Preparing Your Organization for Oilfield Electrification: Things to Watch

Since 2020, the concept of oilfield electrification has emerged with new vigor as a popular business strategy for emissions reduction among oil and gas exploration organizations. This approach replaces fossil fuels with renewable energy from the electric grid to reduce greenhouse gas emissions.

Why the Shift?

The necessity for the oil and gas industry to reduce emissions has intensified due to pressure from investors, government regulators and consumers advocating for reduced emissions impact on industrial activity. For oil and gas producers, reaching net zero carbon emissions by 2030 to 2050, depending on organizational goals, is the driving factor for emission reduction changes currently taking place in the industry.

A hierarchy exists regarding which operational factors are most critical and will have the greatest impact when companies consider how to reduce emissions. It is typical to take the least costly initiatives first. These factors can be minor changes that can reduce emissions by 10% to 20% and include efforts that affect processes, changing natural gas to air pneumatics and reducing flaring. The next items in the hierarchy, which can affect emissions by as much as 40%, typically include oil electrification initiatives.

Challenges and Failures

In the early days of large onshore oilfield electrification efforts, projects frequently failed. Barriers to early entry, low understanding of large electrical infrastructure build-out execution, inadequate feasibility investigations, supply chain issues and more resulted in costly, underperforming or decommissioned projects. A key contributor was that organizations failed to partner early with entities, suppliers and others with more experience in the area. Project owners who embarked on endeavors individually often experienced expensive setbacks that also cost time.

The inclination to operate independently can often emanate from an organization adopting a short-term mindset and viewing electrification as a trend, rather than considering it as a long-term, complex organizational commitment and investment. To effectively make this transition, organizations must renew their commitment to partnership and collaboration to achieve desired outcomes for themselves and the industry.

Electrification Targets

In recent years, producers have had great success when it comes to decarbonization efforts on several fronts. The two most significant initiatives within the oil electrification realm have been supporting enhanced oil recovery (EOR) and natural gas compression conversion. Both initiatives have the potential to reduce emissions on a grand scale.

As targets for emissions reduction, EOR and natural gas compression conversion require a strong and renewable heavy electrical grid. Appropriate assessment of the available and expanding system infrastructure and the current and future greening of the grid power supply mix is paramount to achieving desired goals. Understanding the jurisdictional landscape and creating a partnership road map for success are vital, and organizations leading in the space are achieving this.

The Pathway to Success

Oilfield electrification is a complicated process and including it in a company’s decarbonization mix requires much consideration:

• Think differently. Know that this is a long-term commitment that requires organizational buy-in. Understanding what undertaking this process means is important. While implementing electrification, the scale of required electrical power will be much larger. At times, electrical power must amount to the scale of a small electric utility from the ground up. Know that the investment and associated asset management required for electrification can be significant. To begin the process, organizations must switch to a mindset that allows them to look honestly at their current state. This analysis should review the capabilities of the structural foundation relative to both the short-term and long-term challenges of electrification.
• Clearly define your success and know what your goals are. Each organization has diverse methods and scales for viewing success and will have various means for how it prefers its progress to be marketed and accounted for. Determine if you will go by US EPA standards, World Bank measures or other internal metrics. One must be prepared to describe current decision-making and future successes or failures in such terms.
• Determine your strong suits. An organization’s early steps must be to legitimately analyze current capabilities, strengths and weaknesses — a profile will differ from organization to organization. Once this is complete, knowledgeable partners can help fill in the near-term holes with feasibility studies, contracting, operational efficiencies, power purchase agreements, supply chain support and other elements critical to electrification.

Identify Key Partners

The benefits of approaching the initiative with a partnership are plentiful. These efforts require partners with a profound understanding of multifaceted, multidisciplined programs of varying sizes. Therefore, the mentality should be to focus on partnerships. Not every organization will understand every facet of the electrification process, but developing partnerships with multidisciplined organizations will set the initiative up for success. An honest assessment of your organization will help with realizing which capabilities fall outside current skill sets. Partnering with others to fill the gaps will prepare your organization for the evolution it needs for successful electrification long-term.

Due to electrification being an advanced, long-term decarbonization prospect, it makes good business sense to work with partners who are highly knowledgeable with the oil electrification process.