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Vol. 23, No.25 Week of June 24, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

A place at the table

Senior BP executive says Alaska in unique position for global energy transition

Alan Bailey

Petroleum News

The state of Alaska is uniquely positioned to lead and benefit from the transition in global energy, as the world addresses the challenge of reducing energy related emissions, Susan Dio, chairman and president of BP America Inc., told the annual meeting of the Resource Development Council on June 20. While innovation is a key to meeting that challenge, through finding more efficient ways of producing energy, for example, Alaska has consistently pioneered technical innovation, Dio said.

“Your capacity for innovation has been enormously valuable in recent years, and I predict that it will be even more valuable in the years to come,” she said.

She commented on the manner in which BP in Alaska has been a global leader in enhanced oil recovery and how the company has been able to hold production from the Prudhoe Bay field constant for three years as a result of improved efficiency.

Dio also commented on BP’s interest in the Alaska liquefied natural gas project, saying that BP is playing its part in making that project succeed. The use of natural gas as a fuel, particularly for power generation, will be critical to addressing the long-term challenge of carbon dioxide emissions, she said.

A dual challenge

The challenge that the world as a whole faces involves reducing greenhouse gas emissions while simultaneously meeting the rising global demand for energy, Dio said. The rise in energy demand mainly originates from rising prosperity. BP projects an energy demand increase of 35 percent by 2040, with that entire increase coming from the developing world, in particular China and India.

This will require a transition to a lower carbon economy through the use of renewables and through making every form of energy cleaner.

“The state of Alaska is uniquely positioned to lead and benefit from this transition,” Dio suggested.

For, although renewable energy is set to continue as the fastest growing sector of the energy industry, fossil fuels will continue to exist as a critical component of the energy mix. Even in BP’s most aggressive low-carbon scenario for the future, a scenario that meets the targets set in the Paris climate change accord, fossil fuels will account for more than 50 percent of total energy in 2040, with oil and gas accounting for more than 40 percent of the total.

The BP strategy

To meet the energy challenge, BP has adopted a strategy of reducing emissions from the company’s operations, improving the company’s products and creating new low-carbon businesses, Dio said.

As an example of emission reductions, Dio cited the use of a mathematical model for optimizing production from 180 Lower 48 wells, resulting in a 75 percent reduction in venting emissions events, a 20 percent production increase and a 20 percent cost reduction. BP’s shipping business has recently built 26 new oil tankers that are 20 percent more fuel efficient than the previous generation of tankers. And the company is building six new LNG tankers that are about 25 percent more efficient than their predecessors.

In terms of improved products, BP is now the largest supplier to the U.S. transportation sector of biogas generated from organic waste, as an alternative to liquid fossil fuels. The company is also the largest marketer of traditional natural gas in North America. And BP Castrol now offers a range of carbon-neutral engine oils, including an oil made from sugar cane derived stock.

New BP low-carbon businesses include 14 U.S. wind farms. A BP joint venture with DuPont converts corn sugar into bio-isobutanol, which can be blended with gasoline in higher concentrations than ethanol. BP has partnered with Lightsource, the largest European solar development company, and is planning the largest solar energy facility in the state of Kansas. The company is also investing in a wide range of smaller companies that support low carbon technologies, Dio said.

Worldwide, BP plans to spend at least $500 million per year on low carbon initiatives, she said.

Alaska’s opportunity

Bearing in mind the world’s continuing dependence on fossil fuels, Alaska has a “huge opportunity” to contribute to the energy transition through improved efficiency in oil and gas production, reductions in the carbon intensity of the oil industry and supporting the expanded use of natural gas, Dio said.

For example, the improvement in operational efficiency in the Prudhoe Bay field from 80 percent to more than 85 percent over the past three years represents an annual oil production gain equivalent to a new oil field in Prudhoe Bay. BP plans to conduct a new 3-D seismic survey in 2019 across the entire Prudhoe Bay field. Data from this survey will support new drilling and well work, to help further extend the life of the field, Dio said.

With increasingly competitive global energy markets, it is very important to continue to pursue improved business efficiency. But sound and predictable tax and regulatory policies that support long-term investment and the use of advanced technologies are particularly important, Dio said, commending the state Legislature for rejecting recent proposals for tax increases.

A role in gas revolution

From the perspective of natural gas development, BP thinks that, with massive gas resources at Prudhoe Bay, Alaska can and should play a major role in the global gas revolution, Dio said.

“I believe no single fuel is more important to the global energy transition than natural gas,” she said.

Dio said that BP is going to help make the AKLNG project happen - in May the company announced a gas sales precedent agreement with the Alaska Gasline Development Corp.

“Geographically, Alaska benefits from its relatively close proximity to East Asia, which imports more LNG than any other region on Earth,” Dio said.

However, with global LNG supplies set to more than double by 2040, and with more than 40 percent of that growth coming in the next five years, the LNG market is becoming increasingly competitive. To keep Alaska competitive, the state must continue to maintain a stable tax and regulatory environment, Dio said.

Dio told reporters that BP’s commitment to the AKLNG project reflects the fact that BP sees natural gas production as a key pillar of the company’s strategy for addressing the energy transition. She also commented that Alaska’s proven ability to be innovative in the use of new technologies can help with the project viability.

The opening of ANWR

During her speech Dio also commented on the opening of the 1002 area of the Arctic National Wildlife Refuge for oil and gas activities, saying that this represented a big policy victory at the national level. BP supports access to federal lands for responsible exploration and development, while also supporting the Department of the Interior’s development of an environmental impact statement for oil and gas leasing in the refuge.

“The industry has proven ways to safely develop sensitive areas while minimizing environmental impacts,” Dio said.

Dio later told reporters that BP has openly supported the opening of the ANWR coastal plain, but that any interest in participating in ANWR exploration would depend on the outcome of Interior’s work in evaluating the environmental impacts of oil and gas leasing in the refuge.

At this point, Alaska has achieved real momentum, having come through a very difficult period with renewed strength and commitment for future development, Dio told the RDC meeting. Despite the changes in the global energy situation, the work that the oil industry does and the investments that it makes will remain essential to human prosperity for decades to come, she said.



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