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Beyond the status quo in oil and gas

Article by Ilia Cherezov, Founding Analyst in Clean Hydrocarbons at DSV

Over the last 150 years, hydrocarbons have provided us with an abundant, accessible source of energy, transforming our lives and paving the way for revolutionary industrial innovations. However, despite the world’s continued dependence on fossil fuels, the sector faces a number of significant challenges. Production is declining in existing reservoirs and new ones are not being discovered at anywhere near the rate required to meet demand. Growing concern about climate change and increased pressure from investors has forced major oil and gas companies to implement targets to cut emissions and reduce their carbon footprint. In order to tackle these issues and accelerate innovation, several in-house venture capital arms have been established such as BP Ventures ($450 mil invested), Equinor Energy Ventures ($200 mil invested), Shell New Energies ($1-2 bil per year budget) and Total Energy Ventures ($500 mil per year budget). Innovators are increasingly turning to venture capital to bridge the gap between research and commercialisation, and help finance the high-risk early stages of getting their solution to market. At Deep Science Ventures, we believe that identifying market opportunities comes first, to avoid the far too common approach of pushing scientific research with no market fit. In this article, we take a brief look at the opportunity areas where new oil and gas ventures could create an impact.

As digital disruption continues to impact all industries, the oil and gas sector has turned to data and analytics to drive efficiencies and open up new opportunities. Through the use of sensors and telemetry, digital oil and gas fields are optimising exploration and production, improving the efficiency of predictive maintenance and reducing the exposure of workers to hazards. These technologies have been some of the first to be adopted as they are able to successfully drive down costs and mitigate environmental impact without the need for government subsidies. However, there’s a world beyond pure digital approaches that is yet to be fully explored.

Hydrocarbon reserves are typically located far from the grid and require energy to operate and control equipment. One possible way to do this is through the use of fuel cells to generate clean, highly-efficient power from the raw gas produced at the wellhead. Unlike traditional engines, fuel cells directly convert fuel to electricity via an electrochemical process without combustion. These modular cells are of particular value offshore, where footprint and weight are of key importance. In what is know as gas-to-wire, the conversion of offshore gas to electricity also makes it possible to utilise the transmission cables of nearby wind farms and transport energy from stranded reserves. Despite investors favouring solid oxide fuel cells (Bloom Energy raised $270 mil in their July 2018 IPO), the technology is still severely handicapped for use at the wellhead as a highly purified hydrogen or methane feed is required. The presence of impurities in the raw unprocessed gas poisons the electrode and catalyst materials used in fuel cells. The development of novel materials resistant to this kind of fouling is an active area of research.

Natural gas is viewed as an important partner to supplement renewable energy whilst storage technologies continue to develop. Last year, natural gas was responsible for providing the largest growth in primary energy boosted by the industrial and residential sectors in China switching away from coal to gas. Even though natural gas releases 50% less CO2 than coal when burned, the climate impact of methane (~30 times worse than CO2) means that there is still a need to minimise methane leaks at production sites and across the entire value chain. Venture funds have offered investment support and pilot trial opportunities to accelerate the deployment of methane detection technologies such as SeekOps and Quanta3. Although of great value, these approaches do not address the root causes of leaks such as corrosion, and simply inspect equipment—alerting the operator if a leak is detected. Perhaps a better solution would be to develop self-healing pipes, preventing leaks from happening in the first place, or utilising drones to carry out rapid emergency repairs at remote and possibly hazardous locations. Buildrone from Imperial Innovations have proposed a potential use of such drones, which is unfortunately limited by the fact that the majority of pipelines cannot be directly reached as they are buried beneath the surface.

Another challenge facing the industry is that gas fields with low levels of contamination are becoming increasingly scarce, with 40% of the world’s proven reserves classed as “sour” due to their high concentrations of CO2 and H2S. It is therefore necessary to increase and improve facilities that treat sour gas so it can meet sales quality requirements. Current separation plants use solvents with absorbents or membranes, however cryogenic or low temperature distillation could become a cost effective solution for sour gas streams. This physical separation method exploits the difference in boiling points between methane and CO2 to yield a high purity gas product. The added advantage of the cryogenic approach is that a high pressure liquid CO2 stream is also produced, which can be re-injected into the reservoir for enhanced oil recovery (EOR) or sequestration. This avoids the capture and compression costs that have hindered the development of carbon capture and storage (CCS) projects and would therefore help improve the infrastructure required for CCS – a technology that will play an essential role in meeting future emissions reductions targets. The use of CO2 for EOR could also provide a substantial economic payback by extending the life of existing wells which face decommissioning for no longer being economically viable despite having only had 30-40% of their hydrocarbon reserves extracted.

Aside from CO2, hydrogen sulphide must also be removed from the produced oil and gas. This is achieved using energy intensive sulphur recovery units where the hydrogen present in H2S is “lost” by being transformed to water as the end product of reactions. There is potential to directly recover this hydrogen, as the energy of dissociation of H2S is much lower than that of other hydrogen sources such as water and hydrocarbons. Photocatalytic and biological methods are appealing options since they can be carried out at near ambient conditions. Despite numerous researchers working on this problem, a holy-grail solution that offers an economically viable, reliable continuous process has so far proven elusive.

Aside from the large existing fields, there are numerous small pools of oil and gas distributed across the UK continental shelf. These marginal fields remain undeveloped as they do not meet the requirements for investment using traditional production techniques. A radical twist on the use of bacteria and microbes in oil recovery would be to use them for downhole refinement of the poor quality hydrocarbons found in the reservoir. Over time, the bacteria could progressively convert heavy oil fractions into lighter ones and consume the sour CO2 and H2S to offer a low-cost solution for upgrading of oil and gas in-situ. By reducing the cost of extraction and processing of these hydrocarbons, resources worth an estimated £135 billion could be unlocked for the UK economy. The Oil and Gas Technology Centre in Aberdeen is actively working on this by supporting smaller, ambitious technology developers to implement their new solutions in the field.

Hydrocarbons still have an important part to play in facilitating the energy transition and new technologies are required in order to solve the global energy challenge in a way that meets the climate goals set by the Paris Agreement. Through leveraging the expertise and value chains of the oil and gas industry, Deep Science Ventures are bringing together entrepreneurial-driven scientists to create companies that take energy technologies to market, delivering growth and positive return on investment along with a reduction in carbon footprint. If this is something that you are also passionate about, then please get in touch.

Beyond the status quo in oil and gas

Article by Ilia Cherezov, Founding Analyst in Clean Hydrocarbons at DSV

Over the last 150 years, hydrocarbons have provided us with an abundant, accessible source of energy, transforming our lives and paving the way for revolutionary industrial innovations. However, despite the world’s continued dependence on fossil fuels, the sector faces a number of significant challenges. Production is declining in existing reservoirs and new ones are not being discovered at anywhere near the rate required to meet demand. Growing concern about climate change and increased pressure from investors has forced major oil and gas companies to implement targets to cut emissions and reduce their carbon footprint. In order to tackle these issues and accelerate innovation, several in-house venture capital arms have been established such as BP Ventures ($450 mil invested), Equinor Energy Ventures ($200 mil invested), Shell New Energies ($1-2 bil per year budget) and Total Energy Ventures ($500 mil per year budget). Innovators are increasingly turning to venture capital to bridge the gap between research and commercialisation, and help finance the high-risk early stages of getting their solution to market. At Deep Science Ventures, we believe that identifying market opportunities comes first, to avoid the far too common approach of pushing scientific research with no market fit. In this article, we take a brief look at the opportunity areas where new oil and gas ventures could create an impact.

As digital disruption continues to impact all industries, the oil and gas sector has turned to data and analytics to drive efficiencies and open up new opportunities. Through the use of sensors and telemetry, digital oil and gas fields are optimising exploration and production, improving the efficiency of predictive maintenance and reducing the exposure of workers to hazards. These technologies have been some of the first to be adopted as they are able to successfully drive down costs and mitigate environmental impact without the need for government subsidies. However, there’s a world beyond pure digital approaches that is yet to be fully explored.

Hydrocarbon reserves are typically located far from the grid and require energy to operate and control equipment. One possible way to do this is through the use of fuel cells to generate clean, highly-efficient power from the raw gas produced at the wellhead. Unlike traditional engines, fuel cells directly convert fuel to electricity via an electrochemical process without combustion. These modular cells are of particular value offshore, where footprint and weight are of key importance. In what is know as gas-to-wire, the conversion of offshore gas to electricity also makes it possible to utilise the transmission cables of nearby wind farms and transport energy from stranded reserves. Despite investors favouring solid oxide fuel cells (Bloom Energy raised $270 mil in their July 2018 IPO), the technology is still severely handicapped for use at the wellhead as a highly purified hydrogen or methane feed is required. The presence of impurities in the raw unprocessed gas poisons the electrode and catalyst materials used in fuel cells. The development of novel materials resistant to this kind of fouling is an active area of research.

Natural gas is viewed as an important partner to supplement renewable energy whilst storage technologies continue to develop. Last year, natural gas was responsible for providing the largest growth in primary energy boosted by the industrial and residential sectors in China switching away from coal to gas. Even though natural gas releases 50% less CO2 than coal when burned, the climate impact of methane (~30 times worse than CO2) means that there is still a need to minimise methane leaks at production sites and across the entire value chain. Venture funds have offered investment support and pilot trial opportunities to accelerate the deployment of methane detection technologies such as SeekOps and Quanta3. Although of great value, these approaches do not address the root causes of leaks such as corrosion, and simply inspect equipment—alerting the operator if a leak is detected. Perhaps a better solution would be to develop self-healing pipes, preventing leaks from happening in the first place, or utilising drones to carry out rapid emergency repairs at remote and possibly hazardous locations. Buildrone from Imperial Innovations have proposed a potential use of such drones, which is unfortunately limited by the fact that the majority of pipelines cannot be directly reached as they are buried beneath the surface.

Another challenge facing the industry is that gas fields with low levels of contamination are becoming increasingly scarce, with 40% of the world’s proven reserves classed as “sour” due to their high concentrations of CO2 and H2S. It is therefore necessary to increase and improve facilities that treat sour gas so it can meet sales quality requirements. Current separation plants use solvents with absorbents or membranes, however cryogenic or low temperature distillation could become a cost effective solution for sour gas streams. This physical separation method exploits the difference in boiling points between methane and CO2 to yield a high purity gas product. The added advantage of the cryogenic approach is that a high pressure liquid CO2 stream is also produced, which can be re-injected into the reservoir for enhanced oil recovery (EOR) or sequestration. This avoids the capture and compression costs that have hindered the development of carbon capture and storage (CCS) projects and would therefore help improve the infrastructure required for CCS – a technology that will play an essential role in meeting future emissions reductions targets. The use of CO2 for EOR could also provide a substantial economic payback by extending the life of existing wells which face decommissioning for no longer being economically viable despite having only had 30-40% of their hydrocarbon reserves extracted.

Aside from CO2, hydrogen sulphide must also be removed from the produced oil and gas. This is achieved using energy intensive sulphur recovery units where the hydrogen present in H2S is “lost” by being transformed to water as the end product of reactions. There is potential to directly recover this hydrogen, as the energy of dissociation of H2S is much lower than that of other hydrogen sources such as water and hydrocarbons. Photocatalytic and biological methods are appealing options since they can be carried out at near ambient conditions. Despite numerous researchers working on this problem, a holy-grail solution that offers an economically viable, reliable continuous process has so far proven elusive.

Aside from the large existing fields, there are numerous small pools of oil and gas distributed across the UK continental shelf. These marginal fields remain undeveloped as they do not meet the requirements for investment using traditional production techniques. A radical twist on the use of bacteria and microbes in oil recovery would be to use them for downhole refinement of the poor quality hydrocarbons found in the reservoir. Over time, the bacteria could progressively convert heavy oil fractions into lighter ones and consume the sour CO2 and H2S to offer a low-cost solution for upgrading of oil and gas in-situ. By reducing the cost of extraction and processing of these hydrocarbons, resources worth an estimated £135 billion could be unlocked for the UK economy. The Oil and Gas Technology Centre in Aberdeen is actively working on this by supporting smaller, ambitious technology developers to implement their new solutions in the field.

Hydrocarbons still have an important part to play in facilitating the energy transition and new technologies are required in order to solve the global energy challenge in a way that meets the climate goals set by the Paris Agreement. Through leveraging the expertise and value chains of the oil and gas industry, Deep Science Ventures are bringing together entrepreneurial-driven scientists to create companies that take energy technologies to market, delivering growth and positive return on investment along with a reduction in carbon footprint. If this is something that you are also passionate about, then please get in touch.

About Ilia

Ilia Cherezov studied chemical engineering at Cambridge, where he also completed a PhD specialising in modelling carbon capture and storage. With a passion for developing novel technologies and transferring them into practical solutions, Ilia went on to become product manager at the world’s most innovative distillery startup to get hands-on experience of scaling growth at a small company with big ambitions. At DSV, Ilia is looking to create companies that will help transform how hydrocarbons are extracted, processed, transported and used to pave the way for a cleaner energy future. If the opportunity to be part of a team looking for solutions that have a positive global impact also excites you, then don’t hesitate to get in touch via ilia@dsv.io