Petroleum Review June 2021 - open access articles

The magazine for oil and gas professionals in the energy transition

June 2021 – open access articles The following articles are taken from Petroleum Review magazine’s June 2021 edition for promotional purposes.

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Perspective

PERSPECTIVE

Our sector can deliver, if we work together I Dr Nick Wayth CEng MIMechE FEI, CEO, Energy Institute

t’s hard to think of a parallel for the past year, in which humanity has had to step up so quickly to respond to such an immediate and existential threat.

Whilst there has been (and still is) huge suffering and loss, the year has also demonstrated our ability to innovate and collaborate within and across boundaries, in a way never seen in peacetime.

Collaboration is one of the EI’s core values. Coming into the EI as its new CEO, I have been deeply impressed to see how ‘lived’ this is among the staff team and our broader ‘family’ of committed networks. This is a powerful attribute and sits at the heart of my aspiration for the organisation.

Why? When we look across energy, we can probably find agreement that our greatest priority and challenge is to tackle the climate emergency at a pace consistent with the science, as well as meeting the needs of growing populations and those without access to reliable energy.

What’s harder to land on is a solution, in part because there are many possible pathways and a lot we don’t know yet. But it’s also because those that need to be involved are so fragmented – geographically, institutionally, sectorally and, at times, politically.

Big tent The EI, from the outside looking in, always fascinated me. As an organisation it is such a big tent, and one that doesn’t stand still, since it brought disparate elements of the energy world under one roof back in 2003. I feel lucky and honoured to inherit the legacy left by my predecessor and everyone involved in the EI over the past decades.

Among our individual membership, we are rapidly extending across geographies, with more international members than ever before; across gender (particularly amongst our young professionals); across a broad range of energy technologies and disciplines, some of which didn’t exist just a few years ago.

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And this isn’t just about the services and benefits we provide – the skills and mentoring, recognition for fast-evolving careers, and the wide-angle lens members gain across our increasingly interconnected energy system.

It’s also about communities of expertise, without which the EI would be nothing. You bring your expertise, commitment to professionalism, in many cases volunteer your time and energy to progress shared activities that better our sector. To all of our volunteers around the world, thank you.

Collaborative ethos This translates into something profound through our company membership and technical programme. Working together we define and pursue a shared ambition for meeting the sector’s communal needs, and in a far more cost-effective way than would otherwise be possible.

This collaborative ethos can be seen in the recently published annual report of the EI’s Scientific and Technical Advisory Committee (STAC), which guides the expanding programme of good practice activity, and involves more than 1,000 experts from 200 companies in 100 countries.* Built up over decades in conventional energy, the proven model is being extended and transferred to the needs of fastgrowing low-carbon technologies, helping to make on and offshore wind operations safer, alongside even newer programmes in carbon capture, use and storage (CCUS), hydrogen, solar and integrated power systems. And we are doing it in dynamic ways, not least through our Toolbox web app, taking bite-size health and safety advice in multiple languages, direct to frontline workers.

Outward looking The EI is a trusted voice and convener of fact-based debate; one that also looks outwards to support others with common goals, within and beyond the energy sector.

We are embedded and busy

in so many vital collaborative endeavours, such as the Methane Guiding Principles initiative, the National Engineering Policy Centre at the Royal Academy of Engineering and, through the UN’s Race to Zero, we’re part of a global movement leading by example in ending the impact of our own operations on the climate.

In my first weeks in the job, I've been delighted to pick up discussions with Terra Carta, through which HRH Prince Charles, an Honorary Fellow of the EI, is bringing together the private sector behind a shared vision for sustainability to 2030. And as part of the Tomorrow’s Engineers Code, we’ve joined dozens of organisations in committing to promote vital STEM careers.

A new era of collaboration The past year has been incredibly tough, individually, for our sector and for society. But together we have shown that bold action is possible. It’s not been perfect, but we have responded to an existential threat with concerted action.

Climate change is arguably an even greater, certainly more enduring crisis, and the change required more fundamental.

Humanity is capable of so much – and our sector’s achievements to date are proof of that. COP26 provides an opportunity for governments, societies and industries to make a bold new commitment to work together. Failure to do so would be catastrophic.

The EI is small by comparison, but its reach across the world of energy means it punches significantly above its weight. I aspire for us to be a growing catalyst for change and look forward to supporting you, our members, and hearing your views and ideas on what more we can do. ●

Nick Wayth became CEO of the Energy Institute on 4 May 2021 and can be contacted at ceo@energyinst.org * The STAC Annual Report is at www.energy-inst.org/stac

Russia

ENERGY TRANSITION

The first steps

companies have also expressed interest in branching out into the sector.

It has also been suggested that Russia could supply green hydrogen to Europe, produced from water Russia seems to be taking the first tentative steps towards the through electrolysis, with the process powered by renewable energy transition, with emphasis on opportunities in the energy. Alternatively, state nuclear hydrogen economy, writes Joseph Murphy. group Rosatom is preparing pilot projects to produce yellow hydrogen, also from water using ussia is looking to forge a key national strategies. If hydrogen electrolysis, but with the process role for itself in the energy lives up to expectations, it could transition, as decarbonisation potentially seize market share away powered by atomic energy.

The next question is how efforts gain momentum in some from natural gas. This is a source of Russia will send its hydrogen to of the largest markets for its oil unease for Russia, which provides foreign markets. The country is and gas. The country is the biggest over a third of Europe’s gas. well connected with the European oil and gas supplier to Europe, To hedge against this threat, gas market via pipelines, giving it and also claims a major stake in Russia is looking to supply a clear advantage as a supplier. It many of the fast-growing energy hydrogen of its own. Russia is also now linked to the Chinese markets in Asia. But some of its estimates it could obtain a 20–25% market via the Power of Siberia line, biggest customers are now taking share of global hydrogen trading launched in late 2019. Hydrogen meaningful strides towards by 2035, according to Deputy could be blended into the natural decarbonisation, and this has Energy Minister Pavel Sorokin at a gas flowing through these pipelines. caused Moscow no small amount of government meeting in mid-April, Gazprom’s older export routes concern. equating to somewhere between could only handle small amounts of Russia continues to rely on 1–7mn tonnes of annual supply. hydrogen, although newer pipelines oil and gas for a sizeable chunk Russia is hoping to leverage such as Nord Stream 2 (see Box), of its export revenues. While the its close proximity to hydrogen Turk Stream and Power of Siberia to government does not envisage any markets in Europe, and also Asia, China, could carry a blend of up to significant changes to the country’s to make its hydrogen competitive.

70% hydrogen and 30% natural gas, energy mix in the years to come, It could produce the fuel in several according to government estimates. it is exploring ways of benefitting ways, although it is likely that the This is assuming the hydrogen is from the energy transition taking majority will be derived from the produced in Russia. Alternatively, place overseas. country’s abundant natural gas Russia could continue flowing gas reserves. to Europe and then convert it into Hydrogen focus Hydrogen is classified as blue hydrogen at plants located locally.

Hydrogen is touted by many as the when it is produced from natural Russia’s biggest gas customer is solution for decarbonising areas gas using methane reforming, The Russian and German Germany and the two countries are of industry that would be difficult with CO2 emissions from the governments signed a joint to make green and clean with process captured and safely stored. eager to progress their relationship declaration of intent to co-operate in the field of into hydrogen. The German and renewable energy alone. Indeed, Hydrogen can also be separated sustainable energy on Russian governments signed a joint from methane using pyrolysis, 20 April 2021, with hydrogen Russia is eager to position itself as declaration of intent to co-operate which creates solid carbon as a listed as one of the key areas a major supplier of the fuel in the of focus. Germany remains a in the field of sustainable energy on future. by-product, in which case it is strong supporter of the Nord 20 April 2021, with hydrogen listed The European Commission classified as turquoise. Pyrolysis Stream 2 pipeline, which as one of the key areas of focus. unveiled its long-awaited EU is currently only used on a very could serve as a vital link between Russian hydrogen Russia’s government has hydrogen strategy last year, small scale, however. supply and the European proposed establishing four main leading to a flurry of investment Gazprom has invested in blue market. hubs for hydrogen production. Hubs announcements. Many EU and turquoise hydrogen research, Photo: Nord Stream 2/Igor in the north-west Leningrad region members have also published and other Russian oil and gas Kuznetsov

R

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Russia

and the south-west of Russia would target markets in Europe, as well as providing supplies for domestic transport, power generation and energy-intensive industry. This would help offset a predicted decline in Russian hydrocarbon sales to the continent.

Hydrogen in Leningrad would be produced mostly from natural gas, given the abundant supply arriving there from Siberia en route to Europe. Hydrogen in the south-west, where many of Russia’s solar power plants have been built, would be produced from water by electrolysis using renewable energy.

Another hydrogen cluster on the Far Eastern island of Sakhalin would target Asian markets, primarily Japan and South Korea, which both see hydrogen playing a major role in their decarbonisation plans. The final cluster will be across Russia’s Arctic coast, primarily in the regions of Murmansk, Yamalo-Nenets and Kamchatka. In Murmansk, in Russia’s far north-west, the fuel will be produced via electrolysis using wind power.

Carbon sinks Russia could serve other roles in the energy transition. Russian officials and industry executives have talked up prospects for using the Taiga and other large national forests as commercial carbon sinks. Forestation initiatives in Russia could earn internationally recognised carbon certificates, which both domestic and foreign businesses could then purchase to cover emissions that they cannot avoid, helping to make their operations carbon neutral.

‘Russia has 20% of global forests, so the international community must be fair in that respect,’ Alexey Chekunkov, Russia’s Minister for Development of the Russian Far East and the Arctic, said in an

interview with Bloomberg in late March. ‘We have the potential to turn them into a massive carbon capture hub.’

Russian President Vladimir Putin used his speech at the US-hosted Leaders’ Summit on Climate on 22 April to promote the CO2 absorption potential of Russia’s forests, estimating that the country’s ecosystems take in around 2.5bn tonnes of CO2 emissions each year.

Domestic decarbonisation While Russia seems to be embracing the energy transition on the international stage, changes to its own internal energy mix are expected to be limited in the decades to come.

Russia met 54% of its primary energy demand from natural gas in 2019, 20% from oil, 15% from coal, 7% from nuclear, and 3% from mostly hydroelectric but also other renewables as well as bioenergy.

In its Stated Policies Scenario (STEPS), which reflects the impact of existing policies, the International Energy Agency (IEA) predicts that gas will retain the same 54% share in two decades’ time. Oil will occupy an 18% share, coal 12%, nuclear 8% and hydroelectric, other renewables and bioenergy some 8%.

Russia has little incentive to make more drastic changes to its energy mix under the 2015 Paris Agreement, as its commitments under the treaty are so modest that it has already met them. This is because the baseline for emissions is their level in 1990, before the Soviet Union’s collapse when the country’s pollutants were at a record high. Indeed, the consensus is that Russia still views climate issues as a low priority.

‘Russia often treats climate change as a subset of issues within the spheres of foreign or security policy,’ a paper last year from

the Bank of Finland Institute for Emerging Economies (BOFIT) states.

‘Awareness and recognition of climate-related risks have increased in recent years, but climate issues still garner low policy priority.’

That said, Russia’s oil and gas industry is nevertheless making meaningful efforts to improve its environmental impact. This is largely because environmental, social and governance (ESG) ratings have become an important metric for investors when they decide whether to invest in a company or not.

The progress by Russian producers was exemplified in December last year when Novatek, the country’s biggest independent gas producer, had its ESG rating upgraded significantly from BBB to A. It was the first Russian company to receive such a high rating.

‘It is unclear what the trigger for the upgrade was, but we know Novatek has been working diligently to improve its ESG score, as have, for that matter, other Russian oil and gas companies such as Rosneft, Lukoil and Gazprom,’ analysts at BCS Global Markets wrote in a research note at the time.

Novatek’s board approved a new list of climate goals last August, aiming to reduce perunit methane emissions at its production, processing and LNG operations by 4% and air pollutant emissions by 20%. It plans to reduce greenhouse gas emissions at its upstream activities by 6% and its LNG production facilities by 5%, also boosting the rate at which it utilises associated petroleum gas (APG) to 99%, from 83.3% in 2019.

Other companies have also made such pledges, including Rosneft, Russia’s biggest oil producer. But none have gone as far as to make commitments to net zero emissions, as have their counterparts elsewhere in Europe. l

In the pipeline The Nord Stream 2 pipeline will take German and Russian energy cooperation to another level, although there is dispute about when the pipeline will enter operation.

Nord Stream 2 was originally due to start pumping gas to Germany before the end of 2019. But construction fell behind schedule, firstly because of Denmark’s delay in issuing the necessary permits, and later because the US imposed sanctions on the project, forcing Swiss pipelayer Allseas to abandon work on the line.

Construction was finally resumed in late 2020 following nearly a one-year hiatus, after Russia deployed its own pipelaying vessels to finish the job. The US sanctions threat led a number of European companies, including insurers and certifiers, to exit the project, casting doubt on the timeframe for its implementation.

Some senior politicians in Germany, which remains a strong

supporter of Nord Stream 2, called for trilateral talks to be held with Russia and the US to decide the pipeline’s fate.

President Biden’s administration waived sanctions on 19 May 2021, in a bid to avoid souring relations with Germany. This move to limit penalties on Russian entities and ships involved in the pipeline construction has been welcomed by German Foreign Minister Heiko Maas; but the waiver has been heavily criticised by Republicans in US Congress. The Trump and Biden administrations had opposed the Russian energy supply route through the Baltic Sea as they felt it would hand Moscow too much influence while potentially destabilising Ukraine by cutting significant transit fees for gas transport through the country.

Nord Stream 2 is now due for completion by the end of this year, and could serve as a vital link between Russian hydrogen supply and the European market. l

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Technology

DIGITAL TWIN

Digitising operations Norske Shell and Kongsberg Digital teamed up to create an advanced dynamic digital twin to optimise operations of a major gas processing and export hub.

Brian Davis reports.

D

igitalisation is seen as the key to integrate and optimise asset performance, maintenance and procurement oil and gas operations upstream and downstream and along the value chain. In today’s world of web-based operations on the cloud and the Internet of Things (IoT) Kongsberg Digital and Norske Shell shared a common vision that assets of the future could be operated through a digital ecosystem as a dynamic digital twin.

In 2019, Norske Shell and Kongsberg Digital teamed up to digitalise the Nyhamna facility, a gas processing and export hub for Ormen Lange and other fields connected to the Polarled pipeline. Norske Shell entered the partnership as operator of Ormen Lange and as Technical Service Provider for Nyhamna, where Gassco is operator. The value of the contract scope to develop a digital twin of the offshore and onshore installations and subsea infrastructure was about NKr100mn (£8.64mn).

Kongsberg Digital utilised the Kognitwin Energy dynamic digital twin to establish a dynamic virtual representation of the gas plant which is continuously updated with integrated data and information from numerous sources, reflecting the status of the facility in real time. The digital twin enables frontline operators, A dynamic digital twin allows engineers and remote vendors Shell to simulate different to become fully integrated, with scenarios to determine new integrated data and work processes, options for optimisation of process plant transforming and optimising Photo: Shell the operations and maintenance

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philosophy of the asset.

Rich data, including legacy and paper-based data, is used proactively and workflows are more automated through a contextualised 2D and 3D interface. The digital twin enables users to analyse and optimise performance using a digitised framework via the cloud.

Shell is now equipped to simulate different scenarios to determine new options for optimisation for the onshore process plant. Engineers, operators, partners and people along the full supply chain can access the digital twin via iPads, iPhones, pcs, laptops and other devices both in plant and remotely for improved collaboration and business transformation.

The dynamic digital twin is used to optimise and reduce the time and cost of commissioning, operating, planning and designing assets. Data-driven operations support smarter and more efficient ways of planning, design, engineering and operation of assets, with a real-time view of a facility, processes and production performance. Physical models and machine learning algorithms provide ‘virtual sensors’ and insight into both instrumented and non-instrumented parts of the facility, and can perform ‘what-if’ and scenario analysis to uncover the best options for plant optimisation.

These capabilities are used on existing assets to boost production, manage power consumption and reduce the

carbon footprint, as well as for planning, design and construction of new assets or modification of current facilities. Virtual collaboration between operators and oilfield service suppliers across different disciplines drives down maintenance and operating costs and facilitates remoteoperated assets and operation centres.

New and better solutions Shell’s digital strategy is valuedriven, aimed at finding new and better solutions to drive improved business outcomes, offering new insights that can be leveraged to improve productivity, reliability and performance of the gas facility.

Hege Skryseth, President of Kongsberg Digital told Petroleum Review she is proud to work on Shell’s digital front-runner at Nyhamna. ‘The dynamic digital twin is an open ecosystem designed to utilise a variety of applications to increase efficiency and optimise production for assets. This is truly an exciting collaboration.’

What’s more, ‘We achieved a full line of sight to return on investment (ROI) within just nine months after go live,’ says Rolf Einar Saeter, Business Improvement and Technology Manager in Norske Shell.

The results have been impressive, with a 10–15% increase in people productivity in some cases. The collaboration module yielded a 2–4% reduction in opex (operating expenses) by enabling enhanced levels of remote work, reduced travel to site for staff,

Technology

contractors and suppliers, and accelerated activities such as work permit creation. There have also been improved opportunities for modelling and experimentation through what-if production scenarios, eg simulating well lineups and plant modifications prior to implementation.

Saeter sees dynamic digital twins as ‘the future of energy operations, during the energy transition’. And reveals that Shell plans to use the digital twin technology in scenario planning for offshore wind operations and potential hydrogen plants.

This is Shell’s first digital twin implementation, serving an important gas supplier and huge infrastructure requiring high availability.

‘From the outset in 2017, we wanted a digital system for energy optimisation and collaboration covering all types of work processes and access to different technologies. Our intention was to move into the digital landscape covering three specific pillars – energy optimisation, production system optimisation and collaboration,’ Saeter explains.

Norske Shell ran some pilots to test and educate itself about the potential of digital solutions.

In 2018 it decided to focus on the Nyhamna gas processing plant and build a dynamic digital twin covering all three pillars, and the underlying business cases end-to-end from the reservoir, via the pipeline or vessels, to the gas processing plant and bringing the product to market.

Saeter continues: ‘We piloted the digital twin concept internally then searched for a vendor who could be a true partner to help us fill our technology gap, with the insight and knowledge to help us transform our current business into the future definition of where we want to be.’

After discussion with several potential vendors, Kongsberg Digital was selected as partner in 2019. ‘There were a lot of good companies covering different niche capabilities. But we wanted a more holistic approach and independent partner to help us create a digital landscape.’

‘We required an open, innovative ecosystem that covered all domains. Using data from numerous sources for scenario planning, analysis and demonstration of different business cases. The road is not linear. A problem today is not necessarily one that can be solved five years from now. We

required a dynamic mechanism to solve problems and identify opportunities over time.’

COVID-19 impact The COVID-19 pandemic proved to be a perfect example. ‘The digital twin has helped us through this pandemic period, with remote support from vendors across Europe handling a wide range of challenges. It accelerated our understanding and observation of demand for the digital twin.

And in practice, COVID-19 has had little impact on our Norwegian operations,’ Saeter reflects.

From signing the contract in October 2019, the first version of the digital twin was in operation in less than 90 days, providing an open, innovative and standardised digital landscape based on Microsoft Azure.

Kongsberg’s Skryseth puts the picture in context. ‘Typically, an oil and gas company has multiple systems, with numerous sensors gathering data within the digital bus, ie often using customised solutions for energy management, operational excellence and production optimisation. We took a different approach.’

Norske Shell insisted from the outset it wanted standard, not customised, software. Because if an organisation really wants to benefit from digital solutions it needs to ensure that as many applications as possible work on the same solution to give richness in functionality and continuously increasing features over time – whether developed by Shell, other energy partners or third-party developers. ‘This is the backbone of an open ecosystem,’ Skryseth maintains.

Norske Shell also required a compelling business case.

‘We required a forward-looking business case, with a lot of education [on digitalisation] to build trust around our analytics.

While also bringing back value fast to convince the decision makers that we were on the right path,’ says Saeter.

So, what was the main challenge? ‘The big challenge was to dig out data from legacy IT systems, so internal data was readily available for innovation and planning. The data was contained in different applications, shapes and forms. The time required to access all that data was maybe the biggest lag to project progress,’ Saeter admits.

There was also the thorny issue of change management. However, he notes: ‘In practice, after just a few weeks the team was driven

by “expectation management”.

People were eager to configure a system which could support their needs, with precision and upskilling on all sides, to ensure it serves its purpose while also creating value. This was a win-win for the partnership – creating an integrated organisation, removing boundaries between functions and sharing data collaboratively.’

Artificial intelligence (AI) and machine leaning algorithms now play an important role in optimising performance and maintenance management, rather than the conventional firefight in many process plants. ‘Even a 1–2% improvement gives substantial payback,’ says Saeter. ‘The key word is trust. You must have trusted data from the machine learning/AI landscape.’

Significant benefits Today, Norske Shell and Kongsberg believe the dynamic process flow simulator is giving a huge advantage in understanding how the Nyhamna plant is operated and how to improve it further.

The dynamic digital twin has reduced the cost of buying energy by 30%. Saeter suggests: ‘The digital twin can be seen as a “new operating system”, able to check that everything has the right connectivity within one easily accessible system, for process management, efficiency and materials management, for example. We are seeing efficiency gains throughout the organisation.

We also have a leaner IT infrastructure and have managed to virtualise risk – which is a major focus of oil and gas operations.’

Looking forward, Norske Shell aims to take the digital twin from the reservoir to the market across the whole value chain, including subsea infrastructure, pipeline inspection and well testing. Giving the organisation the opportunity to optimise energy use and production while also reducing waste in the transactional landscape. Most important, the digital twin accelerates the timeto-market for new projects.

The skills landscape has also changed. Saeter says: ‘Three years ago, there were no data scientists outside the IT department. Now, AI and machine learning is at the front-end of oil and gas operations, transforming the business.

Transparency helps us make decisions faster, builds awareness and indicates areas of business and performance optimisation. I believe digitalisation is creating a flatter organisation which is transforming the business.’ ● Petroleum Review | June 2021 25