March 21, 2005

Survey finds upstream energy firms face barriers to deployment of environmental technologies

A pivotal report from the Petroleum Technology Alliance Canada (PTAC) analyzes the barriers preventing upstream oil and gas companies from investing in emission-reducing and other environmental technologies and recommends ways and means of increasing the upstream sector's adoption and deployment of best-practice environmental technologies.

"The oil patch could save $1 billion every year by introducing up-to-the-minute technologies for reducing greenhouse gases, which have the happy side effect of slashing energy bills and the amount of wasted reserves," said PTAC president Eric Lloyd. In his view, industry should begin viewing environmental technologies as an economic opportunity rather than a cost. Such technologies would both reduce pollution and greenhouse gas (GHG) emissions and lower production costs.

The Barriers to Deployment of Environmental Technologies study was part of PTAC's Technology for Emission Reduction and Eco-Efficiency (TEREE) project. Carried out during the latter half of 2004, it involved a Web-based survey of companies in the upstream oil and gas industry, supplemented by a workshop in October, a series of personal interviews and secondary research. More than 200 industry and government representatives participated in the Barriers project.

Based on the survey results, GHG emissions emerged as the top-ranked environmental challenge faced by the upstream industry, followed (in order) by: fresh water consumption; land use and habitat destruction; lack of, or uncertainty surrounding, regulations; degradation of land/soil contamination; and wastewater treatment/management of produced water.

Canada's level of deployment of environmental technologies is seen as generally lower than in other countries, with industry and policymakers alike playing a waiting game. Oil and gas producers have expressed the need to better discern the wheat (best-practice technologies) from the chaff (all the environmental technologies marketed to them).

While the upstream sector has made substantial progress in addressing some important environmental issues in recent years, it is behind in taking advantage of environmental technologies due to a "triple whammy" of factors. Study participants reported that deployment of environmental technologies is more difficult for this sector than for others, that it is more difficult in Canada than in other countries, and that environmental technologies are harder to deploy than other types.

The study yielded a fairly lengthy list of barriers to increased adoption and use of environmental technology by upstream companies. The four highest ranked were finance-related and included: equation of environmental technology investments with "costs" rather than "cost savings;" industry's reluctance to foot the up-front costs of environmental technology (based on a perception of long payback periods); short-term focus of industry and the financial markets; and non-competitive returns on investment.

Among the other barriers cited were: time required to implement the technology; regulatory uncertainty and inconsistency; measurement challenges; small scale of many environmental technologies; and inadequate enforcement.

The study report notes that the upstream industry has made progress in a number of areas over the past five years, having lowered its benzene emissions intensity, increased sulfur recovery rates, reduced the number of spills and pipeline releases, and confirmed the effectiveness of carbon sequestration. Particularly noteworthy has been the dramatic reduction in flaring and venting, "perhaps the industry's greatest success story," says the report.

PTAC proposes "best practices" approach to development, use

The study calls for a "best practices" approach in order to encourage deployment of environmental technologies without invoking an unduly onerous regulatory or enforcement regime. The report's recommendations, divided into four areas of focus, are essentially a series of enablers which will see best-practice technologies not only developed and demonstrated, but validated, deployed, shared and monitored, with the resulting "good news" better communicated.

To encourage the development of environmental technologies, the report recomends:

* the creation of an income tax credit for investors in environmental technology companies; and

* the enrichment of the Scientific Research and Experimental Development (SR&ED) tax credit for environmental technology developers.

To ensure demonstration and validation of best-practice environmental technologies, the report calls for:

* demonstration funding (from a variety of existing sources);

* independent environmental technology validation; and

* "greening" of Alberta's Innovative Energy Technologies Program to benefit the environmentally responsible recovery of petroleum.

Proposed steps aimed at increasing deployment of the best environmental technologies include:

* the creation of a government-industry group to seek out best-practice environmental technologies; and

* a "one-window" approach to access funding as well as a database for best practice environmental technology.

Finally, the report recommends regulatory alignment with deployment of best practice technologies and improved communication of progress being made by the oil and gas industry.

Barriers is the result of a project launched by PTAC's Technology for Emission Reduction and Eco-Efficiency (TEREE) committee, in co-operation with PTAC and hydrocarbon energy stakeholders, to develop and implement sustainable, eco-efficient and economical GHG reducing technologies.

Funding for the project was provided by Western Economic Diversification Canada, Alberta Economic Development, the Alberta Energy Research Institute (AERI), Alberta Environment, CETAC-West, Climate Change Central, Environment Canada and Industry Canada. PTAC is a non-profit organization established in 1996 to facilitate innovation, technology transfer and collaborative research, development, demonstration and deployment of technologies for the responsible development of western Canada's upstream hydrocarbon energy industry.

The full report, along with more information about the TEREE initiative, is available on the PTAC Web site, www.ptac.org, or from Denis Gaudet, PTAC director of technology transfer, 403/218-7710, E-mail dgaudet@ptac.org.

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