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Circular Economy For Oil & Gas Sector

Featured in October, 2017 Edition By Alok Raj Gupta
It is no hidden fact that the oil & gas sector operations are highly resource intensive. In fact, a good deal of energy is already consumed (in the form of powering the turbo equipment to draw oil out of wells, for example) to produce every barrel of crude oil. Let’s get a better perspective on this. It took one barrel of oil to extract, process, refine, ship and deliver 100 barrels of oil during 1920’s. In the present age, conventional oil production worldwide pays off at about a 15 or 20-to-1 ratio. It is worse in Canada at about 5-to-1, where the oil comes from tar sands. Talk about oil production through processes such as fracking, and it becomes almost impossible to justify such acts from environmental point of view. It takes up to 8 million gallons of water to complete each fracturing job. Typically, a well can be fracked 18 times and that means about 72 trillion gallons of water used for 500,000 active wells in the US. That’s not it. Approximately 40,000 gallons of up to 600 types of chemicals, including known carcinogens and toxins such as lead, uranium, mercury, radium, ethylene glycol etc., are used per fracturing. In terms of other unsustainable practices, we already know that flaura and fauna in the region of oil & gas mining are adversely impacted. There is no limit on the damage during events like oil spill.

In spite of fast adoption of renewable and clean energy all over the world, hydrocarbon sources still are much greater in quantum in terms of providing energy source to the world, and it will continue to do so in the future. Let’s accept the fact the crude oil and gas will continue to be mined at significant scales until they are totally exhausted, but that is not happening foreseeable future. However, the rate at which environmental damage is taking place can lead to irreparable outcomes which we are not prepared for, a snippet of which I described earlier. The only and the best way to continue to live with the necessary evil of oil & gas, is to make to operations sustainable.

Sustainable or environment-friendly oil & gas operation may seem to be an oxymoron to many readers, where words from two poles are forcefully juxtaposed to fall in line with the ‘go-green’ trend of the modern world. However hard to believe, but there are deeper and meaningful outcomes possibilities if we try to integrate the principles of circular economy in the oil & gas value chain.

Today's linear ‘take, make, dispose’ economic model relies on large quantities of cheap, easily accessible materials and energy, and is a model that is reaching its physical limits. Looking beyond this current linear model, the circular economy is restorative and regenerative by design. Relying on system-wide innovation, it aims to redefine products and services to design waste out, while minimising negative impacts.

Three fundamental principles guide circular economy, each of which holds immense relevance for the hydrocarbon industry. The loop diagram below captures the three principles very well.
Source: www.ellenmacarthurfoundation.org

Principle 1 refers to preserving and enhancing natural capital by controlling finite stocks and balancing renewable resource flows. What this means for hydrocarbons essentially is that we should decelerate the rate of extraction since the resource is finite. Introducing the flow of clean and renewable sources such as wind and sun into the energy system is also an effort in this direction. Eventually, how much we are able to reduction consumption of fossil fuels depends and how extensively we are able to exploit renewable sources.

Principle 2 connotes the idea of optimizing resource yields by circulating products, components and materials at the highest utility at all times in both technical and biological cycles. With respect to the industry in question, it means that we should able to produce more using the same volume of resources and equipment.

Principle 3 lays down that systems should be so designed that it drives out negative externalities. Just because it is economically infeasible to store flare gas, it is burnt to add carbon to the atmosphere. Just because oil companies want every gallon of oil even from the farthest crevice, they inject gallons of chemical underground, causing potential contaminations. Newer technologies and methods must replace these. Decision-making must incorporate environmental cost along with economic cost.

These principles need to be studied for every aspect of oil & gas operations. I see that many action items will come out which must be integrated in the existing practices. Every circular economy action item must be evaluated on economic scale and at least the one with highest RoI must be adopted pronto.

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