When Nicole Romanow looks at drilling rigs from 30 years ago, she is impressed by the change and innovation that has occurred in Canada’s oil and gas industry – and what is yet to come.  

That’s because as team lead for sustainability strategy at Canadian drilling company Ensign Energy Services, she understands the level of equipment that is in the field today and what is on the way tomorrow.  

It’s no more rig workers manually hauling chains around. It’s high-tech, highly automated machinery geared for optimum performance. And technology is increasingly targeted to reduce greenhouse gas emissions.  

“To see the high-spec rigs we have today and the rig automation, the step-change in drilling performance, emissions management and land stewardship is remarkable,” Romanow says.  

While Canada’s oil sands sector often makes news for innovations that reduce environmental impacts like emissions per barrel and water use, similar efforts by the so-called “conventional” industry – basically everything that is not the oil sands – can get overlooked, says Mark Scholz, CEO of the Canadian Association of Energy Contractors (CAOEC).  

“On the conventional oil and gas side, there’s a lot happening that might not necessarily make it to the headlines,” he says.  

“And the conventional side of the business, that’s where the vast majority of the employment is coming from, stretching across western Canada.” 

Conventional oil and gas mainly centers on drilling, whereas the oil sands is more like building large-scale manufacturing facilities.  

Every active drilling rig in Canada generates about 220 direct and indirect jobs, according to oil and gas labour information provider PetroLMI. 

About 5,400 wells are expected to be drilled in western Canada in 2022, according to the Petroleum Services Association of Canada (PSAC). This is up from 4,650 wells in 2021 but well below the record 11,475 wells drilled in 2013. 

Rigs are being outfitted with new technology to reduce emissions, in a highly competitive business that doesn’t allow for much flexibility on costs.  

“We think that long-term, lasting sustainability is about not only saving on emissions, but also improving performance. Those are the solutions that are economic and have staying power,” Romanow says.  

“From the service side, it’s always about how you can provide a unique edge that way.” 

Faster Drill Times 

Drilling has already come a long way in reducing emissions, Scholz says, primarily because of new technologies that allow rigs to run much more quickly and efficiently.  

“Wells that 15-20 years ago took us 40 days to drill now take us 5 days to drill, because we have rigs that have better horsepower and better pumping capabilities,” he says.  

“We have better downhole equipment and drill bit technology, and we have directional tools that allow us to basically change the direction of the bit so that we can do horizontal drilling and capture more of the resource play that we’re drilling through.” 

Fewer days on location means less time using the rig’s engines or consuming energy to run equipment. Scholz says this reduces emissions by about 85 per cent compared to older technology. 

Alternative Fuels and Batteries 

Replacing diesel fuel is the name of the game for lowering emissions on drilling rigs, and right now that’s being done through dual-fuel natural gas/diesel generators, natural gas generators, connecting directly to the electrical grid, and more recently battery energy storage systems.  

“Batteries are the hottest topic as of late,” says Ashley Connolly, who runs marketing and business development for Canadian contractor Precision Drilling’s suite of environmental technology solutions.  

“When coupled with diesel, natural gas, or dual-fuel generators, a battery energy storage system reduces the number of generators online and increases the average load on the engines, allowing them to run more efficiently.” 

Precision is part of an $8-million pilot project with Caterpillar and major natural gas producer Tourmaline Oil Corp. using a mobile natural gas generator and battery system. The project has $3.2 million in funding from Emissions Reduction Alberta.   

The system is projected to save 3,800 tonnes of emissions per rig per year. With the proposed commercialization plan, Tourmaline estimates a reduction of 11.3 million tonnes of CO2 equivalent emissions by the end of 2050. 

Engine Automation 

Automation has been a major improvement for Canada’s oil and gas drillers, and new applications are helping reduce emissions, Connolly says.  

New engine automation technology continuously monitors rig power demand and compares that against the available engine power, for example the number of engines online.  

With new technology, engines are automatically started or stopped to have only the required number running, which optimizes efficiency, reducing fuel consumption and associated GHG emissions. 

Romanow says automation systems like this allow rig operators flexibility to switch energy source based on conditions. 

“They’re pulling from the most efficient source of energy from a performance perspective, as well as from an emissions perspective,” she says. 

The Future 

Beyond batteries and the benefits of using power from the electrical grid, Connolly expects that the future will involve more new technologies like carbon capture. But the application will require different systems than those used at an oil sands project or fertilizer plant. 

“Carbon capture projects have been focused primarily at the facility level or stationary areas, not mobile equipment,” she says. 

“We’re working on developing that. We are also exploring how fuel cell technology and hydrogen as a fuel source can be implemented into drilling operations.” 

Scholz says the drilling industry’s commitment to innovation and lower environmental impacts should help recruit the many new workers needed as global oil and gas demand continues for decades to come.  

“This is very much a high tech, highly innovative industrial process that we’re involved in that takes the environment very seriously,” he says.  

“It’s going to require the special skill sets from a new generation that’s going to help us really deploy these technologies and ultimately help us design and implement new ones.” 

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Collapsing global oil demand? Don’t bet on it.

Media outlets proclaimed the impending collapse last week, based on a report by U.K.-based natural resources consultancy Wood Mackenzie that uses flawed assumptions about the pace of decarbonizing energy markets.

While Wood Mackenzie emphasizes that its report “is a scenario, and not our base-case forecast,” and “one interpretation” of how the world could achieve net zero greenhouse gas emissions, it nevertheless paints a misleading picture about the road ahead.

COVID has shown the scale of our reliance on oil

The COVID-19 pandemic has shown the scale of how integral oil is to power the world, and how unlikely it is that major declines in oil demand are on the way anytime soon.

Wood Mackenzie’s scenario projects that oil demand, which is now almost 100 million barrels per day, will start declining in 2023 and drop to about 35 million barrels per day in 2050.

At the height of pandemic lockdowns in April 2020, approximately one-third of the world’s vehicles were off the road and up to 95 per cent of airplanes out of the sky, estimates Jackie Forrest, executive director of the ARC Energy Research Institute. At that height of the immobilization, global oil demand dropped by just 20 per cent.

“It is shocking, because I think a lot of people didn’t realize that light-duty vehicles are not the only thing that consumes oil. We still continued to want to eat and move goods around, and a lot of shipping still happened,” Forrest said in a February ARC Energy Ideas podcast. “That level of lockdown didn’t reduce oil demand maybe as much as people thought.”

In addition to transportation fuel, oil is used to make countless plastic and synthetic products – everything from clothing, computers, cell phones, car components and furniture, to medical equipment, plexiglass, hand sanitizer, carpets, toys, and beauty products.

“In 2020 we saw oil demand fall by 10 million barrels per day, but as you will see, 2021 forecasts show a rebound in demand of about 5 to 6 million barrels per day,” said Joseph McMonigle, secretary general of the International Energy Forum, during a February joint virtual session with OPEC and the International Energy Agency.

“Certainly the impact to demand was profound and unprecedented, the biggest demand shock in history, but it is important to note that 90 per cent of demand remained intact, demonstrating oil’s resiliency and necessity to fuel the world economy.”

Wood Mackenzie scenario goes beyond International Energy Agency projections

Wood Mackenzie’s scenario goes even further than the International Energy Agency (IEA)’s most aggressive decarbonization scenario, which the IEA says the world is not on track to meet.

Under the IEA’s Sustainable Development Scenario, which aligns with the goals of the Paris climate agreement, global oil demand declines to 66 million barrels per day in 2040. But as the IEA notes, the SDS scenario is not the one that is playing out.

What is playing out is what the IEA calls its Stated Policies Scenario, which is expected to see global oil demand increase to 104 million barrels per day in 2040, driven by population growth and emerging economies in India and Asia.

Emerging economies want cheap, reliable energy

According to United Nations forecasts, the world’s population is expected to grow by 2 billion people by 2050, reaching 9.7 billion, driven primarily by growth in India.

Indian energy minister Raj Kumar Singh told a recent meeting hosted by the IEA that it is unfair to expect developing countries to stop using fossil fuels, BBC reported.

“You have 800 million people who don’t have access to electricity… You can’t say that they have to go to net zero. No, sorry, they have the right to develop…they want to build skyscrapers and have a higher standard of living, and you can’t stop it,” he said.

ATB Capital Markets says that while net zero is an important goal collectively, some emerging economies may have different priorities.

“For North America and much of Europe, focus in the last decade has been to curb the consumption of oil. For India and China, however, the focus has been on raising the quality of life for its people,” analysts said in a research note last week.

Natural gas critical in all scenarios

In the Wood Mackenzie scenario, demand for natural gas “remains resilient” over the coming decades as Asia’s developing markets replace coal with natural gas for power generation. This is similar to the IEA’s Sustainable Development Scenario, where natural gas demand decreases to 344 billion cubic feet per day in 2040, from about 390 billion cubic feet per day in 2019.

But in the more likely Stated Policies Scenario, global natural gas demand is expected to continue increasing, to 505 billion cubic feet per day in 2040.

Replacing coal with natural gas-fired power is a key long-term opportunity for Canada. Just one project, LNG Canada, is expected to reduce GHG emissions in China by the equivalent amount of shutting down 20 to 40 coal-fired plants.

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