News

Feb 03, 2021

Demand for wellsite closures presents opportunities for oil and gas sector; collaboration will be key

Source: PTAC / CRIN

Event Overview

Addressing the backlog of inactive, unreclaimed wellsites and associated facilities throughout western Canada has become a high-profile challenge for the energy industry, provincial and federal governments, Indigenous communities, landowners and the public. This article summarizes a half-day virtual visioning event held Dec. 9, 2020. (Access the event recording on our Resources page.)

Table of Contents

  • Industry Insight
  • The Power of Review and Continuous Improvement
  • Innovation That Drives Success
  • Where Do We Go From Here?
  • Summary
  • Acknowledgements

In the words of Richard Wong, Manager of Operations at the Canadian Association of Petroleum Producers (CAPP), “Status quo is not an option. To ensure that we continue to protect communities, environment and industry from liability and to encourage economic growth, solutions are needed that will efficiently reduce the inventory of inactive sites in western Canada; reduce orphan well risk; and modernize the liability management framework.”

Costs to complete the work required to move sites through decommissioning and environmental closure stages are estimated in the billions of dollars, and it requires significant coordination within and between producer companies, and with multiple service providers and stakeholders. Wellsites are geographically dispersed through the western provinces, challenging even the most effective teams to streamline activities. Decommissioning through closure stages can also span multiple years, requiring careful monitoring and coordination.

Stakeholders have identified key opportunities to reduce the backlog of sites and manage liability more effectively. Together, policy makers, industry and other stakeholders are working to incentivize spend on asset retirement; reduce risk and uncertainties to support return on investment; identify, refine and implement best practices; and address common hurdles through science and technology innovation.

Industry Insight

In the forum, representatives from the Explorers & Producers Association of Canada (EPAC) and CAPP provided industry and regulatory insight into the importance of liability management and highlighted current efforts in framework development and risk management.

Tristan Goodman, President of EPAC, described the ripple effect of liability management challenges through various sectors, and the environmental, social and corporate governance (ESG) gains that can be achieved through proactive liability reduction. “Right now, we don’t have consistency or a singular framework for systems and procedures that we report on for aspects of liability. We will see an increase in the influence of ESG as more standardization comes. All perspectives are responding to these pressures.”

In a nutshell, through effectively reducing liability, 
producers strengthen the case for both direct and indirect 
potential investment in the energy sector.


The Power of Review and Continuous Improvement

Small and large producers alike reported breakthroughs 
in cost reduction, numbers of sites achieving regulatory closure, 
and streamlined field activities after implementing changes 
to historical practices. 

Area based closure, or the clustering of sites within an area, was seen in many cases to result in significant efficiencies. Kris McNutt, Well Decommissioning Coordinator with the Orphan Well Association (OWA), described how planning and preparation, assembling an experienced and dedicated team, and employing cutting-edge technologies were key to record numbers of wells decommissioned in 2020.

Lisa Warren, Senior Manager of Remediation with Husky Energy, also cited the power of internal initiatives to align stakeholders and secure budgets to maximize success. “Changing the way we were thinking and adopting a ‘questioning attitude’ drove efficiencies (capital savings of 35 percent), reduced cycle time to closure by 20 percent and achieved safety measures of zero Total Reportable Injury Rate (TRIR),” said Warren.

Part of the approach taken by Husky was also shared by Carl Lammens of Petronas, a smaller producer with assets in northeast British Columbia. “Asset retirement is recognized as a key part of the upstream business cycle. By planning at a higher level up to five years in advance, we ensure budgetary stability, avoid stalls, maintain reliable and experienced staff, and hit our seasonal windows.”

All industry presenters acknowledged the need to carefully track and review costs and project execution to capture learnings and implement change. Lars de Pauw, Executive Director of the OWA, noted innovation by all stakeholders through all stages of work contributed to incremental savings and efficiencies.  

Innovation that Drives Success 

Given the scale of the current backlog, what does ‘success’ look like? Through this event it became clear that success could be measured on several scales, beyond the obvious volume reduction at lowest cost and fastest timeline. Purposefully developing best practices and fit-for-purpose technologies creates an opportunity for Canadian leadership in an area that has become a worldwide challenge, as many assets reach the end of their productive lives.

The innovation opportunity was illustrated by several forum participants, including Ryan Smith, President of 360ELM. The firm specializes in the retirement of legacy assets, and Smith described asset retirement as a ‘young’ space with plenty of opportunity for optimization. “While we have decades of data on site construction and operation, the focus on asset retirement is relatively new, and we need to develop specific expertise in this area,” said Smith.

Jil Macdonald of AltaML, with former experience at the Alberta Energy Regulator, shared the potential for more effectively classifying, monitoring, communicating and streamlining activities related to asset retirement, using data collected over decades and harnessing new technologies and digital innovation.

Bonnie Drozdowski, Director of Environmental Services with InnoTech Alberta, illustrated a path forward in addressing complex but well-defined challenges through multi-disciplinary teamwork. She recommended that:

“Owners of the problem need to be included
and they need to be the ones helping to define
desired outcomes and pulling for solutions. 
Solution providers need to focus on achieving those outcomes,
taking details into account but not getting lost in them.”

A hot topic in the world of asset retirement is ‘re-purposing’ or following circular economy principles to identify uses for the sites and the data they have generated over their working lives.

Potential opportunities include production of other products like hydrogen, lithium, helium; transportation of other products like grain; geothermal production; storage of products like compressed air, CO2 sequestration, waste disposal; use of existing sites for new uses, such as greenhouses.

Keely Cameron, LLP with Bennett Jones and the Energy Futures Lab, with examples from George Sutherland of the Canadian Petroleum Training Institute (CPTI), a panel participant, described initiatives to repurpose or co-purpose oil and gas infrastructure, sites, wells, facilities and pipelines to reduce environmental impact, create jobs, and diversify the economy. While this may be the way of the future, current challenges include overlapping regulatory regimes, access to the grid, impacts on existing agreements, and allocating reclamation liability to ensure environmental obligations will eventually be addressed.

Where Do We Go from Here?

“Collaboration and research have been critical to recent successes and will continue to be an important element to help enhance the liability management framework moving forward. Areas of potential opportunity include: implementing risk-based approaches to managing drilling waste and salt-impacted sites, and advancing a low-probability receptor approach to reclamation in western Canada,” said Richard Wong of CAPP. He also described a modernization of the regulator’s liability management framework, various incentives for producers and a post-closure program.

Innovation in the regulatory framework, science, technology and business processes have all been shown to contribute to more effective retirement of oil and gas assets. The community of practice has identified that sharing successes and learnings, improving communication and building connections with others, including technology developers, are important for their ability to more effectively manage asset retirement.

“This is a global issue, not just an Alberta or Canadian liability. 
We can solve this with collaboration."

“This is a global issue, not just an Alberta or Canadian liability. We can solve this with collaboration. Don’t wait for someone else to lead – get started, communicate, share knowledge and data,” recommended engineering consultant Gerry Boyer.

At the end of the day, the energy sector has recognized that proactively managing asset retirement can fuel profits and enable social license, as investors and public stakeholders see a correlation with positive ESG ratings.

The innovation ecosystem and organizations such as PTAC and CRIN have important roles to play in identifying challenges and connecting players to effectively address them. This is accomplished through continued discussion, identification of key challenges and development of strategic projects created through public-private partnerships. 

Summary

  • Area Based Closure and strategic planning create efficiencies in many areas
  • Efficiencies and value are created through increased communication and holistic cross-sector collaboration
  • Centralized budget and evaluation of entire portfolio allows selection of sites with full visibility to ensure effective allocation of effort, ideally to reach full regulatory closure
  • Collaboration through industry associations helps guide best practices and regulatory changes
  • Practitioners can help decision-makers see increased value from liability management work
  • Use multipurpose equipment where applicable, and look to adjacent industries for technologies and best practices that could enhance asset retirement work
  • Where necessary to address complex challenges, ensure that desired outcomes are clearly articulated and the right players form collaborative teams

Acknowledgements

Thank you to all of the presenters and panelists who shared their insight and experience, and to the organizing committee who put on this half-day event jam-packed with great information and conversation from start to finish!

Presenters

  • Richard Wong, CAPP
  • Kris McNutt, Orphan Well Association
  • Lisa Warren, Husky Energy
  • Gerry Boyer, InnoTech Alberta
  • Carl Lammens, Petronas
  • Bonnie Drozdowski, InnoTech Alberta
  • Keely Cameron, Bennett Jones

Panelists

  • Chris Powter, Owner, Enviro Q&A Services (Moderator)
  • Lars DePauw, Executive Director, Orphan Well Association (OWA)
  • George Sutherland, President & CEO, Canadian Petroleum Training Institute (CPTI)
  • Jil Macdonald, Director AI Enterprise Integration, AltaML Applied AI Labs
  • Ryan Smith, CEO, 360 Energy Liability Management

Organizing Committee

  • Tannis Such, PTAC
  • Lorie Mayes, PTAC
  • Sonia Glubish, Canadian Natural
  • Lauren Arthur, PTAC
  • Simone Levy, InnoTech Alberta

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