh niche in renewables may start looking.
Feature Heading: Section Head
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www.the-eic.com | energyfocus
Oil and Gas 2050 outlook
energy mix Oil and gas will remain crucial components of the world’s energy future, while renewables will grow their share, writes Graham Bennett at DNV GL – Oil & Gas
il and gas will account for 44% of world energy supply in 2050, compared to 53% today, while gas will become the largest single source of hydrocarbon energy from 2034, latest figures from DNV GL’s Energy Transition Outlook (ETO) predict. The ETO, a forecast that spans the global energy mix to 2050, predicts demand for energy will flatten in 2030, then steadily decline over the next two decades thanks to step-changes in energy efficiency. The fossil fuel share of the world’s primary energy mix will reduce from 81% currently, to 52% in 2050. Demand for oil will peak in 2022, driven by expectations of a surge in the number of light
24 energyfocus | www.the-eic.com
electric vehicles, accounting for 50% of new car sales globally by 2035. However, the stage is set for gas to become the largest single source of energy towards 2050, and the last of the fossil fuels to experience peak demand, which DNV GL expects will occur in 2035. This significant shift is a key part of a wider energy transition.
Gas in the future energy mix Gas will play a key role alongside renewables in meeting future lower-carbon energy requirements. There will be increased interest in the fuel as traditional oil majors reduce the carbon impact of their business portfolios by increasing the share of gas in their reserves,
and by investigating ways to decarbonise the gas networks. The world has abundant natural gas resources: 530tn cubic metres (Tcm), of which around a third (180Tcm) are identified, proven conventional reserves, and 350Tcm are other gas resources, such as unconventional and hydrate sources. North-east Eurasia and the Middle East and North Africa will increase gas output until at least 2040, as per the ETO report. They will overtake North America, currently the world’s largest gas producer, where gas production is essentially flat for the next decade. The model also predicts a decline in European gas production. Production is
2050 outlook: Oil and Gas
The stage is set for gas to become the largest single source of energy towards 2050
or oil, but gas must also compete with cleaner renewables. Carbon capture and storage is part of the solution to this, and could further reduce the carbon footprint of gas. Over the next two decades, as gas demand matures, hydrogen, wind, solar, biofuels and other new energy technologies will continue to gain momentum. However, as the ETO makes clear, there are uncertainties that could change the trajectory of the energy transition and impact on the prospects of gas. The ultimate mix, location and scale of gas transport projects is continuously evolving, while geopolitics and regulatory reforms have the potential to alter many aspects of the supply-demand equations.
Digitalisation and automation
forecast to rise in South East Asia, China and the Indian subcontinent, where it will more than double in the latter two regions. The DNV GL report forecasts a doubling of gas production in Sub-Saharan Africa, though absolute levels will remain relatively modest. Challenges to the market position of gas include regulatory issues such as carbon pricing and emission caps; these could pose risks to gasâ€™ future share of the global power generation mix. Gas competes with coal on availability and affordability. While coal-to-gas switching will continue, coal is easier to transport and import, two reasons why we have seen lower uptake of gas in Europe and Asia. Combusting gas generates less carbon than burning an equivalent amount of coal
The oil and gas industry faces broad challenges in maintaining a sharp focus on cost efficiency, safety and sustainability for hydrocarbons to make a positive contribution to the energy transition. Digital technologies and smarter use of data can assist in meeting these challenges. Digitalisation will play a primary role in containing costs while improving safety by enabling reduced downtime, predictive maintenance, performance forecasting, real-time risk management and energy efficiency. Across industries in general, collecting, moving, analysing and interpreting data is becoming progressively easier and cheaper through the impact of remote sensing, automation, augmented reality, the industrial Internet of Things (IoT) and other advances in information and communication technology. Cloud-based digital twins represent an opportunity for greater operational and cost efficiencies in future oil and gas operations. Analysing sensor data from a corporate IoT, digital twins can provide easy-to-understand dynamic updates on asset condition and operational parameter states, helping to optimise scheduling of costly inspection and maintenance regimes.
Midstream and downstream applications Midstream and downstream, greater computational power and more sophisticated software are enabling strategic responses to market demand and regulation, and to energy policy and decarbonisation targets, driving energy transitions.
DNV GL ETO reports DNV GL has published a suite of reports on the Energy Transition Outlook, which are available to download free of charge. The main ETO report covers the transition of the entire energy mix to 2050. Sector-specific supplements accompany this, such as the oil and gas supplement and a renewable, power and energy supplement. The report will be updated annually and the next issue will be published on 30 August 2018.
Data is a strategic asset for gas transmission and distribution system operators (TSOs and DSOs). For TSOs, one driver of demand for data is that balancing transmission networks is becoming more sophisticated. Some DSOs are meanwhile piloting real-time smart networks as they prepare to operate using mixed gas sources such as natural gas, re-gasified liquefied natural gas, biomethane and hydrogen in their systems. The heating value of each gas varies by type and source, posing questions about what is priced. Greater computational capabilities and more powerful software will allow operators to manage a larger volume of data and increase its value by interpreting it in ways tailored to the needs of external and internal audiences. There is significant potential for the industry to become more accustomed to openly sharing data across projects and operations, integrating supply chains and creating transparency to increase trust and raise efficiency. Similarly, significant cost savings can be identified through the use of data to increase visibility of key aspects of multi-year, multi-stakeholder construction projects in oil and gas to all relevant parties. Whichever tools are chosen, it is becoming clear that our world still relies on an energy mix, within which the energy transition to cleaner fuel sources has started. Moving through the decades to 2050, the importance of the activities currently underway within companies and at government level will become clearer, showing tangible outcomes that make a difference to how energy businesses operate. By Graham Bennett, Vice President, UK and West Africa, DNV GL â€“ Oil & Gas www.the-eic.com | energyfocus
LEADING COMPRESSOR TECHNOLOGY AND SERVICES www.burckhardtcompression.com
Oil and Gas Mexico
Mexico shifts to shale As Mexico opens up its shale potential to the world, Hector Rocha and Christian Bravo at EY Mexico look at whatâ€™s on offer
hale plays in Mexico are considered some of the most important in the world. The country has the sixth-largest potential gas reserves and eighth-largest potential oil reserves in the world, with estimated technically recoverable resources of 545tn cubic feet of natural gas and 13.1bn barrels of oil and condensate, according to the Energy Information Administration. These unconventional resources are located in the Chihuahua, Sabinas, BurroPicachos, Burgos, Tampico-Misantla and Veracruz geological provinces. There have been exploration activities since 2010, mainly in the Burgos, Tampico-Misantla and Sabinas basins, to confirm the continuity of the play across the border, but activity for the rest of the areas has been limited. Development of particular shale gas plays represent a compelling value proposition for Mexico. Bringing these new resources online will help meet increasing demand while reducing dependency on imports and counteracting current production decline. However, the developments must make economic sense.
Shale bonanza The National Hydrocarbons Commission has announced the first unconventional
bid round (3.3), to be held on 5 September 2018. The eagerly awaited auction encompasses nine onshore blocks for exploration and production in the Burgos Basin, known for its gas and condensates. The excitement around unconventional resources in Mexico comes mainly from the fact that the Upper Cretaceous Eagle Ford formation, which is probably the most active shale play in the world, underlies much of South Texas and extends into Mexican territory â€“ known as the Eagle Ford-Agua Nueva formation. Additionally, the well-known Haynesville formation in the US continues into Mexico, where the analogous formation is called PimientaLa Casita. Based on current limited data, the Eagle Ford-Agua Nueva formation shows similarities to its US equivalent and is estimated to house two-thirds of the unconventional resources. However, geological structures on the Mexican side are considerably more complex: the shale zone is narrower, has lesser continuity and is structurally more disruptive. On the other hand, PimientaLa Casita is considered the most attractive unconventional target in Mexico, as it does not have the challenges that Eagle Ford-Agua Nueva has. However, it comes with its own peculiarities: it lies deeper than Agua Nueva, below the 3,000 metres mark, which translates into more
technical and operational challenges. Additionally, Pimienta-La Casita only houses one-third of the estimated technically recoverable resources. The Burgos Basin holds the largest undeveloped shale resources in Mexico, which offers a clear opportunity for investment. It is still a greenfield, and activities so far have not been enough to properly characterise the plays. Participants in Round 3.3 will have to use their technical knowledge and expertise to assess the blocks with limited data (20 wells and scarce 2D or 3D seismic), as well as the regulatory framework around topics such as the use of water, aquifer contamination, inducedseismic, gas leaks, etc.
Fuel for thought Current technical requirements for participation do not state that the operator must have experience in unconventional plays. Such operators must arm themselves with expertise, create alliances and hire oilfield service companies, or be vulnerable to the big challenges these plays will bring. Round 3.3 is only the beginning for the Mexican-era of unconventional oil, as it represents only 4% of the total technically recoverable resources published in the five-year plan. There will also be opportunities for the construction of midstream infrastructure further down the line, once the fields are ready for production. All in all, operators must decide whether or not to set a footprint earlier in one of the largest shale reservoirs in the world and use it as an advantage for future rounds, while leveraging their expertise to make positive returns out of their investment. By Hector Rocha, Oil and Gas Partner and Deputy Leader, and Christian Bravo, Oil and Gas Market Intelligence Director, EY Mexico Disclaimer: the views reflected in this article are the views of the authors and do not necessarily reflect the views of the global EY organisation or its member firms.
www.the-eic.com | energyfocus
Oil and Gas North Sea
Specialists boost North Sea prospects Andrew Hockey at Independent Oil and Gas discusses how the energy transition is helping reinvigorate the UK North Sea by enabling development of more marginal domestic gas reserves cheaply
ne impact of the energy transition is a tighter rein on oil and gas CAPEX from the majors, which has led them to move away from the traditional, â€˜matureâ€™ areas of the North Sea and focus remaining funds on higher margin opportunities. This has left space for more independent operators to pick up divested aging, neglected or stranded assets and keep them producing or bring them to market. Independents like us (Independent Oil and Gas [IOG]), Verus Petroleum and Enquest can specialise by targeting certain parts of the upstream value chain. Enquest,
28 energyfocus | www.the-eic.com
for example, is a late-life asset specialist focusing on squeezing the last drop out of older fields that may have passed under the radar of bigger companies. This transition is injecting life into mature areas of the North Sea. Capital costs are down and operating efficiency is up, helped by lower operating costs and a rise in production efficiency. New technologies are being applied in the simplest ways, using off-the-shelf or repeatable designs where possible, which helps cut costs and shorten the time to first production. The government is also playing its part, having put in place a much simpler framework, both fiscally and from a
regulatory point of view. Establishing the Oil and Gas Authority was a good thing, with its emphasis on maximising economic recovery (MER) and encouragement for data sharing and collaboration to enhance efficiency. Another important step was to split liability for decommissioning costs with previous owners, which encourages purchase and late-life development by smaller specialists. Until recently it was difficult to get hold of capital â€“ but as prices rise, fund managers are raising their exposure and more is becoming available to small companies, enabling them to move forward with projects. In addition, contractors are also more open to take some of their payment after first gas, and gas
Saving stranded assets
The energy transition is injecting life into mature areas of the North Sea
off-takers are also more willing to provide capital, although normally only for near-field upgrading and development – rather than in frontier or high-risk areas.
Gas security of supply The UK has been a net gas importer since 2003, and the proportion has now risen to about 60%. Unless fresh reserves are developed in the North Sea, this figure will increase further (gas is expected to be used heavily as a bridging fuel in the energy transition), raising questions over security of supply and (with the closure of the Rough storage facility last year) flexibility in meeting spells of high demand.
New domestic gas production is also good for the UK’s balance of payments, employment, energy consumers and the economy generally. This move to develop more marginal fields at relatively low cost, re-using existing infrastructure, should be welcomed wholeheartedly by all concerned. Aside from producing more gas for use as a bridging fuel, and extracting a larger proportion from each accumulation, the oil and gas sector is also demonstrating its commitment to the environment through efforts to reduce associated methane (a powerful greenhouse gas) emissions. Most companies are also making efforts to reduce their carbon footprint by consuming energy
IOG’s Southern North Sea gas portfolio is a great example of the new type of developments happening in the basin. It consists of two main development hubs, with proven reserves and nearby prospective acreage. The key to keeping costs down is to use existing infrastructure, so gas will be transported to shore through the Thames Pipeline, which IOG acquired in April from Tullow, Centrica and Perenco. The decommissioned 90km pipeline runs from the Thames cluster of fields to the Bacton gas terminal. IOG plans to tie in output at the 60km point and recommission the line. The Blythe hub will produce gas from the Blythe and Elgood fields, while the Vulcan satellite hub takes gas from the Southwark, Elland and Nailsworth discoveries. Without this plan, the departure of previous owner ConocoPhillips and the closure of the Theddlethorpe Terminal later this year would have left these fields as stranded assets containing 2P reserves of 303bn cubic feet (Bcf) – which is a substantial volume. In addition, IOG owns the 114Bcf appraisal opportunity at Harvey, along with two 30th Licensing Round awards nearby, both containing existing gas discoveries totalling around 200Bcf. This amounts to another 314Bcf that could be brought to shore in this value-for-money project. Funding all this is tricky, and that’s an area of focus. Phase one capital requirement alone totals about £200m. IOG is aiming to secure funding and get to final investment decision later this year, with first gas set for late 2019.
more efficiently – all of IOG’s platform designs have solar panels and no flaring. The UK North Sea oil and gas industry is going to be important in the coming decades, providing secure, flexible, low carbon energy, tax revenue and employment. It’s crucial to keep our global leadership in areas such as subsea engineering, and opportunities are beginning to return. Hopefully, we can also attract a younger, more diverse workforce. We realise that the industry’s image isn’t always brilliant, but I think we’ve still got a lot to give this country in the years to come. By Andrew Hockey, CEO, Independent Oil and Gas www.the-eic.com | energyfocus
Oil and Gas Europe
Industry gears up for
ONS 2018 With an industry back on track, ONS is the place to position yourself for the future. The capability to innovate and to bring innovation successfully to market will undoubtedly be crucial to extending the life of the North Sea
IMAGES: BO B. RANDULFF, ROAR LINDEFJELD / STATOIL
ounded 44 years ago, Offshore Northern Seas (ONS) has developed with the times and today provides a platform for the presentation of strategic, commercial and technological issues facing the international oil and gas industry, as well as showcasing the latest innovations within the industry. Held from 27-30 August, ONS 2018 is the ideal arena for more than 1,200 exhibitors and approximately 65,000 visitors to establish new partnerships and alliances, and to reflect on how the industry should meet the energy future. As the world moves towards a cleaner energy economy, innovation will be critical in securing a low-carbon future. Based on this year’s theme, ‘innovate’, the event will address opportunities in technological advances, fundamental shifts in business models and leadership equipped to manage large-scale transformation. This biennial event is a great way to gain exposure for your business, and to explore business opportunities in the Norwegian oil and gas sector.
30 energyfocus | www.the-eic.com
North Sea comeback As we enter an era of strategic partnerships with new players and different perspectives, private equity is driving resurgence and we see companies like Neptune and Chrysaor, as well as small exploration and production companies like IOG, building extensive portfolios via asset sales from majors, while Aker and BP are exploring new models. A total of 239 oil and natural gas projects (not including decommissioning) are expected to start operations in the North Sea – across Denmark, the Netherlands, Norway and the UK – between 2018 and 2025. Of these, 126 are under development and 113 are proposed projects. The UK leads with 66 active projects, Norway has 53 and the Netherlands and Denmark follow with four and three projects, respectively. Norway leads in terms of the number of proposed projects with 57, followed by the UK with 48. The Netherlands and Denmark both have four projects. Proposed CAPEX of US$114.35bn is expected to be spent between 2018 and 2025 to bring the planned projects online in the North Sea, with US$45.26bn expected to be spent on projects slated for the future.
Under threat of decommissioning in 2017, the Tyra field is now being redeveloped by Total. The US$3.34bn project will replace some of the existing platforms, which had subsided by around five metres over a 30-year period. The two existing gas processing and accommodation platforms on Tyra East and Tyra West are being replaced by one new processing platform and one new accommodation platform. The four well head platforms and two riser platforms will have their jackets extended by 10m. The current topsides will be replaced by new topsides. McDermott International and Dragados Offshore are among the contractors working on the redevelopment.
Final investment decisions are expected on 16 fields across the UKCS in 2018. Commitment to the basin has been shown by the major oil companies, BP and Shell, who have approved development of the Marconi-Vorlich oil fields and the Penguins field redevelopment, respectively. Three separate EPC contracts will be undertaken at Premier Oil’s Tolmount gas field and cover the building of the platform, pipeline and onshore work. The OGA’s recent 30th Offshore Licensing Round saw the award of 213 licences, covering 229 blocks or part blocks, to 61 companies.
Europe: Oil and Gas
Significant offshore field developments continue to move forward. Equinor, the largest player in the country, is currently developing the first phase of the huge Johan Sverdrup oil field, which will come into production during 2019. Phase two is moving forward at pace, with several EPC awards pending. Once both phases are completed, by 2022, Johan Sverdrup will see oil production peak at 660,000bbl/d. Aker BP is also at the forefront of new developments – notably the Hod oil and gas field redevelopment, which it aims to make a final investment decision on by the end of 2019.
ACTIVITY TO WATCH ACROSS THE REGION
Visit the EIC-hosted UK pavilion Please take the time to visit the exhibitors on the UK pavilion in Hall 5 to find out how their innovative products and services can add real value to your projects and programmes.
Arc Energy Resources
Specialises in the supply of corrosion resistant cladding and the manufacture of specialist fabrications for the nuclear, oil and gas, renewable energy, petrochemical, defence, agritech, rail, and water industries, delivered by a highly qualified, fully accredited and experienced team. See our interview with Arc’s Managing Director Andrew Robinson on page 50.
Clarkson Research Services
Its large research team compiles and interprets data on the world’s cargo and offshore fleets of over 150,000 vessels on a daily basis, including technical features, freight rates, ship prices and cargo/economic statistics.
Garlock Pipeline Technologies
A world leading manufacturer of critical pipeline sealing and electrical isolation products, it employs advanced engineering and manufacturing processes to meet the challenging demands of the oil and gas, water/wastewater, and construction and infrastructure industries.
Designer and manufacturer of compact diffusion bonded heat exchangers. Up to six times smaller and lighter than conventional shell and tube heat exchangers, Heatric’s compact diffusion bonded heat exchangers are commonly used in in gas and light hydrocarbon liquid processing and gas compression cooling, as well as in petrochemical and chemical processing.
Lonestar Fasteners Europe
A leading manufacturer and distributor of standard, special and exotic fasteners and bolting. With an extensive stock inventory, the company is able to provide a wide range of fully certified safety critical bolting and fasteners, on short lead times and at competitive prices.
A global supplier of solutions protecting people and equipment from fire, blast and radiant heat hazards for the offshore and onshore oil and gas, nuclear, renewable energy, chemical and petrochemical industries.
Specialists in the design and manufacture of ultra-robust ex and fibre optic connectors, USB memory drives, Bluetooth and wi-fi dongles for explosive atmospheres, utilising Exd, Exde, Exn and Exi protective methods.
www.the-eic.com | energyfocus
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UK takes lead in
CCS The return of CCS to the political agenda could play a big role in decarbonising the UK economy, writes Brad Page at the Global Carbon Capture and Storage Institute
34 energyfocus | www.the-eic.com
t is exciting to see the growing recognition of carbon capture and storage (CCS) among climate experts, policy makers and industry players in the UK and globally. Despite a difficult few years and something of a hiatus for CCS deployment in the UK, the mounting evidence and independent analysis that has emerged during this time has left no room for doubt about the importance of CCS in developing a decarbonised economy.
Endorsed at the highest levels The UK Committee for Climate Change says that without CCS, the road to 2050 targets will be costlier and overall ‘highly challenging’. Other recent reports published by University College London and the
European Academies Science Advisory Council have also emphasised the urgent need for the technology to be part of a portfolio of mitigation technologies to reach global climate targets. Expert organisations, including the Intergovernmental Panel on Climate Change and the International Energy Agency, are ardent supporters of this safe, proven technology. A swathe of climate change luminaries has also endorsed the technology, including Grantham Research Institute Chair, Lord Nicholas Stern and the father of the phrase ‘global warming’, Columbia University professor Wallace Smith Broecker.
Back on the agenda Globally, the UK has been among a raft of countries paving the way for CCS
deployment; finally the technology appears to have turned a corner, and is back on the political agenda. At the end of 2017, the UK government released its Clean Growth Strategy, setting out the country’s ambition to grow the economy in a sustainable, responsible manner – achieving economic growth but also meeting climate goals. With this highly awaited strategy, the government reaffirmed its commitment to deploying CCS in the UK, subject to cost reductions, and added a ‘U’ to the acronym – widening its interest to CO2 utilisation (CCUS) as well as storage. With the Climate Change Act of 2008, the country defined legally binding targets to reduce emissions by at least 80% of 1990 levels by 2050. In this race against time,
CCUS has a critical role to play alongside energy efficiency measures, renewables and other climate mitigation technologies CCUS has a critical role to play alongside energy efficiency measures, renewables and other climate mitigation technologies. The UK Minister of State for Energy and Clean Growth, the Rt Hon Claire Perry, has assumed the driver’s seat. She is strongly committed to pushing forward a costeffective deployment of CCUS in the UK, and to that end has recently launched a dedicated CCUS Council, on which I have the privilege of sitting. This is augmented by the CCUS Cost Challenge Taskforce, which also plays an important government advisory role. This wide group of leading UK and European industry and academic representatives are all working collaboratively to collate existing knowledge and experience and address the challenges which CCS faces – particularly in areas of cost, policy, regulation and advocacy. For the UK government, the technology is not only seen as a climate mitigation tool; CCUS is perceived as a strategic technology with the potential to become an opportunity for UK industries and local communities.
The conduit to a new energy economy By positioning itself as a CCUS leader, the UK can build a strong and sustainable low-carbon energy economy. CCUS has the potential to decarbonise the country’s energy and heating systems, deliver jobs and offer increased energy security. With CCS, the country also has the ability to develop important transport and storage infrastructure to further the commercial value of the technology. It is a little-known fact that CCS is the only clean technology able to penetrate many industrial emissions, which alone contribute to 21% of global CO2 emissions.
Around the world, CCS/CCUS is being increasingly seen as the conduit to a new economy of hydrogen, bioenergy and CO2 reuse applications, the latter including by-products such as mattresses, upholstery, bricks and cement.
A watershed year In the UK, 2018 will be a watershed year for CCUS. With the support of a wide range of stakeholders, the government is defining deployment pathways for CCUS with the objective of deploying the technology at scale in the 2030s. This is occurring as climate change experts prepare for a global stock-take of CO2 emissions, to be held at COP24 in Poland during November. This inventory will assess how individual countries are tracking against their climate change commitments, and I fully expect that the result will be that we are way off the Paris targets. This makes it vitally important that countries like the UK establish clear pathways and recommendations that allow CCUS to be deployed in multiple sectors across the country. There is already an impressive body of evidence to support this, alongside high quality geological resources and natural industry clustering that can drive down cost through shared facilities and even infrastructure reuse in some cases.
A wealth of promising projects There is also work underway to develop promising projects that demonstrate the vital role of CCS in the UK’s low-carbon economy. These projects have the potential to kickstart the deployment of industrial CCS at scale. On the north-east coast of England, the Tees Valley hosts 60% of the UK’s energy-intensive industries. A group of five leading industrial companies have joined forces to try to deploy CCS and potentially create Europe’s first industrial zone, a ‘hub and cluster’ arrangement, that is equipped with CCS technology. With this project, CCS will bring new investments to the region, as well as maintaining and creating jobs for local communities. The H21 Leeds City Gate project also demonstrates industry willingness to be part of the solution to reduce emissions. The project has the aim to replace natural gas with hydrogen for heating and cooking in homes in one of the UK’s largest cities – www.the-eic.com | energyfocus
Figure 1: Carbon exchange and conversion (CxC) technology Client emissions process flow less ~95% CO2
NOx and SOx removed
Leeds. The project would rely on CCS to capture CO2 from hydrogen production. Also promoting the use of hydrogen and CCS is the Liverpool-Manchester Hydrogen Cluster – a conceptual study to develop a practical and economic framework to introduce hydrogen to a core set of major industrial gas users in the Liverpool-Manchester area and feed into the local gas distribution network as a blend with natural gas. In Scotland, the Acorn Project offers a scalable CCS development that would use existing CO2 capture and pipeline infrastructure to get a CCS system operational at minimum capital cost, creating a cost effective practical stepping stone from which to grow a regional cluster. The Caledonia Clean Energy project in Grangemouth is another perfect example of CCS capability. This proposes construction of a new natural gas-fired power plant that will be integrated with CO2 capture facilities. The project could also link to other clusters in the region, including Teesside. According to a recent study, investments in this development could create 225,000 jobs and boost the UK’s economy by £160bn between now and 2060. Such projects are critical to building strong business models for CCUS.
The UK moves ahead With the recent Clean Growth Strategy, the UK has demonstrated that it is committed to taking a lead in CCUS deployment. This is a great opportunity for the UK to showcase its leadership in climate, energy and innovation. By bringing all players together, the UK government has set the agenda. Collaboration, knowledge-sharing and dialogue are essential ingredients in accelerating deployment of this critical technology. With 17 large-scale facilities already in commercial operation around the world, and a further five poised to come onstream, we look forward to the exciting CCS developments that the UK can unveil over the next few years. As the world authority on CCS, we are delighted to be advising and participating in these developments and we are confident that CCS will continue to go from strength to strength. By Brad Page, CEO, Global Carbon Capture and Storage Institute
36 energyfocus | www.the-eic.com
CO2 NOx SOx
Client power plant emission point
CxC gas extraction, cooling and heat recovery
Recycled ionic capture media
CxC wash column stage 1
Recycled ionic capture media
CxC electro chemical plant stage 1
CxC wash column stage 2
CxC electro chemical plant stage 2
Hydrocarbon by-product liquid and gas storage
New technology holds key to reaching carbon emissions targets While carbon conversion technology is still in its infancy, Mark Stacey at Crown International spotlights one technology on the cusp of being commercialised
rown International and Future Environmental Technologies Engineering have developed a ground-breaking carbon capture and exchange technology that uses flue gas CO2 as a feed stock for conversion into a range of valuable commodities, including formates and industrial alcohols. Modular by design, the solution meets the Control of Major Accident Hazards Regulations Tier 1 requirements and can be installed and operational at a site within two years. Two initial trial projects (for the then-Department of Energy and Climate Change [DECC]) have captured 90% of CO2 (at 99% purity) and 85% of nitrous oxide (NOx) in flue gas emissions. Projections suggest the technology will deliver a return on investment within one year of operation, returning a total net present value cost per tonne of CO2 abated of just £47 (compared to £74 for monoethanolamine and £61 for advanced amines process).
So how does the process work? The method utilises a two-stage carbon capture and conversion process (see Figure 1). In stage one, the flue gas is captured from the power plant’s flue stack at temperatures up to 270ºC. It is then cooled via a bespoke condensing economiser, which recovers heat and water and also acts as the input gas monitoring point. From there, the gas moves into a wash column,
where a continually circulating metal-ion solution acts as the gas capture and carrying medium, removing and transforming any NOx and sulphur oxide present. Once that process is complete, the conversion process gets underway. The remaining CO2 flows into a second-stage wash column where the gas is captured and separated. It then undergoes further processing via a patented methodology in which it is converted into high-grade hydrocarbon gas and/or by-products for on-site reuse or sale. Opportunities exist to convert the output into harmless carbonates and bicarbonates for direct, safe deposit into the sea or into a diverse set of products, including formic acid, ethylene, methanol, syngas and, with additional feed materials, sulfuric acid. The remaining remediated cooled flue gas is then emitted from the wash column stack, which also acts as the output gas monitoring point. The process does not require elevated temperatures and pressures, nor does it produce any waste products that require disposal.
Commercial viability The key to success of any carbon capture technology lies in making sure it is commercially attractive enough for energy companies to invest time and resources in adopting the solution. The DECC trial projects results suggest the benefits of this new technology warrants that investment.
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Nuclear Cutting costs
Making nuclear affordable Nuclear can be a cost-competitive energy source, writes Professor Andrew Sherry at the National Nuclear Laboratory – but collaboration will be the key
IMAGE: SCIENCE PHOTO LIBRARY
ith the UK beginning preparations to replace and decommission its fleet of advanced gas-cooled nuclear reactors, our industry is on the cusp of major change. This change will spark a series of large engineering projects, creating a plethora of opportunities for businesses currently not involved in nuclear to collaborate with the nuclear sector over the next decade or more. What those projects will look like is the focus of lively debate. Should they build big like Hinkley Point C, requiring significant investment upfront and taking many years before revenue is generated? Or would it be more economic to commit to a series of smaller projects that are easier to get off the ground financially and will produce a faster return on investment? Finding ways to do nuclear more economically is an imperative for the industry – and discovering the methods by
38 energyfocus | www.the-eic.com
which we can achieve this is a key objective for the National Nuclear Laboratory (NNL). If we are to achieve this mission we also recognise that we cannot afford to be insular in our approach. We must be open to ideas coming into our sector from the outside. That desire to build partnerships is so strong that Innovation through Collaboration was the theme of our annual NNL SciTec conference this year.
If we are serious about tackling global warming then nuclear energy is one of the most important low-carbon alternatives available to us
When you take a closer look at the nuclear sector, you can see that there is huge scope for collaboration. Far from being distinct from other industries, there is an enormous amount of overlap. For example, we share a lot of materials and manufacturing commonality with sectors such as the oil and gas and chemical industries. Of course, we cannot ignore the fact that we are dealing with a nuclear core – and that has a clear impact on our culture, which is risk averse. Our approach to safety,
which we refer to as ‘defence in depth’, is embedded into the regulatory regime. But when you examine a nuclear power station, you can see that, in essence, most of it is a civil construction project like any other, with concrete, pumps, valves and welds – hence our keen interest in working more closely with industries that operate outside of nuclear, to bring in modern technologies that can reduce costs and maintain safety.
Cutting costs: Nuclear
New £200m nuclear sector deal launched The UK government has announced an ambitious £200m deal to help drive down the costs of nuclear energy, develop potential world-leading nuclear technologies and encourage more women to work in the industry. The sector deal, which will help nuclear energy to remain competitive against other forms of low-carbon energy, increase UK industrial capabilities and signal the UK’s global leadership in nuclear to the rest of the world, includes: The unlocking of growth opportunities in the nuclear supply chain through joint government and industry support for smaller companies in the UK to access higher value contracts and new markets Up to £44m for research and development funding to support the development of advanced modular reactors
Bringing in new ideas We want to bring in fresh thinking and are reviewing technologies and techniques being deployed elsewhere. This could include everything from reviewing how laser cutting is being used to decommission oil platforms to how advanced manufacturing technologies are producing components for aerospace more rapidly. We are also looking at innovations such as digital technologies, robotics and artificial intelligence to see if they have a place in waste management and inspections, as well as advanced manufacturing technologies such as electron beam welding and hot isostatic pressing. Fresh thinking can come in the form of business processes, too. I recently chaired a roundtable discussion with leaders from major UK industries including shipbuilding, satellites, digital, materials and rail construction. What was clear from that discussion is that we all encounter the same business problems: collaboration in the supply chain, programme and risk management, financing and the ability to
A new partnership with the Welsh government to develop a £40m thermal hydraulics facility in North Wales, as part of the Nuclear Innovation Programme to support the design and development of advanced nuclear technologies A firm commitment from industry to reduce the cost of new nuclear build projects by 30% by 2030, and the cost of decommissioning old nuclear sites by 20% by 2030
nurture culture and our future leaders. We all acknowledged that if we do not widen our supply chains, we’ll get the same answer every time and never hear of new ideas. There’s a lot to be gained from talking to different industries – especially when it comes to managing major engineering projects. Just look at the London 2012 Olympic build. This was an enormous civil construction programme and we can learn a lot from the way that risks were reduced and shared with suppliers.
International outlook For those organisations wanting to collaborate with the nuclear industry, there are also growing opportunities to export expertise, products and services. This will
only be heightened as our domestic civil nuclear programme starts to move away from advanced gas-cooled reactors, which are unique to the UK, and embraces light-water reactor technologies. The nuclear community is also international and there is a recognition that developments in one country will quickly impact the rest of the world. This allows for expertise originating in the UK to influence developments in other countries, be that the Far East, Europe, the Middle East or the US. We cannot ignore that public and investor perception of nuclear varies from country to country, and political decisions can impact demand for nuclear power. But the prospects for the industry internationally are extremely bright. We have witnessed a real groundswell of pro-nuclear thought in recent years, including among some of the environmental community. There is a recognition that if we are serious about tackling climate change then nuclear energy is one of the most important low-carbon alternatives available to us. When looking at the nuclear industry, the situation can be summed up by echoing the sentiments of Lord Hutton in last year’s House of Lords Science and Technology Select Committee report. In essence, do we want to be a country that does nuclear, or a country that has nuclear done to us? We clearly believe that we should be the former, and with international energy requirements growing rapidly, there are huge incentives for UK businesses to drive innovation within the nuclear industry to reposition the sector for growth, to diversify the sector to deliver flexible heat and power, and to enhance international impact, both in decommissioning and waste management and in clean nuclear energy. By Professor Andrew Sherry, Chief Scientist, National Nuclear Laboratory Want to find out more about global nuclear developments? Download EIC Senior Energy Analyst Oliver Barnes’ Nuclear New Build Insight Report, free of charge to EIC members, or £195+VAT for non-members www.the-eic.com/Publications/ MarketIntelligenceReports.aspx www.the-eic.com | energyfocus
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OW N K O O B
Leaving Euratom E Britain is hard at work on leaving the European nuclear agency Euratom. But even with a suitable transition, there remains much work for the government to do to prevent the significant disruption that industry is concerned about, writes Tom Greatrex at the Nuclear Industry Association
ven the most hardened of opponents of the European Union would accept that the process of leaving the EU, and disentangling more than four decades of negotiations, regulations and systems, is proving to be a complex and time-consuming process. For the civil nuclear industry, there is an additional layer of complexity that arises from the separate – but related – Euratom treaty, which effectively impacts every aspect of the industry’s activity: generating power, building new power stations, decommissioning old ones, scientific research and trade across international borders. Whether or not it was strictly necessary or desirable to leave Euratom in parallel with leaving the EU, as the UK government has
decided to do, the reality is that the complex process of disentangling the UK from Euratom, and simultaneously replicating arrangements that enable us to meet the same international requirements as currently apply, is well under way. More than a year ago, the UK Nuclear Industry Association (NIA) set out the steps that needed to be taken to put new arrangements in place, and avoid the disruption of the type of cliff-edge exit from Euratom that is in nobody’s interest. Unusually, and in comparison to other sectors, there is a strong mutual interest in avoiding disruption to an international industry and the supply of components, services and systems, which are routinely traded across borders, regardless of whether an individual state has nuclear in its generation mix or not.
The complex process of disentangling the UK from Euratom, and simultaneously replicating arrangements that enable us to meet the same international requirements as currently apply, is well under way www.the-eic.com | energyfocus
Nuclear: Brexiting Euratom
Alarm bells ringing The clock has been ticking since the referendum, but it has only really been for the past 12 months or so that the alarm has started to sound. The UK government has woken up from what looked to many like a slumber, and is now rushing to get ready and out of the door in time for the end of 2020 – or if there is no deal, and no transition, by March 2019. Euratom covers research and development for both fusion (most notably at Culham) and fission; safeguarding inspections at UK nuclear licensed sites; and the framework for international agreements between Euratom and the rest of the world and the nuclear single market, which enables the current friction-free movement of nuclear components, goods, services and personnel. Outside of Euratom, the UK needs to have its own mechanism for safeguarding inspections (that is, checking that fissile material is being stored and used correctly, in line with our non-proliferation obligations), bilateral agreements with other nations (Nuclear Co-operation Agreements), and a future relationship with Euratom.
Euratom Established in 1957, the European Atomic Energy Community, commonly known as Euratom, exists to promote and support the development of nuclear energy in Europe by regulating the nuclear industry across the continent, safeguarding the transportation of nuclear materials, overseeing the safe disposal of nuclear waste and carrying out nuclear research. The treaty establishes strict safety standards for the nuclear industry and also governs nuclear safeguards; these ensure nuclear materials are not diverted from civilian to military activities. While Euratom is a separate legal entity from the EU, it is governed by the EU’s institutions. The community consists of the EU’s 28 member-states and one associate state, Switzerland, and has cooperation agreements of various scopes with nine countries around the world: the US, Japan, Canada, Australia, Kazakhstan, Ukraine, Uzbekistan, Armenia and South Africa.
Working with Euratom On safeguarding, the positive is that the International Atomic Energy Agency (IAEA) passed the UK’s application to enable our regulator, the Office for Nuclear Regulation (ONR), to take on responsibility for safeguarding from Euratom inspectors. The first piece of Brexit-related legislation – the nuclear safeguards bill – has all but completed its passage through Parliament. The practical implementation of these changes will need the ONR to recruit and train staff, establish an IT system to record
The first piece of Brexit related legislation – the nuclear safeguards bill – has all but completed its passage through Parliament 42 energyfocus | www.the-eic.com
information, inherit equipment and report to the IAEA. That is all under way, and there is a pleasing level of pragmatism in the approach that will enable ONR to work alongside Euratom inspectors in the short term. The regulations arising from the legislation will need to be agreed, and we anticipate some formal consultations in the next few weeks.
Priority countries and future relationships When it comes to future relationships with other states, new agreements with the US, Japan, Canada and Australia are the priority – and governments have
been talking. Formalising an agreement is partly dependent upon safeguarding arrangements, and the agreement with the IAEA now enables that to happen in earnest. An initial agreement with the US, for example, has been placed before Congress and has begun the lengthy and not entirely predictable process of ratification. How straightforward that proves to be is dependent upon the US political environment and whether unrelated disputes between Congress and President Trump hold up approval, even where there is no disagreement in principle.
Transition The biggest risk is how discussions between the UK and EU progress. There is no conceivable reason that there should be significant difficulty on the specifics of Euratom – except for the fact that Euratom is one element of a much broader set of negotiations, covering some much more contentious issues. Typically, European negotiations take right until the deadline, and the final agreement will often emerge after different issues are traded off. With that backdrop, it is impossible to predict exactly how it will turn out. In each of these areas, time is of the essence. The practical and logistical implementation will take time – inspectors have to be recruited and trained, IT systems built, agreements negotiated, ratified and implemented – and while there has been some progress in recent months, a deadline of March 2019 still looks – as it did when Article 50 was triggered – very challenging. It is why a transitional period, yet to be formally agreed, is so significant in avoiding the disruption nobody wants to see. While many will still question the wisdom of leaving a treaty-based organisation just to replicate its arrangements, doing so without allowing enough time would be the worst type of negligence – in May 2017, the NIA set out why having a transition period, to mitigate the risks and uncertainties that are not within the gift of government or industry, was such a priority. More than a year on, and despite the progress that has been made, that contingency still looks more necessary than precautionary. By Tom Greatrex, CEO, Nuclear Industry Association
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ver a billion people across the globe lack electricity access. Millions more are in energy poverty, or only have access to unreliable, expensive, harmful fuels. To address this monumental humanitarian issue, in 2015, the United Nations set the Sustainable Development Goals to provide ‘reliable modern energy’ for everyone by 2030 – predominantly from renewables. One innovation that could assist in its delivery is the mini-grid.
UK mini-grid innovation ‘Any site with high demand and renewable resources is a potential mini-grid site,’ says Cornwall New Energy’s Technical Delivery Manager, Amanda Forman. Community groups in Cornwall are developing mini-grids as an alternative to fossil fuels, while the neighbouring Isles of Scilly are trialling mini-grids to reduce household bills, and another trial mini-grid at Exeter University’s Falmouth campus will be operational this September. Although UK mini-grids are mostly still in trial phases, ‘there are opportunities everywhere’, says Forman. UK trials create opportunities to gain and share expertise – especially for academics, she adds. One example, is the University of Southampton, Sustainable Energy Research Group (SERG)’s six ‘learning entity’ mini-grids in Africa (Kenya, Cameroon and Uganda). AbuBakr Bahaj, head of SERG, told Energy Focus there are ‘always opportunities’ for UK companies in developing and supplying mini-grids in developing nations.
Renewables Mini-grids SERG researched remote village electrification, with the first of six trials – a 13.5KW solar PV mini-grid in Kenya – installed back in 2012. Designed by SERG and built in three days, electrifying 30 businesses, ‘everything except the batteries’, were sourced from the UK, says Bahaj. As mini-grids can electrify businesses (as opposed to individual solar home systems), they can ‘really make a difference to people’s livelihoods’, says Bahaj. The speed and social benefits of SERG’s mini-grid trials has gained the attention of governments in Kenya, Uganda, Zambia and Tanzania.
Renewable mini-grids in developing countries This June, African banking group Standard Bank confirmed that the mini-grid trend is taking off in Africa, with most mini-grids funded as public-private partnerships (PPPs), and large, government-backed
Energy Focus asks can renewable energy mini-grids close the energy access gap?
non-renewable projects decreasing. Mozambique, Ghana and Zambia have particularly attractive tariffs for PPP mini-grids, Standard Bank said. Any ‘remote locations with high fossil fuel prices and a strong need to decarbonise’, make the best geographical, technical, social and economic parameters for mini-grids, says Matthias Becker, Siemens’ Solution Manager for Hybrid Power Plants in Asia, Australasia and the Pacific. These ideal characteristics are found in Sub-Saharan African countries, but also South America and Asia. For example, the Philippines has seen growth in mini-grids due to its many isolated islands with low electrification rates, says Becker.
Future outlook One challenge mini-grids face, however, is providing constant supply: many still rely on diesel generator backups. To avoid diesel, Bahaj says it is important to tailor generation capacity to use, and to use batteries to provide reliable power. In Kenya, SERG’s mini-grids proved more reliable than the central grid, due to frequent grid blackouts. As well as tailoring and batteries, other alternative concepts, such as demand and response measures (momentarily shutting off unnecessary appliances to meet spikes in demand) and innovations in standardised, remote-controlled systems can allow more places to be electrified with mini-grids, says Becker. Depending on the resiliency and adaptability of technologies installed, he adds, it is feasible to bring 100% affordable, renewable energy to rural and undeveloped areas via renewable mini-grids.
www.the-eic.com | energyfocus
Renewables Decarbonising heat
The heat is on I Decarbonising the heat sector is one of the biggest policy challenges in the coming years, writes Professor Robert Lowe at UCL Energy Institute
t is increasingly clear from the latest science that the objective of stabilising the Earth’s climate requires a global transition to net-zero and then to net-negative carbon emissions. To give even a 50% chance of limiting global mean temperature rise to no more than the 1.5°C contained in the Paris Agreement, this must be done within the second half of this
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century (Millar et al. 2017). The implied rate of decarbonisation of the global economy would be without precedent – as, however, would the residual risk of dangerous climate change, with its multiple potential consequences and risks (IMBIE Team, 2018).
In light of the above, in April this year, Claire
Perry, Minister of State for Energy and Clean Growth, asked the Committee on Climate Change (CCC) to review the UK’s climate targets – a review that is likely to both accelerate and deepen the 80% reduction target built into the Climate Change Act. The likely practical consequence will be that all the major terrestrial energy sectors, including heating for buildings and industry,
Decarbonising heat: Renewables
will need to be completely decarbonised by or shortly after 2050, with any residual emissions offset by CO2 capture and storage. In its latest report, Reducing UK emissions 2018 Progress Report to Parliament, the CCC shows that, while the decarbonisation of the UK electricity system is well under way, other major sectors of the UK economy have made little or no progress. Emissions from buildings have been between 80 and 120m tonnes of CO2 equivalent since the 1980s, and the structural mix of fuels used for heating has been essentially static since then, dominated by use of natural gas in boilers. Modest gains in efficiency have been largely offset by a rising population, increasing stock of buildings and higher internal temperatures (Oreszczyn and Lowe 2010). With minor exceptions, the UKâ€™s approach to reducing emissions from heating has been limited to raising levels of insulation in new and existing housing, improved controls and attempts to promote changes in consumer
What is missing is the infrastructure and the supply chains to deliver it, and a clearly defined strategy and policy framework to guide action behaviour. While these can play an important role in reducing the scale of the problem and accelerating the process, they will not allow wholesale transformation of energy supply and conversion to be avoided.
Infrastructure gap The energy technologies that are available
to support decarbonisation of heat include use of decarbonised electricity either directly or, more likely, via heat pumps, replacement of natural gas with hydrogen (whether from steam reforming of natural gas with carbon capture and storage, or using ever-cheaper renewable electricity to electrolyse water), biomass and solar thermal. Heat networks are often included in this list, but do not on their own reduce the carbon intensity of heat, instead playing an enabling role. This list of technological options is obvious and has not changed for decades. What is missing is the infrastructure and the supply chains to deliver it, and a clearly defined strategy and policy framework to guide action. Policies such as the Renewable Heat Incentive have been essentially exploratory, providing useful information to policymakers about the current status of technologies, but too small to do more than scratch the surface of the underlying problem.
www.the-eic.com | energyfocus
Renewables: Decarbonising heat
Energy system models
IMAGES: SCIENCE PHOTO LIBRARY
New systems architecture needed It is clear that the decarbonisation of heat on the timescale outlined above is too big and complex a task to be left entirely or largely to the market. Strategy, policy and planning will also be needed. Recent attempts to define a strategy for heat decarbonisation have implicitly viewed heat supply technologies as being in competition for market share with comparatively little consideration of questions around whole energy system architecture, integration and inter-vector synergies. These omissions stem in part from the whole energy system models that have been used in the Department for Business, Energy and Industrial Strategy (BEIS), by the CCC, the Energy System Catapult, the Energy Research Partnership, academia and in industry to explore policy options. Energy system architecture and associated issues are not well represented by the UK’s two main whole energy system models – UK Times model (UKTM) and the Energy System Modelling Environment (ESME). Essentially, these two models select optimal mixes of technologies within predefined architectures – but they do not optimise architecture. The importance of this lies in the fact that key technologies exhibit significant economies of scale with respect to capital and operational costs, and that there is the potential for powerful synergies between electricity and heat – in principle allowing their complete decarbonisation, together with much of terrestrial transport. At the same time, the interplay of smart systems, transmission and storage – much of it delivered outside the electricity system – offers the promise of the flexibility needed to accommodate very large inputs from variable renewables and relatively inflexible nuclear. But the extent to which economies of scale, synergies and system-wide flexibility are realisable in practice is heavily dependent on energy system architecture. It is likely that different system architectures will perform differently under the impact of unexpected technical and cost evolution that affects the relative ranking of individual technologies. It
48 energyfocus | www.the-eic.com
Decision makers in both government and industry use UKTM and ESME to help them examine different energy options and explore future energy possibilities to achieve a low-carbon, affordable and secure energy system.
Bottom-up, technology-rich cost optimisation
Cost optimisation combined with probabilistic approach to uncertainty
Decarbonisation pathways, technology assessment
Low-carbon technology assessment
Used by BEIS to inform the UK government’s Clean Growth Strategy in 2017
Used by the CCC and DECC to inform a broad range of energy policies, including the fourth Carbon Budget, Heat Strategy and Bioenergy Strategy
UK single region
UK, split into 12 regions (Scotland, Wales, Northern Ireland, nine English regions)
Four seasons, four intra-day (day, evening peak, late evening, night)
Two seasons (summer, winter), five intra-day (overnight, morning, mid-day, early evening, late evening)
Developed by UCL and BEIS
Developed by Energy Technologies Institute
For more information please visit www.ucl.ac.uk/energy-models/models
may become possible to partially de-risk decarbonisation strategy by selection of particular energy system architectures over others – for example those that support interchangeability at the level of individual technologies, while preserving the key features of the overall structure.
Huge task ahead Methodologically and computationally, the above questions constitute an extremely demanding, intrinsically whole-system problem, which has only recently become the focus of research initiatives – examples include: the Energy Systems Catapult and the Institution of Engineering and Technology’s work under the Smart Systems and Heat programme, which approaches the problem from the perspective of market organisation and governance; the International
Energy Agency’s Draft Annex TS3 – Hybrid Energy Networks, which plans to approach the problem from a predominantly engineering perspective, focusing on the topology and technology of interconnections between electricity, gas and heat networks; and BEIS’ Heat Strategic Options Project, which aims to develop the policies that will be needed to put the UK on the lowest cost path to heat decarbonisation. The Engineering and Physical Sciences Research Council-funded Decarbonisation of Heat Challenge is the latest initiative in this area. Based at UCL Energy Institute, and part of the Oxford-based Centre for Research on Energy Demand Solutions, it will undertake a fundamental review of the structure of the UK’s main energy system models, first to characterise their strengths and weaknesses, with a view either to improving them or developing pragmatic work arounds to ensure that policy makers and energy researchers have access to tools commensurate with the epochal challenge that faces us all. By Professor Robert Lowe, Deputy Director, UCL Energy Institute
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EIC Member Focus Arc Energy Resources
Andrew Robinson, Arc Energy Resources
Uncertainty. Where will the oil price go next? Will renewable technology reduce significantly in cost? Will the government subsidise, tax or nationalise any particular industry sector? Where is public perception focusing, in an age of social media? Decision-making in modern business is increasingly risky.
Can you tell us a little bit about Arc? Arc Energy Resources is a welding engineering company, employing 70 people in Eastington, Gloucestershire. We specialise in corrosion-resistant weld overlay cladding, radiographic-quality fabrication and precision machining for the oil and gas, nuclear and petrochemical sectors. Products include flanges, pipelines, risers, valves, pressure vessels, spools, pig launchers and other specialist equipment. How did Arc start out? Arc was founded by my parents, Alan and Rosemary Robinson, in 1994. Alan pioneered development of cladding in the 1980s, and started Arc to offer the highest level of technical support and production techniques. Key milestones include gaining Investors in People (2004), ASME U Stamp (2007), Fit4Nuclear (2011) and Rolls-Royce approval (2017). What’s a typical day like at Arc? We work on such a wide variety of components and projects that every day is different. One day we could be cladding 30-tonne oil rig valves and the next, welding sensitive components for Rolls-Royce.
What the best thing about running a family business? The sense that the whole company is part of the family. We look after our staff, and are rewarded with exceptional loyalty. Some of them have worked together for over 35 years! Also, the ability to take a very long-term view with regard to investment. If you weren’t working at Arc, what do you think you’d be doing? My background is in economics. Before I worked at Arc I was on a graduate fast track at HM Treasury, so I’d probably be working in finance, living in London. I steered away to focus on a career where I could see physical products being produced.
50 energyfocus | www.the-eic.com
Energy Focus caught up with Managing Director Andrew Robinson to find out what day-to-day life is like at Arc Energy Resources What’s been Arc’s biggest highlight to date? So many! Big defence contracts; 30-tonne valves; urgent complex wye pieces for BP; Rolls-Royce approval (the only Tier 1 welding supplier); the acquisition of our machine shop in 2016; winning Stroud Life Business of the Year in 2015; and the introduction of latest generation cladding technology, built in-house last year, to name a few! Can you tell us about your move into the nuclear sector? We identified nuclear as a growth market in 2011, to counteract the cyclical nature of oil and gas. We’ve developed our operational, quality and safety systems since then, and are now working on really exciting projects including support structures for Hinkley Point C and waste containers for Sellafield. What challenges face energy suppliers in a decarbonised world?
What can visitors to Arc’s ONS 2018 stand expect to find? Our highly qualified welding engineers will be on hand to offer technical advice about fabrication and cladding. Visitors will be able to view and touch samples of our work, and we can discuss any particular issues relating to welding, corrosion and wear. What’s next for Arc? We’ve invested heavily in new technology – robotic welding, bi-cathode weld overlay, and computer numerical control (CNC) machining. The next phase is developing these initiatives to their full ability. This will support our ongoing expansion into the nuclear and rail industries. We are particularly excited about working in partnership with Sellafield on waste containers. What would it surprise our readers to know about Arc? The size of the operation, and the breadth of our offering – not just cladding and welding, but technical support, procurement, project management, design-formanufacture, CNC milling and turning, non-destructive testing, shot blasting, coating and inspection (manual and coordinate measuring machine) as well. And you? I live with my wife, two-year-old son, and four-year-old Maltichon, Disney, who are my top priorities outside of work. My passions are sport, particularly rugby, and music – classical and rock, not usually together! I also have a genuine interest in encouraging young people into engineering.
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