1. 11 Fugitive emissions and the future of the oil and gas industry in a low GHG environment Eddy Isaacs, FCAE Strategic Advisor, Faculty of Engineering University of Alberta

2. 2 Flaring and venting a global problem  ~5% of world annual gas production is flared or vented  130 billion m 3 of gas (4x oil sands gas consumption)  350 Mt of CO 2 eq (~ ½ of Canada’s annual GHG emissions)

3. 3 Canada’s 2014 emissions breakdown by IPCC sectors (2016 National Inventory Report) Energy – Stationary Combustion Sources 331 Mt CO 2 e (45%) Energy – Fugitive Sources 60 Mt CO 2 e (8%) Agriculture 59 Mt CO 2 e (8%) Industrial Processes 51 Mt CO 2 e (7%) Waste 29 Mt CO 2 e (4%) Total: 732 Mt CO 2 e

4. 4 Sources of methane emissions

5. 5 Canada’s 2014 GHG Emissions from Fugitive Sources (2016 National Inventory Report) Venting 32 Mt CO 2 e (54%) Flaring 6 Mt CO 2 e (10%) Natural Gas – Leakage 13 Mt CO 2 e (22%) Oil 7 Mt CO 2 e (12%) Coal Mining 1 Mt CO 2 e (2%) Total: 60 Mt CO 2 e

6. 6 Alberta’s 2013 GHG Emissions by sector (Environment Canada)

7. 7 2014 Alberta Flaring & Venting (AER ST60B - 2015)

8. 8 Map of Alberta’s Solution Gas Flaring and Venting

9. 9 Cold Heavy Oil Production with Sand (CHOPS) in Lloydminster area – a major culprit  Much greater reservoir access  Development of high permeability channels – “wormholes”  Substantial increase in oil rates

10. 10 Why Flare and Why Vent? Understanding the Challenges  Technology mature for large scale applications  Technology solutions dependent on flow rate, gas quality, C2+ content, gas variability, infrastructure & distance to market  Most Canadian emitting sources are small and economically unattractive to monetize  Low single site volumes, unsteady supply & quality  Will require integration with a conventional steady supply and infrastructure

11. 11 Technology development (CanmetENERGY)  Developing innovative analysis tools to quantify cost-effective mitigation potential of flaring and venting  Transferable to other jurisdictions  Results for Alberta and Saskatchewan suggest cost- effective mitigation potential is significant  Economic results attractive when compared to other proposed technologies such as CCS

12. 12 GHG abatement cost curve for Canada (ICF International)

13. 13 Creating value gas-to-liquid (GTL) technology (Alberta Innovates – Energy & Environment Solutions)  New modular technologies – monetize shut-in, flare & vented gas sources  Smaller plants become economically attractive TECHNOLOGIES EVALUATED Syngas GenerationSyngas Conversion Haldor Topsoe HTAS Praxair OTM Johnson Matthey CMR Primus Green Energy Ceramatec Gas2 CPOX Haldor Topsoe HTAS Johnson Mathhey Primus Green Energy Velocys Ceramatec GasTechno (Direct NG conversion) http://www.ai-ees.ca/wp-content/uploads/2016/03/gtl_ceri_presentation_by_ddp.pdf

14. 14 Regulatory Processes  Alberta’s target is 45% reduction of methane emissions from O&G operations by 2025  Alberta’s Directive 060 and Saskatchewan’s Directive S-10  Improved measurement and reporting  Mandatory requirements for reducing flaring, incinerating and venting of associated gas  Other producing provinces require facilities to have fugitive emissions management plans

15. 15 Impact on oil and gas operations and the future  Increasing stringency of carbon pricing will pose challenges at low oil and gas prices, examples  Alberta: 12% emission intensity reduction to increases to 20% by 2017  BC: LNG emissions intensity benchmark  more efficient technologies, investing in offsets or purchasing “funded units” at $25/tonne  Annual emissions limit for oil sands capped at 100 Mt (currently at 70 Mt)

16. 16 Oil sands technology options to reduce GHGs (lower energy and water use) Solvent enhancement to thermal recovery  LASER (IOL; commercial)  SAP (Cenovus; demonstrated)  ES-SAGD (Nexen, IOL, Total, Statoil; pilot/commercial stage)  Cyclic solvent (IOL; pilot)  Heated solvent (n-Solv; pilot) Infill wells  Wedge well (Cenovus; commercial)  eMSAGP ( MEG; pilot) Electrical  ET-DSP (pilot)  Harris EM Technology (pilot)

17. 17 Summary  Emissions from flaring and venting - a significant part of Canada’s GHG profile  60 Mt CO 2 e is equivalent to 86% of annual oil sands emissions  Canadian emitting sources are mostly uneconomic to capture at low natural gas and low carbon prices  Potential for combining with stranded (shut-in) gas will require the appropriate regulatory environment  gas-to-liquid technologies become attractive at low gas prices (Alberta’s Petrochemical Diversification Program)  AER: Vented gas that can sustain combustion and is uneconomic to conserve must be burned  The oil and gas sector is severely challenged in a low carbon and low price environment  Emissions cap on oil sands does provide some room for growth and will spur innovation in advanced recovery and conversion technologies

18. 18 Thank You