Saving energy inthe oil and gasindustry

Climatechange2013

www.ipieca.org

The global oil and gas industry association for environmental and social issues

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Saving energy inthe oil and gasindustry

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Contents

SAVING ENERGY IN THE OIL AND GAS INDUSTRY

Why energy efficiency is important 1

The context 2

Global energy demand 2

Competing goals and challenges 3

Energy use in the oil and gas industry 4

Where is energy used? 4

Oil refining 4

Oil and gas production 4

Transportation 5

How the oil and gas industry is saving energy 6

Energy efficiency and greenhouse gas reduction 6

Why energy efficiency? 6

Energy management systems 7

Benchmarking tools 7

Best management practices 8

Communication and awareness 8

Reduction in flaring and venting 9

Energy improvement projects and new technologies 10

Future challenges: the way forward 12

References and information sources 13

SAVING ENERGY IN THE OIL AND GAS INDUSTRY

1

Oil and gas will remain essential to globaleconomic development and prosperity fordecades to come, even with low-carbon policiesin place (see Figure 1). However, globalconcerns about climate change are leading to afocus on the amount of energy it takes toproduce these hydrocarbon-based fuels, and theadvent of more unconventional sources andmethods continue to further increase the energyintensity of production. In the face of thesechallenges, the industry recognizes that fossilfuel use is a contributor to atmosphericgreenhouse gas (GHG) concentrations, and thatemissions should be minimized where possible.Energy efficiency and conservation can make amajor contribution to both environmentalprotection and energy security.

Most of the potential for saving energy lies withend users. In addition to producing oil and gas,the industry also uses oil and gas in its ownoperations, and efficiency can significantlyreduce the industry’s impact. As traditionalhydrocarbon energy resources are depleted, theproduction of energy from ever more sensitiveand difficult environments is becomingincreasingly complex. By focusing efforts onenergy efficiency, the industry is striving toensure that oil and gas will continue to beavailable, while addressing energy security andenvironmental concerns in the best, most cost-effective way.

Major challenges remain, notably in counteringthe increased use of energy to exploit lessaccessible crude oil resources and to meettougher fuel quality standards. The oil and gasindustry, as responsible producers, aims toprovide consumers with a consistent source of

energy for mobility and power, to help end-users consume less fuel and to promote rationalenergy use all along the supply chain.

Energy efficiency and energy conservation aredistinctly different; however, both play a role inreducing the amount of energy used. Energyefficiency is about reducing the energy intensityof a process or activity so that less energy isrequired to provide the same product orservice. This can be achieved by introducingmore efficient technologies, equipment orprocesses. On the other hand, whilst definitionsof energy conservation differ, it is generallymore related to culture, human behaviour andoperational procedures. It typically means usingless energy by reducing use (e.g. turning offequipment when alternatives are available) orby eliminating unnecessary activities andenergy losses, rather than using less energy toaccomplish the same thing.

Enhancing energy efficiency is an importantissue for oil and gas companies, who cancontribute by implementing changes in theiroperations, planning and investments. There aremany positive drivers for industry becauseenergy efficiency can improve productivity,lower operating costs and reduce environmentalimpacts. Energy efficiency and conservation canalso extend the life of finite natural resourcesand help to keep energy affordable forconsumers by lowering investment andoperating costs for harnessing new energyresources to meet rising demand.

As an industry association, IPIECA aims to raiseawareness of the benefits of energy efficiencyand promote the sharing of best practices.

Why energy efficiency is important

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Global energy demand

Global demand for energy is growing, driven byrising population and economic growth. Over thepast three decades, world energy use has morethan doubled in absolute terms. This increase, inturn, has enabled the world economy to expand,raising living standards and helping to meet theaspirations of millions of people around theworld. It is impossible to operate a factory, run ashop, drive a car, or deliver goods to consumerswithout using some form of energy. As theworld’s energy needs grow, the range of energysources continues to expand to include renewablesources such as geothermal, solar, wind andbiomass along with novel energy converters suchas fuel cells. However, renewable energy sources(including biomass) currently account for only13% of supply, and—despite their growth—it willbe decades before they comprise a significantpercentage of our energy supply.

Even if the global use of renewables doubles ortriples over the next 25 years, it is likely that the

world would still depend on fossil fuels for morethan 60% of its energy needs over thattime frame (see Figure 1). For example, theglobal transportation sector—the fastest area ofgrowth for energy demand—is faced withlimited near- to mid-term practical alternativesto petroleum-based fuels. In many cases, oil andnatural gas also continue to provide the mostreadily available and cost-effective source of

The context

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18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

01980 1990 2000 2010 2020 2030 2035

otherrenewables

biomass

hydro

nuclear

gas

coal

oil

Source: IEA World Energy Outlook 2011 (New Policies Scenario, in line with 2°C max temperature rise)

Figure 1 World primary energy demand, 1980–2035

SAVING ENERGY IN THE OIL AND GAS INDUSTRY

3

energy to the electric power, industrial,commercial and residential sectors, and theycontinue to be essential feedstocks for a widerange of industrial and consumer goods. Giventhis fact that petroleum feedstocks will continueto serve as the worlds’ primary energy resourcefor years to come, it is imperative that energyefficiency is a key component of energymanagement in the oil and gas industry.

Competing goals and challenges

Around the world, there is growing concernabout climate change caused by the growth ofGHG emissions in the atmosphere. Fossil fueluse is one of the sources of those emissions.Governments and communities are, therefore,taking steps to reduce greenhouse gases.Examples of policy mechanisms to do so includecarbon taxes or emissions cap-and-tradeschemes, direct regulation of industrialoperations to limit emissions, and end-userefficiency standards.

The most effective way to reduce carbonemissions today is to use less energy. Savingenergy through improved efficiency andconservation has a central role to play inreconciling the goals of economic development,energy security and environmental protection.A number of recent studies have shown thatinvestment in more efficient energytechnologies is often the most cost-effectiveway of curbing the growth in demand for fossilfuels and reducing emissions of GHGs and airpollutants (IPCC, 2007; IEA, 2006).

While the oil and gas industry makes a vitalcontribution to meeting the world’s energyneeds, the industry’s activities in extracting,processing and marketing fuels also accountsfor 27.4% of total global primary energy use(IEA, 2011). Even given the strides in recentyears, there remains considerable potential forimproving energy efficiency throughout theindustry, which can have a significant positiveimpact globally.

As well as being a major producer of energy,the oil and gas industry is itself a majorconsumer of energy. That is, large amounts ofenergy are needed to extract resources from theground and process, transform, transport anddeliver those resources to end users, relativeboth to the economic value and to the volume ofthe oil and gas supplied.

Where is energy used?

Oil refining

Oil refining is an energy-intensive activity,accounting for about half of all the energyconsumed by the oil and gas industry as awhole. And factors such as more stringent oilproduct standards (e.g. ultra low-sulphurdiesel), increasing demand for lighter products,and heavier crude oil slates all demandincreased processing, which in turn placesupward pressure on the overall energy intensityfor refining. However, steady energy efficiencygains have been achieved in the sector, thanks

to the investment in, and focus on, efficiencyimprovements over the past three decades.Benchmarking indices have become standardin the refining industry as a tool to monitorand drive energy efficiency improvements andcompare performance between refineries. As aresult, the average energy intensity of therefining industry segment has fallen by 13%since 1980 in OECD countries, according toIEA data.

Oil and gas production

Large amounts of energy are also needed toextract oil and gas from the Earth. Energy usein petroleum extraction covers a range ofactivities, including: driving pumps to extracthydrocarbons and to reinject water; heating theoutput stream to allow separation of the oil, gasand water; producing steam and reinjecting gasfor enhanced oil recovery; poweringcompressors and pumps for transporting oil andgas through gathering pipelines to processingplants; and driving turbines to generate theelectricity and heat needed for on-site operations

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Energy use in the oil and gas industry

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and living quarters. Energy needs vary widelyaccording to local circumstances andoperational conditions. Locally-produced gas isthe main fuel used for upstream operations. Theenergy intensity of oil and gas extraction hasbeen increasing—by approximately one-thirdsince 1980 in OECD countries—despite heavyinvestments to improve efficiency (IPIECA 2013).

There are two main reasons: ● As oil and gas fields mature, hydrocarbon

production declines and water increases asreservoirs become depleted. Yet the amountof work and, therefore, energy required toproduce those volumes stays about the sameor even increases. Increased use of energy-intensive secondary and enhanced recoverytechniques is also boosting energy needs.

● Increasing reliance on less accessibleconventional fields such as offshore deepwater, heavy crude oil and non-conventional resources such as oil sands,for which the production processesgenerally require more energy. The energyand environmental costs of recovering theselow quality oils have limited theirdevelopment for decades.

Transportation

Supplying oil and gas products to consumersinvolves transportation through various modes.Seagoing oil tankers, fuelled by diesel oil andresidual fuel oil, as well as pipelines, whichmainly use natural gas to fuel pumps andcompressors, account for much of the energyconsumed in transporting and distributingcrude oil, refined products and natural gas.Road tankers and rail cars that distributepetroleum end products to service stations andto various end users also consume significantamounts of diesel. While important advanceshave been made in improving energy efficiencyin oil and gas transport, the resulting energysavings are largely offset by a geographic shiftin production to regions that are often furtherfrom demand centres, thus increasing thevolume of fuel required to deliver the productsby pipeline or tanker.

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Energy efficiency and greenhousegas reduction

There is a strong consensus within the oil andgas industry on the importance of saving energyby improving the efficiency of operations alongthe supply chain and eliminating unnecessarywaste. Large investments have already beenmade, and oil and gas companies continue todevote considerable resources in pursuit offurther energy savings. The primary strategiesinclude implementation of energy managementsystems, developing energy benchmarks,identifying and introducing best managementpractices, enhancing communication andawareness, driving energy efficiency and GHGemission reduction projects and developingnew technologies.

Why energy efficiency?

Energy is needed to extract resources from theground, and to process, transform and deliverthose resources to consumers. Because energycomprises a significant portion of the oil andgas industry’s overall operating costs,

companies already have a strong financialincentive to save energy. Using energyefficiently reduces costs along the whole supplychain, improving competitiveness and makingend products more affordable for consumers. Itis also a powerful environmental tool, reducingthe carbon intensity of processes and thereforereducing carbon emissions to the atmosphere.This is why oil and gas companies haveinvested heavily over the years in more efficienttechnologies all along the supply chain, andplan to invest more in the future.

But worldwide, opportunities still exist within theindustry to make significant contributionstowards reducing energy consumption andgreenhouse gas emissions by taking advantageof energy efficiency improvements.

How the oil and gas industry is saving energy

Energy efficiency vs. conservation

Energy efficiency and energy conservationare distinctly different; however, both playa role in reducing the amount of energyused. Energy efficiency is about reducingthe energy intensity of a process or activityso that less energy is required to providethe same product or service. This can beachieved by introducing more efficienttechnologies, equipment or processes. Onthe other hand, whilst definitions of energyconservation differ, it is generally morerelated to culture, human behaviour andoperational procedures. It typically meansusing less energy by reducing use (e.g.turning off equipment when alternativesare available), or by eliminatingunnecessary activities and energy losses,rather than using less energy to accomplishthe same thing.

SAVING ENERGY IN THE OIL AND GAS INDUSTRY

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Energy management systems

Many companies have developed andimplemented formal energy managementsystems that seek to incorporate efficiencyimprovements and emissions reductions intoroutine business operations. A consistentstandard for energy management systems is nowavailable from the International Organization forStandardization (ISO) as ISO 50001, whichprescribes the key elements required for effectiveenergy management and efficiencyimprovements. Elements include a corporateenergy policy, a baseline for energy use,improvement goals and action plans, energyreviews and routine evaluation of progress.

Energy management systems have been inplace for several years in various segments ofthe industry. Examples include: ● Exxon Mobil’s Global Energy Management

System (GEMS), targeting refineryoperations and chemical plants;

● Petrobras’ Energy Efficiency Programme forrefining, cogeneration and heating systems;and

● Repsol’s Energy Management Systems inrefining and marketing segments includingdistribution and fuel stations.

Because of the success they bring, energymanagement systems may become morecommon throughout the industry in the next 10years. IPIECA has developed specific guidanceon applying the concepts of ISO 50001specifically for the oil and gas sector, to facilitatethe use and effectiveness of energy managementsystems across the industry (IPIECA 2013b).

Benchmarking tools

Another management tool to facilitate energyefficiency is benchmarking. Consistent metricscan be used to evaluate performance within afacility and also compare energy efficiencybetween facilities. They can be the basis forsetting goals, identifying energy reductionprojects and tracking progress.

However, defining relevant energy performancemetrics in the oil and gas industry is not astraightforward endeavour. Every refinery andevery oil and gas field is unique. In the refiningsector, each refinery has its own uniquecharacteristics, shaped by the markets it serves,the local environmental requirements and thetypes of feedstocks used to make the finalproduct. Each refinery is essentially a collection

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of individual process units, each designed andtuned to produce particular refined products.To address these challenges, the refining sectorhas developed modular energy performanceindexes which take into account the differentlevels of complexity between refineries.

Oil and gas production is even morechallenging and diverse. Fields vary accordingto whether they are predominantly oil or gasoperations, sited onshore or offshore, havemarkets for natural gas, require enhancedrecovery, and a myriad of additional factors.The use of benchmarking tools allows theevaluation of energy efficiency regardless ofthese diverse conditions.

Best management practices

As oil and gas companies identify successfulpractices and systems which can be adopted byothers in the industry, IPIECA is committed tosharing those best practices. A Task Force iscompiling a series of guidelines on ‘OperationsGood Practice’ related to:● power and heat generation;● efficient use of power for compression,

pumping and energy conversion;● venting of equipment;● practices specific to wells, process units,

and upstream and midstream plants;● refineries and petrochemical plants; and● energy efficient design.

IPIECA and its partners have published anumber of guidance documents aimed athelping the industry to monitor emissions anddevelop reduction projects, including:

● Compendium of Greenhouse Gas EmissionsMethodologies for the Oil and Gas Industry;

● Oil and Natural Gas Industry Guidelines forGreenhouse Gas Reduction Projects;

● Increasing the Pace of TechnologyInnovation and Application: EnablingClimate Change Solutions; and

● Natural Gas as a Climate Change Solution:Breaking Down the Barriers to Methane’sExpanding Role.

Communication and awareness

Industry groups, such as IPIECA, OGP andother partnerships, facilitate the sharing ofideas and promote the awareness of energyefficiency and GHG reduction options bothwithin the industry and externally.

As the oil and gas industry continues toencourage networking and partnerships withother key stakeholders, IPIECA members standready to broaden their dialogue with energyconsumers on how to save energy for the goodof everyone. IPIECA coordinates its activitieswith a range of stakeholders including:● United Nations Environment Programme;● International Association of Oil and Gas

Producers (OGP) (www.ogp.org.uk);

SAVING ENERGY IN THE OIL AND GAS INDUSTRY

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● Global Gas Flaring Reduction (GGFR)Partnership (www.worldbank.org/ggfr);

● Oil companies’ European association forenvironment, health and safety in refiningand distribution (CONCAWE)(www.concawe.org);

● Carbon Mitigation Initiative (CMI)(http://cmi.princeton.edu);

● CO2 Capture Project(www.co2captureproject.org); and

● Global Climate Change and Energy Project(http://gcep.stanford.edu).

Reduction in flaring and venting

One important way in which the oil and gasindustry has been conserving energy is byreducing the flaring or venting of natural gasproduced in association with crude oil. Flaringis sometimes carried out where barriers to thedevelopment of gas markets and gasinfrastructure prevent the gas from being used.

The industry is committed to eliminatingunnecessary flaring by developing processingand distribution infrastructure in order tomonetize the gas.

The Global Gas Flaring Reduction Partnership—a World Bank-led initiative that brings togetherrepresentatives of governments of oil-producingcountries, and state-owned and majorinternational oil companies—facilitates andsupports national efforts to use currently flaredgas by promoting effective regulatoryframeworks and tackling the constraints on gasutilization, particularly in developing countries.The goals of the partnership are to: reduceglobal methane (and therefore greenhouse gas)emissions; enhance economic growth;strengthen energy security; improve industrialsafety; and enhance air quality. These effortsare critical, because methane is the second mostimportant greenhouse gas, accounting for 14%of global GHG emissions and more than one-third of today’s global warming potential.

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IPIECA and OGPhave developed aguidance document,entitled Preparingeffective flaremanagement plans,to further promotereductions in flaringand venting withinthe industry.

Success stories involving flaring or ventingreduction or elimination include Nigeria’s ShellPetroleum Development Company (SPDC)—ajoint venture between the Nigerian NationalPetroleum Company, Shell, Total and Agip. Thecompany invested more than $2.3 billion overa five-year period in building pipelines andcompressor stations to gather associated gasand use it in local power plants or for makingliquefied natural gas (LNG). As a result, the

Energy improvement case study: the Athabasca Oil Sands Project (AOSP)

The AOSP, a joint venture of Shell,Chevron Canada and Western Oil Sands,is located in Alberta, Canada, and is thefirst fully-integrated oil sands project.

Integrated oil-sands projects are veryenergy intensive, so the AOSP wasdesigned to minimize the energyrequirements for financial andenvironmental reasons. Energy savingswere made at the mine by using low-temperature extraction techniques, andthrough the integration of heat streamsand the installation of gas-firedcogeneration facilities.

amount of gas flared has been cut by 30% overthat time period (www.shell.com).

Energy improvement projects andnew technologies

Investment in a variety of specific energyimprovement projects has been ongoing toaddress the energy efficiency challenge. The oiland gas industry has been a strong supporterof technology development, and has establishedvarious partnerships to accelerate thedevelopment of carbon capture and sequestration(CCS) and other important technologies (seecase studies below). CCS is being sought as atechnology to reduce GHG emissions, but isitself quite energy intensive. The challenge is touse CCS as a way to curb greenhouse gasemissions using the best available technology tomaximize energy efficiency.

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The Gorgon Project—a joint venture of Chevron, ExxonMobil and Shell—is one of the world’slargest natural gas projects. Carbon dioxide (CO2) is removed from the gas during processingoperations, but instead of disposing of the CO2 by venting to the atmosphere, the Carbon DioxideInjection Project plans to inject the CO2 into the Dupuy Formation which lies around 2.5 km belowBarrow Island. This could become the largest CO2 storage project in the world.

The project represents the application of current best practice in thermal efficiency andgreenhouse gas emissions control, recognizing that the gas processing facility will be a largeemitter of greenhouse gases.

After injection operations reach full capacity in 2015, the Gorgon Carbon Dioxide InjectionProject plans to inject between 3.4 and 4 million tonnes of CO2 per year. The CO2 injected willbe carefully monitored via a number of surveillance wells and repeated seismic surveying.

The project receivedglobal recognition whenit was formallyrecognized by theCarbon SequestrationLeadership Forum (CSLF)at its annual meeting inWarsaw on 8 October2010.

New technologies case study: the Gorgon Carbon Dioxide Injection Project, Australia

Energy improvement case study: the Total Ecosolutions programme

The Total Ecosolutions programme is aimed atdeveloping products and services designed to helpcustomers to continuously reduce their environmentalimpact, such as energy or water consumption. Bythe end of 2011, it was estimated that the use ofTotal Ecosolutions products and services avoided 805,000 metric tonnes of carbon dioxideemissions in 2011 (estimate based on sales in 2011). That is the amount emitted by more than80,000 European Union residents in one year.* (www.total.com/EN/total-ecosolutions)

( *Source: European Environment Agency, October 2010, Greenhouse Gas Emissions Per Capita in EU-27 Member States)

1. Gas isfed fromreservoirto plant

2. CO2 is separatedfrom natural gas

3. CO2 is compressedand injected morethan 2 kmunderground intothe Dupuy FormationunderneathBarrow Island

4. Movement of theCO2 undergroundis monitored byrepeated seismicsurveys andsurveillance wells

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Future challenges: the way forward

through innovative efficiency gains andconservation. Energy efficiency is often thecheapest, fastest and most environmentallyfriendly way of meeting the challenges ofreducing industry’s own energy needs.

All stakeholders in the hydrocarbon sector—from producers to consumers—have a role toplay, working together, to ensure energy isused efficiently and cleanly. The hydrocarbonindustry is committed to stepping up efforts toseek out every opportunity for saving energywhere it is economic to do so, and to helpingpolicy makers formulate strategies andmeasures aimed at saving energy andreducing emissions.

The oil and gas industry is facing majorchallenges in meeting the world’s risinghydrocarbon needs in an environmentally soundand socially acceptable way while curbing itsown energy consumption. Many new sources ofhydrocarbons, including oil sands, shale gas,gas-to-liquids and biofuels, are inherently moreenergy-intensive. Tougher standards for refinedproducts and the growing shift towards lighterproducts are pushing up the energy intensity ofrefining. The greater distances over which oiland gas must be transported will boost fuelneeds, as would the introduction of carboncapture and storage. These challenges make itall the more important to unleash the potentialthat still exists for the industry to save energy

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References and information sources

Publications

IEA (2006). Energy Technology Perspectives. Organisation for Economic Co-operationand Development (OECD)/International Energy Agency (IEA), Paris.

IEA (2011). World Energy Outlook. Organisation for Economic Co-operation andDevelopment (OECD)/International Energy Agency (IEA), Paris.

IPCC (2007). The Fourth Assessment Report (AR4) of the United NationsIntergovernmental Panel on Climate Change (IPCC), IPCC, Cambridge University Press.

IPIECA (2013). Energy efficiency: Improving energy use from production to consumer.London.

IPIECA (2013b), Guidelines for implementing ISO 50001 Energy ManagementSystems in the oil and gas industry. London.

Websites

Alliance to Save Energy: www.ase.org

American Council for an Energy-Efficient Economy: www.aceee.org

International Association of Oil and Gas Producers (OGP): www.ogp.org.uk

International Energy Agency: www.iea.org

IPIECA: www.ipieca.org

World Energy Council: www.worldenergy.org

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IPIECA is the global oil and gas industry association for environmental and social issues. Itdevelops, shares and promotes good practices and knowledge to help the industry improve itsenvironmental and social performance, and is the industry’s principal channel of communicationwith the United Nations.

Through its member led working groups and executive leadership, IPIECA brings together thecollective expertise of oil and gas companies and associations. Its unique position within theindustry enables its members to respond effectively to key environmental and social issues.

IPIECA5th Floor, 209–215 Blackfriars Road, London SE1 8NL, United KingdomTelephone: +44 (0)20 7633 2388 Facsimile: +44 (0)20 7633 2389E-mail: info@ipieca.org Internet: www.ipieca.org

© IPIECA 2013 All rights reserved. www.ipieca.org

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