Background to study

1. Management of produced water on offshore oil and gas production facilities: comparative assessment using flow analysisPaul Ekins and Robin VannerPolicy Studies Institutep.ekins@psi.org.uk, r.vanner@psi.org.ukOffshore Forum, London February 8th 2005

2. Background to study Policy Studies Institute Material flow and sustainable development work Professor Ekins & Robin Vanner UKOOA [UK Offshore Operators Association] Sustainable development work Collaborative two year study under DTI LINK programme funded by EPSRC • Study objectives: • Direct benefit to oil and gas sector • Four industry issues covered • Develop a generic sustainable business model • Use material flow analysis combined with their values

3. Input C t, £, e Production X £ Product B t, £ Input A t, £ Waste D t (£?) End of pipe Y £ Waste G t, value Input F e, £, e Waste E t, value Approach to material flow analysis Private values £Product(B) > [£Inputs(A,C) + £Process(Y) - £Waste(D)] Mass balance Inputs = Outputs Implicit social valuation -£Input waste(D) > Value[F+Y-(G+E)] Is D worth that?

4. Industry case studies Decommissioning of offshore structuresMaterial value of recycling, combined with implicit social valuation of non-financial outcomes Produced Water Material implications of end-of-pipe cleanup technologies, stakeholder perception of harm and the precautionary principle Energy use offshoreLife of field view of energy use and material flows leading to indicators and ultimately efficiency measures Corporate relationshipsThrough a number of case studies, seek to understand stakeholder issues and relationships in the context of an industry in transition.

5. What is produced water? • Produced with oil • In the UK in 2002; 272mt produced water, 105mt oil (72% of fluids) • Physically separated from oil to leave water with a dispersed oil content of typically ~20ppm (mg/l) • Some dissolved content (aromatics and phenols) – toxic i.e capacity for harm rather than actually causing harm • Not feasible to biologically treat offshore • Typically discharged into the North Sea • Of the 272mt produced by the UK sector in 2002, 5.4kt was dispersed oil (represents ~6% of total oil inputs into North Sea from all sources) • Volumes tend to increase as fields mature • OSPAR has recommended that total dispersed oil content is reduced by 15% (baseline 2000) by 2006 • Represents a 36% reduction against expected 2006 discharges • Open to UK sector wide trading scheme

6. Harm and uncertainty? A range of stakeholder views of harm • Some stakeholders would require an effect to be proven and detrimental for a produced water discharge to represent harm • What about uncertainty and the precautionary principle? • Others stakeholders only require for produced water discharge to have the potential for having an effect for it to represent harm • What if an effect is not posing any impact on an organism? • Adams 2002; uncertainty will lead to stakeholders applying culturally based ‘risk filters’ to perceived ‘virtual’ risks • DEFRA and the precautionary principle: • “Where there are threats of serious or irreversible damage, a lack of full scientific certainty must not be used as a reason for postponing cost-effective measures to prevent environmental degradation” • What is cost effective? • What if end of pipe wastes could cause serious or irreversible damage?

7. Advanced cleanup technologies • Filter • Produces hazardous and low grade radioactive waste • Re-inject into well (PWRI) • Requires significant energy to power injection pumps • Inject into available well • Drill new well and inject produced water • Substitute for existing water injection required to increase pressure • C-Tour – extraction of some actually dissolved content using solvent produced on the facility • Epcon – advanced tank separation All require present physical pre-separation

8. Material and value flows 2006-2012 case study

9. Material and value flows2006-2012 case study Doing nothing may forego ~£1mt (£78m) of production in order to comply with the required reduction in OIW

10. Private assessment • EPCON is cheapest (£19k/t oil removed) • If this is enough to meet reduction target • PWRI expensive (£78k/t oil removed) but provides a contingency against further discharge regulation • Case studies operator did not value fuel gas or CO2 • May be as cheap as £9k/t if substituting for existing water injection • C-TOUR also removes actually dissolved PAHs and phenols, the two groups of chemicals which are the components of most concern • The actually dissolved content is not covered by regulation • Filtration also good at reducing dispersed oil and risk • Waste management costs are a pessimistic view • The case study operator rejected filtration due to waste and project risk Operators will make their investment decisions based on their particular portfolio of assets and their view of the potential for emissions trading

11. Regulatory assessment is more problematic? • All costs are present (2004) private values • ~50% of which would likely be offset against tax • Waste and CO2 values are based on private valuations and do not represent damage costs or social values • Imputed values are minimum implicit valuations (in present terms) and therefore also do not represent a social valuation • The Predicted No Effect Concentration (PNEC) risk assessments are theoretical and supposedly conservative • What about the precautionary principle? • Discharges of produced water are set to increase • What about the threat of climate change? • Oil and gas sector is in the EU ETS – Emissions from produced water abatement therefore imply emissions reductions in other sectors

12. Regulatory assessment issues • In respect of the 15% sector wide reduction and 30ppm concentration limit: • How effective are they at reducing perceived harm? • Does the perceived harm justify the costs (material and financial)? • What potential is there for produced water ‘hotspots’ if there is an unconstrained trading scheme? • Future regulation and continuous improvement/reduction management philosophy • Society can’t remove all risks – where to stop? • Good understanding and communication of risk required • Material flow (and value chain) analysis can highlight cross media environmental issues and total process waste costs