Energy Excellence Awards: Oil And Gas Operational Excellence Finalists Excel At Water Works, Liability Liberation

The second annual Energy Excellence Awards (EEAs) program, presented by the Daily Oil Bulletin, uniquely recognizes energy excellence and focuses on the advancement of collaboration within Canada’s energy industry.

The country’s oil and gas industry is entering what could be the most challenging period it has ever experienced. While the current COVID-19 crisis will undoubtedly touch each one of this year’s nominees, there may be no better time to celebrate the achievements of those developing the energy solutions for the future.

For 2020, the DOB received close to 90 nominations in four broad awards categories — Project Execution Excellence; Innovation & Technology Excellence; Exporting Excellence; and Environmental Excellence — recognizing work completed last year. The nominees were further broken down into 12 subcategories across the four groupings, before being judged by a committee of industry leaders.

From April 21 to May 6, we will be sharing the finalists in each of these subcategories. Today, we feature the best in Project Execution Excellence in the subcategory of Oil & Gas.

Special Note: Starting May 7, we’ll be hosting a series of special online webinar presentations to honour these companies and announce the champions in each category. Register here for these events.

Of the challenges facing conventional oil and gas producers in recent years, handling water and asset liabilities rank among the biggest. They represent major cost challenges for producers, and public perception challenges for the industry in general.

As its name implies, hydraulic fracturing requires a great deal of water — which must be sourced, managed and disposed of in an environmentally sustainable way. It is subject to a tremendous amount of innovation as companies attack it from all angles in an attempt to reduce costs and secure approvals for major projects.

For ConocoPhillips Canada (CPC), that meant working closely with local First Nations and devising clever ways to deal with their environmental concerns to construct its Montney Water Supply Pipeline. For Velvet Energy Ltd., it meant moving away from the need to source fresh water for fracking entirely.

And for fellow Energy Excellence Awards finalist for project execution in oil and gas, Skye Asset Retirement, it meant originating an entirely new way of dealing with oilfield liabilities, such as retired wells that threaten to increase the orphan well problem.

ConocoPhillips Canada: raising the bar on pipeline consultation, completion

There was a time when building a pipeline was a straightforward and uncontroversial endeavor. But in today’s often highly charged atmosphere of environmental mistrust and jurisdictional conflict, it has become a highly contentious affair. Projects are put under a microscope, contested on any conceivable level, and can become mired in the approval process for years before moving forward.

And so it is that one company that set an exemplary example of getting out in front of the process, dealing with any potential issues in a highly collaborative way, and exercised flexibility to deal with any and all concerns, was recognized by judges as a finalist for oil and gas project execution excellence.

CPC credited early engagement with the Halfway River First Nation (HRFN) as key to the successful completion of the construction of its water pipeline from a point of diversion on the Halfway River in northeast British Columbia to its water hub and central processing facility. CPC was confronted with a number of wildlife issues that it worked to resolve at the front end of the process.

Open communication was vital, the company emphasized: both parties took the time to listen to one another and also made field visits as a group. “We listened to the Nation’s concerns and brought our execution and construction colleagues — the ones responsible for building the pipeline and reclaiming it — to the table so they could participate in this dialogue,” stated CPC. “From our perspective, HRFN’s collaborative approach to resolving concerns and mitigating issues was invaluable.”

Equally important was the support and technical expertise of CPC’s capital projects pipeline construction team that was instrumental in the successful execution of the collaborative project. The company’s SPIRIT (safety, people, integrity, responsibility, innovation, teamwork) values guide how it does business.

The company identifies Indigenous communities that may be impacted by its projects early on and works to include the values and feedback gathered through the engagement process with them into the design and implementation of projects.

In this case, CPC engaged with HRFN during the scouting stage to determine the route of the primary water pipeline so that it could incorporate, as much as possible, their feedback into the selection. Although a section of the route was not ideal from the Nation’s perspective, through a series of meetings that included construction staff, ConocoPhillips listened to their concerns, and then did what it could to mitigate those concerns.

Of primary importance to the Nation was minimizing impacts to a wildlife corridor that the company was intercepting with its pipeline right-of-way (ROW), as well as maintaining a buffer around a high-value habitat area frequented by species of significance to the Nation, including moose, black bear, beaver and lynx.

HRFN’s land manager had documented the wildlife that live in the Alexander and Bernadette Creek valleys, an area seen as having a diverse ecosystem capable of supporting key wildlife. It was essential to HRFN that construction avoided opening additional access into this area and that the game trails be maintained so as not to interrupt the movement of wildlife accessing important habitat features on the east and west side of the ROW.

“We worked closely with the Nation to identify the location of these game trails in relation to the project so we could ensure they remained open during pipeline construction,” the company said.

It went so far as to establish a buffer around a high-value habitat area by executing a 300 metre bore. Pipeline bores are typically used to cross roads and streams, but this one was unique to CPC in that it worked to maintain a wildlife corridor buffer by using the bore, leaving the timber intact and leaving a buffer around the identified high-value habitat.

The linear pipeline construction activities were halted at either end of the bore/buffer area and completed from each end independently to ensure the integrity of the buffer was maintained. Leaving this stretch of standing timber along the ROW also greatly reduced the line of sight and provided cover to facilitate wildlife movement from east to west.

For restoration, CPC adopted some of the practices developed through the Faster Forests program. The productive soil layers were stripped and stockpiled during the construction phase and then replaced after pipeline installation was completed. The “rough and loose” practice developed through Faster Forests creates a diversity of microsites and encourages natural regeneration from the native seed bank, the company said.

“We recognize the rights and respect the traditional values, heritage and diverse cultures of Indigenous peoples and seek early and continuous engagement to build trust, respect and develop mutually-beneficial relationships. Where possible, we contracted local Indigenous companies to work with us on this project,” concluded CPC.

Skye Asset Retirement: Taking asset liabilities off companies’ books

As Western Canada’s producing oil and gas fields mature, increasing numbers of aging and idled assets accumulate, weighing down producers balance sheets and causing public anxiety about environmental reclamation.

Those undesirable assets represent opportunity for Calgary-based startup Skye Asset Retirement, which stands ready to take them off the hands of producers and bring them into retirement faster than would otherwise be the case.

Skye completed the first of its kind oil and gas liability acquisition in November in a transaction that represents an entirely new way to address asset retirement obligations. Skye took transfer of oil and gas sites with the intent to only take those sites through to regulatory closure. Such a transfer of non-producing sites to an exclusively closure company has not been realized in industry until now.

The concept began in 2017 as a project taken on by the team at 360 Energy Liability Management as a way to assist oil and gas clients in dealing with overhanging inactive liabilities.

It involved the development of a proprietary insurance product to cover overages in a transfer of this nature, also an industry first. Together with local insurance partners, Skye was able to re-build an insurance product with the Lloyd's of London insurance market.

The due diligence for the first deal came in exactly on budget and met the short timelines of the partner in the transaction, the company said, adding the uniqueness of the transaction itself is the key defining piece in determining the success of Skye.

The company built a tool that allows the energy industry to eliminate inactive liabilities at a fixed fee, with an insurance backing and with confidence that the liability is going to a subject matter expert to be retired. The risk between the two parties is shared as both accept the estimates assigned in due diligence as the real closure costs and both are accepting of the transfer of liability.

The closure aspect of the work uses cutting edge-digital technology (Strattix Software) to track costs/activities for both internal, insurance and partner demands.

The collaboration between Skye and 360 is unique to liability management. 360 as a business has developed a unique methodology, cost data base, execution team and client base which allows Skye to exist in the marketplace. “In effect, we believe that you cannot have a liability acquisition company (Skye) without having a liability management firm (360),” notes Skye.

The transfer of liability to Skye means that the previous operator is absolved of the environmental obligation and risk associated with future issues. As Skye exists solely to close oil and gas sites, there will be an acceleration of closure activity on sites transferred to Skye. “In effect, we will increase the number of retired sites and decrease the amount of inactive oil and gas sites,” said the company, which believes it has paved the way for a future of liability acquisition companies to follow.

Skye’s goal is to address the root of the inactive asset liability, said chief executive officer Ryan Smith. It’s built to be a tool for industry for the long-term to help meet their environmental, social and governance goals, he said. By providing turnkey retirement, remediation and reclamation of inactive oil and gas wells, and on facilities and pipelines, Skye enables producers to focus on producing assets.

Velvet Energy: Preserving fresh water

The sourcing, utilizing and disposing of enormous volumes of water needed for fracturing operations can be a costly endeavor. In 2017, Velvet Energy Ltd. set out to eliminate freshwater usage in hydraulic fracturing operations in its Gold Creek asset near Grande Prairie, Alberta.

Velvet’s Gold Creek Produced Water Recycling Program achieved its full replacement objective last November with the completion of four hydraulic fractured Montney wells with 100 per cent recycled produced water.

The project achieved all operational performance objectives on schedule, managing to progressively reduce operational water management costs for both hydraulic fracturing operations and disposal, while gradually reducing Velvet Energy’s reliance on freshwater.

Furthermore, the achieved reduction of water hauling by eliminating approximately 73,800 truckloads of water in 2019 has reduced the surface impact of its operations on Alberta roads, reduced greenhouse gas emissions, and allowed for the development of a safer and more environmentally sustainable water operation in the Gold Creek area.

The company set out several objectives when it launched the project in 2017, including a reduction in aggregated water management costs to less than $12 per cubic metre, freshwater use full replacement in hydraulic fracturing operations and reduction in water hauling by 90 per cent by 2019.

Reaching the ambitious targets would involve a number of actions, including:

  • Design and construction of 73.6 kilometres of bi-directional pipelines for the distribution of produced water across the asset, at an estimated cost of $33 million;
  • Design and implementation of water separation processes, primary treatment and pumping infrastructure at three oilfield batteries to allow for on-demand water access across the asset, with a capital investment of approximately $12 million;
  • Drilling and completion of nine disposal wells, at an approximate investment of $22 million, to effectively dispose of excess produced water while reducing operational costs and GHG emissions associated with waste transportation;
  • Design and deployment of temporary freshwater storage infrastructure, with a capital investment of approximately $3 million, and a groundwater well to reduce operational costs and the environmental impact of transitional freshwater operations;
  • Implementation of first-to-market water remote data systems and customized water management database with regulatory compliance; and,
  • Implementation of produced water chemistry monitoring and chemical modelling programs to prevent and mitigate incompatibilities derived from the mixing of multiple water sources in both hydraulic fracturing and disposal operations.

The project involved collaboration with a number of industry partners, including SemCAMS Midstream ULC, in the implementation of water processing and deployment of water infrastructure. Water processing, risk sharing, distribution tie-in and water chemistry targets were developed in partnership with SemCAMS.

Velvet Energy partnered with Random Acronym in the first implementation of WaterTracker and FieldTracker for upstream oil and gas. WaterTracker is a cloud-based, Alberta-specific water database, intended for the aggregation, analysis and reporting of industrial water inventories.

The database allows for the mapping of water inventories and infrastructure, identification of operational water opportunities, automatic tracking of water movements, diversion and usage, streamlined water usage reporting system compliance and generation of on-demand water management statistics.

FieldTracker is a portable remote hardware implementation that allows for the monitoring of water telemetry (volumes, flowrates, levels, pressure and temperature) intended to provide reliable and up-to-date water data during hydraulic fracturing operations. It is self-powered, satellite and cellphone compatible, remotely configurable and intrinsically integrated with the WaterTracker database.

Velvet Energy additionally partnered with Whitewater Management Ltd. in the deployment of FieldTracker in temporary water pipelines, further optimizing data collection from the field. Whitewater has used this technology to monitor heat losses, resulting in heating optimization during shoulder seasons and up to 50 per cent GHG reductions in surface water transfers.

Velvet Energy also works closely with Sturgeon Lake Cree Nation and Horse Lake First Nation in the deployment of water pipelines and environmental monitoring associated to water infrastructure.

“The deployment of infrastructure and technology resulted in the reduction of freshwater demand for hydraulic fracturing, reaching four wells with 100 per cent freshwater replacement in November 2019,” the company said. “Furthermore, the elimination of 73,800 truckloads in 2019 and its associated reduction in GHG emissions is considered a significant environmental operational improvement.”

The project also contributed to the growth of produced water treatment and handling service offerings in Alberta. The remote water data technology pilots, chemical injection supply chain optimization, and general development of infrastructure added over 40,000 person-hours and intellectual property to innovative Alberta companies, said Velvet Energy.

The Project Execution Excellence awards category is brought to you by our Industry partner, Fluor Canada.

Since 1949, Fluor Canada has been involved in the engineering, procurement and construction of a wide range of energy related projects that are spread across the Canadian landscape. Throughout its 70-year history in Canada, Fluor has provided local, regional and international clients with full-service capabilities, which include economic evaluations, conceptual engineering, feasibility studies, program management, detailed engineering, procurement, transportation and logistics, modularization, fabrication, direct-hire construction, construction management, commissioning, start-up, operations and maintenance.

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