Oil and gas field operations are beginning to be fueled by a surprising source—renewable energy, according to new research and analysis by IHS Markit.
“Energy efficiency efforts and reductions in flaring can only do so much to lower greenhouse gas emissions, so some companies are turning to zero-carbon sources to power their upstream, midstream, and downstream operations,” said Judson Jacobs, IHS Markit’s executive director, upstream energy.
But that is not the only driver.
“There is a striking pace of growth over the past few years and a dynamic commercial environment for delivering renewable energy to oil and gas operations,” Jacobs continued, adding that stakeholder pressure to reduce emissions is another factor.
“It is also about steeply declining costs for renewables and the industry’s growing familiarity and experience with these technologies. And there are tangible improvements to operational performance that go along with using them,” he said.
IHS Market said its research reveals that field-based renewable installations are demonstrating reliability. And electrification—drawing renewable-generated power direct from the grid, as for offshore platforms in Norway—removes most energy-generation equipment entirely, enabling fewer on-site personnel needed to operate it and smaller facility footprints. Additional benefits include reduced maintenance expenses and the elimination of fuel deliveries to the site.
Fast-Growing Market
While the number of renewable energy projects is small, it has been growing rapidly over the past couple of years. While fewer than 15 such projects existed from the early 2000s—when the industry first began to deploy such technologies—through 2017, the IHS Markit Oil and Gas Field-Based Renewable Energy database now counts more than 45 announced projects—28 of those coming in 2018 and 2019.
The combined volume of averted CO2 emissions from these projects is expected to exceed 3 million metric tons per year (3 MMtpa). By contrast, in only one other year did projects avert even 0.3 MMtpa. Deployments are taking place in both new developments and existing assets, with solar the most-prominent renewable technology, followed by hydropower and wind.
“North America and Europe, where renewables deployments have been most prolific to date, are still growing,” said Minuri De Silva, IHS Markit research analyst, costs and technology. “And other conducive regions such as the Middle East, Latin America, and Asia are also poised for greater adoption as they address technical and commercial issues. The growth potential is significant.”
The types of oil and gas companies using field-based renewables is also widening. International oil companies (IOCs) have been leading in this area, but use has expanded to national oil companies (NOCs), independent exploration and production firms, and even oilfield services companies.
Getting Past Early-Adopter Stage
While IHS Markit believes the number of field-based renewable energy projects will continue to accelerate in the coming years, the firm says several challenges must be overcome before adoption becomes widespread. Cost relative to traditional energy-generation sources, the development of supply chains in remote regions, and energy storage for intermittent renewable sources are among significant factors currently constraining growth.
According to Jacobs, current activity in the oil and gas field–based renewable energy space is at the early-adopter stage. “It is a dynamic and important trend to follow,” he said.