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Oil To Power Oshot2009

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Oil To Power Oshot2009

  1. 1. Oil to Power – an Alternative Marketing Concept Simon Richards EPConsult Ltd …or how to get more bucks for your barrel! 1
  2. 2. Summary of Presentation A new business model that can make small oil fields, “difficult” crudes and low rate wells attractive by increasing the value of the oil. This leads to improved economics, resource management, field sustainability and reduced emissions. 2
  3. 3. Value • What do we mean by “value” • Neoclassical economics: – Price = value, relative to supply-demand balance – No market = no value • Classical economics: – Price ≠ value – Value is the labour saved through use of good or service – Market and value are disconnected • OG industry uses Neoclassical definition 3
  4. 4. Background • Crude oil is an intermediary product and so the value remains relatively low – Conventional wisdom to maximise production rate and minimise the field life • Increased value of crude oil could:- – Extend field life. – Allow lower rates from tight, fractured and thin reservoirs and/ or low mobility fluids 4
  5. 5. Revenue = Production x Price ?? – CAPEX - OPEX 5
  6. 6. Challenges • An increasing proportion of the remaining resources are heavy (viscous) and/ or sour and/ or acidic. – Often difficult to extract at a fast enough rate – Price of these oils is often discounted considerably from the benchmark crude 6
  7. 7. Opportunity • A new business model that :- – Will increase the value of the crude oil • Enables development of heavy, sour, acidic and/ or viscous oils and low productivity wells • Extend economic life of field and increase reserves – Eliminate USD exchange risk – May enable economic carbon capture and storage as well as (im)miscible gas injection EOR 7
  8. 8. Method • Sell crude oil (energy) as power. – Power is generated at the production facility. – Oil and gas are not exported. – No pipelines, tankers, pumps and compressors etc. – Cables, transformers and converters. • Electricity is very versatile – crude oil can only be sold to downstream companies • Potential markets:- – Offshore production facilities – Onshore electricity grid 8
  9. 9. Concept Description • Conventional approach up to production separator, including produced water system. – Artificial lift by downhole pump – no gas lift. – Water can be disposed or re-injected – Oil and gas used to fuel reciprocating engine- driven power generators. – AC power transformed to HV for onshore – Rectify to DC if required for offshore 9
  10. 10. Oil to Power Schematic 10
  11. 11. Reward • Power price is: – often more than crude oil; – often more stable than oil; – linked to local factors • Oil price linked to global economic health. • No exchange rate risk - revenue in local currency. • Carbon cost is driver for CO2 re-injection. – £19.90 /Te (2009). Approx £12.75 /MWh. • Climate Change Levy £4/ MWh 11
  12. 12. Value of Power $100 Brent $90 Field A $80 Electricity Price ($ per bbl) $70 $60 $50 $40 $30 $20 Low Medium High Uncertainty Range of Oil and Electricity Price 12 12
  13. 13. Applications • Heavy/ extra-heavy crude oil have increased energy content/ barrel and electricity yield. • High sulphur and/ or acidic crude oil. • Low rate wells/ fields • Low reserves • (Im)miscible gas EOR with CO2 or flue gas • Stranded/ marginal oil and gas fields • Onshore/ offshore 13
  14. 14. Source: WoodMac 14
  15. 15. Power Generation Technology • Diesel engines • Fuel limitations: – viscosity 2000 cSt @ 50 °C – sulphur content 5% • Fuel types - diesel, heavy fuel oil, crude oil and gas; • Electrical efficiency up to 47% • CHP efficiency up to 90% 15
  16. 16. Emissions Control • Produced water treatment and disposal or injection; • Flue gas includes CO2, NOX, SOX, CO, particulates & unburned hydro-carbons – These can be controlled by: • primary methods stop contaminants forming during combustion (e.g. high efficiency, low sulphur fuel, low combustion temperature); • Secondary methods capture contaminants from the flue gas afterwards (e.g. FGD, SCR, CCS); 16
  17. 17. Source: Wartsila 17
  18. 18. Cost • Cost is field specific and depends on output and location • Onshore rule of thumb USD1.4MM/ MWh Offshore FPSO Lifecycle Oil to Power Reserves Cost USD/ bbl MMbbl High Low Power Lifecycle Rate Rate MW USD/ bbl 16 56 158 35 102 40 27 72 88 56 73 19 42 158 39 18
  19. 19. Contact Information Simon Richards EPConsult Ltd www.ep-consult.com simon.richards@ep-consult.com +44 20 7582 5555 Final Thought Our role is not so much to produce barrels but to turn our assets into cash…. 19

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