Moving with the world market

Strategic planner Toby Uppington and environmental consultant Simon Morten discuss future challenges oil and gas companies face in reducing their environmental impact amid increasing global demand for petroleum products.

Conditions across the oil and gas industry continue to challenge operators around the world. In August 2015, oil prices hit a six-year low, with the seven major global oil firms reporting annual profit declines, according to International Energy Agency (IEA) figures. Despite the profit slide, the global demand for oil continues to rise.

While interest in alternative energy sources — renewables and nuclear in particular — is strengthening, the world’s dependence on oil will be a given for many years to come. IEA figures also suggest natural gas will play a part as one of the world’s key ways of generating electricity, despite an increase in renewables production in 2015.

However, difficult trading conditions should not mean that operators take their eye off the ball with regard to their environmental impact. Controversies about drilling in the Arctic Circle and public uncertainty around new forms of extraction, such as shale gas drilling, or fracking, means that, more than ever, operators at all levels need to do as much as possible to reduce the potential for environmental harm caused by their activities and avoid adverse publicity.

Do no harm

Minimising harm is a critical area for operators. International players should hold themselves to stringent standards wherever they work. In a globalised, connected world, scrutiny from shareholders and pressure groups is ever-present. Environmental impacts in one geography will have repercussions in every market.

Retaining the international license to operate is essential, pushing global players for the highest standards, both in their ongoing operations and when it comes to cleaning up end of life facilities.

That’s not to say there aren’t financial pressures to minimise costs. Procurement teams in the corporate centre may push for cheap, locally delivered clean-up solutions and those global standards may demand a greater level of clean-up than local regulations demand. Yet, this globalised, rather than locally driven approach is an advantage for governmental authorities in emerging markets as it provides examples of global best practice for countries who are still formulating environmental legislation.

Changing models and markets

The European oil market is changing. Many of the oil supermajors are selling low profit, high risk downstream facilities in European countries to focus on branded fuel wholesale, extraction and production. This changing market condition has led to smaller local and regional companies expanding to meet the demand for domestic fuel, leading to huge multi-site environmental liability assessments and transfer deals as well as a highly competitive market for those who provide environmental services.

Through maximising in-situ real-time technology, data visualisation, groundwater and free phase fuel tracer tests, mobility assessments, careful risk assessment and innovative, targeted remediation design, we’re also able to move with the market changes.

Upstream and downstream

When it comes to the clean-up itself, there will be remediation challenges at all stages of the extraction, refining, transport and supply process. Clean-up of retail facilities — filling stations and forecourts — is perhaps the most well-known. Although probably the most straightforward in purely technical terms, their physical location in the hearts of communities means their clean-ups demands sensitive handling, often involving multiple stakeholders.

A balancing act

Sensitivity must be balanced with safety and efficiency. While individual forecourt projects may be small scale, they are usually part of a much larger portfolio of retail sites. The dynamic nature of the retail petroleum market means that, at any one time, a proportion of these sites will be or are being constructed, changing hands, or closing down. Remediators must be able to deploy a clean-up solution quickly, safely and cost effectively, to achieve the desired end-use, while effectively managing future liability.

Safety in partnerships

For the past 20 years AECOM has partnered with an oil and gas supermajor — just one of our global petroleum industry clients — to conduct environmental liability management activity across its retail petroleum operations in the UK, Netherlands, Germany, Austria, Switzerland, Poland, Spain and Portugal. During this time we’ve completed several hundred projects for the client, offering a range of services, including soil and groundwater assessment, risk assessment, and remediation.

By working in strong partnership with the company’s remediation management group, we’ve been able to combine our wealth of technical, project management and safety experience to continuously deliver our services on time, provide cost benefits and achieve year-on-year improvements in safety performance across the programme, leading to a safety record substantially better than the industry average.

Global meets local

While refineries often present less immediate risk to human receptors than forecourt filling stations — they’re usually further away from towns and cities, for a start — the amount and degree of contamination they present is huge. Due to a legacy of marine supply, the majority of refineries are positioned in extremely sensitive locations in terms of water resources and ecological receptors, with many located in local, European or globally protected areas. Technical challenges may be matched by political or cultural factors. In countries such as Iraq, there may be requirements to employ a proportion of the local workforce in the remediation project. Although this helps create employment and stimulates local economies, it adds another layer of complexity on the operator and its supply chain in terms of training, safety and supervision.

Hearts, minds and environments

There are other challenges. Instability in oil-producing regions means that security and safety of those teams involved in the clean-up is paramount. Nigeria and Iraq are still major oil producing countries, but conflicts are ongoing in both regions. Engagement with local communities is also critical, to ensure that local leaders and people know why the remediation is happening and what is involved.

Legacies of previous conflicts too, will affect how remediation programmes are set up and managed. In Kuwait, dealing with the after effects of the First Gulf War requires meticulous planning and vast effort. The Kuwaiti government has decreed that this historic contamination must be addressed before new drilling can start, but it is a massive job. As well as wrecked facilities with considerable accompanying contamination, ordnance and explosive remnants of war also remain in the ground, requiring safe detection and removal before work can commence.

Breaking convention

Instability in some oil-producing regions has prompted many players to look at different ways of economically extracting hydrocarbons from previously uneconomical fields. Of these, fracking has generated most interest and almost as much controversy. Many are concerned about the potential for negative environmental impacts of these new techniques and this is driving a desire for fact based assessments and a range of innovative impact mitigation tools.

Separating truth from panic

Technical expertise can help operators separate the truth from the panic around environmental impacts and support advocacy in discussions with regulators and communities by providing clear, unbiased information. Operators will also need to develop new ways to clean-up the by-products of these techniques, such as the water used in the shale drilling process.

No crystal ball

Oil prices and geopolitics are consistent only in their propensity for unpredictable change. Operators, whatever their size, will need to weather any storms. However, by providing solid advice about environmental impacts and innovative, cost-effective remediation, our consultants can help operators maintain their reputations, keep their cost base down and act responsibly towards the communities in which they work.