Why circular economy principles are relevant to oil & gas industry than most others? I will attempt to answer the question through this article, as a follow up to my piece in October’s issue, ‘Circular Economy for Oil & Gas Sector’. While the previous article set the context and explained the principles of circular economy, I will now try to delve a bit deeper into.
Closing the loop for the oil & gas value chain, by far, can offer one of the most resource-saving potential across all sectors. That is simply because the hydrocarbon sector is extremely resource intensive, to begin with. Circular economy principles, when applied to this sector, will not just save resources but also huge sums of money, which means a lot, especially when compressed margins are reducing stakeholders to bundle of nerves. These principles are also the best answer to a question I am often asked – What is the best strategy to integrate ‘sustainability’ in the oil & gas sector. And I am beginning to respond in just three simple words to save my breath, “close the loop”.
Let me firstly summarize the three principles which govern circular economy integration. First principle is about preserving and enhancing natural capital by controlling finite stocks and balancing renewable resource flows. An interesting aspect about oil production to note is that there is plenty of energy used to produce oil which is captured by Energy Return on Investment (EROI). If you work out the mathematics, it turns out that at least 1 barrel of oil equivalent of energy is used to produce 10-20 barrels of crude. That is 5-10% of the energy used to power the oil & gas production process, which comes from burning oil, gas or coal. First principle recommends replacing this with renewable sources so that it makes better economic as well as environmental sense. Second principle is about the optimizing resource yields by circulating products, components and materials at the highest utility at all times in both technical and biological cycles. A boiler or turbine operating at better efficiency than before is definitely aiding in closing the loop. Finally, third principle lays down that systems should be so designed that it drives out negative externalities. Burning flare gas or use of gallons of chemicals for fracking has immense negative impact, which needs to scooped out of the system.
I would like to share a classic example to show how effort towards closing the hydrocarbon loop is being made. The refining sector introduces a great opportunity to apply circular economy principles that address both the water and technical materials aspects. Almost half of all gasoline made at U.S. oil refineries uses a hydrofluoric acid (HF) catalyst in the process. Small amounts of this acid must be neutralized with a base chemical, often potassium hydroxide (KOH). The resulting material, spent KOH, contained in aqueous mix, forming a wastewater, is disposed of by the refineries as a hazardous waste. Veolia has developed a method to recover and recycle this spent chemical. For every 100 pounds of KOH used, the process recovers and return nearly 95 pounds to reuse the material in refinery processes. For one of the clients, Veilia achieved savings of over $20 million over five years. For another, the need for quantity of virgin KOH to be produced was reduced, thus reducing corresponding greenhouse gas emissions by a carbon dioxide equivalent amount of over 40,000 tons per year. Similarly, approximately 13 million fewer gallons of freshwater were used as a result of the KOH recovery, compared with making new KOH.
This is just one example. The entire value chain is replete with potential areas where loops can be closed so we can make the so called most polluting industry sustainable!
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