mexico study final - millennium...
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MexicoAssociatedGasU/liza/onStudy
PerrineToledano,BelindaArchibongThankstoTomMitroforhisthoughAulreview
Energysectorreformandmandatorytechnical
guidelines
Fallingflaringfigures
Growingdomes/cdemand
Needformoreinvestmentininfrastructureand
technology
Summaryoffindings
S Mexico’sreformofthestate-ownedoilcompany,PetroleosMexicanos(PEMEX)in2013alongwiththecrea/onofthehydrocarbonregulatoryagency,ComisionNa/onaldeHidrocarburos(CNH)in2008isagamechangerfortheoilandgasindustry.ThelatestmandatorytechnicalguidelinesofJanuary2016areaddressingmanyofthechallengesthatCNHhasencounteredsofarinregula/ngflaringandven/ng.
S Fallingflaringandven/ngfiguressince2008havebeenlaudedasaresultofeffortsfromtheMexicangovernmentincludingthe2008EnergyReform.Significantinvestmentsingashandlingandreinjec/ontechnology,par/cularlyattheCantarellfieldbyPemex,isalsodrivingmuchoftheflaringreduc/onsince2008.
S Growingdomes/cdemandforgasforpowergenera/oncouldmo/vateanincreaseinAssociatedPetroleumGas(APG)useinMexico.
S Howeveritwillrequiretheconstruc/onofmoregatheringfacili/esandgastransmissionlinesunlessGreyryock’stechnologiesofsmallscalegastoliquidsarewidelyadopted.Failingthis,moreflaringisexpectedinthefuturesincethegasreinjec/onprogramswon’tabsorballtheAPG.
0510152025303540
bcmflared
in2011
Top20gasflarersintheworld(2011)
Sta/s/csonAPGflaring
Onthecompaniesinvolved
S GasflaringinMexicohasrecentlycometotheforefrontofthecountry’spetroleumindustrydiscourse,asthecountryholdsthe/tleofthe15thforemostgasflarergloballyasof2011.
Source:NOAAsatellitedata
Thesta/s/csofAPGflaringinMexico
Thesta/s/csofAPGflaringinMexico
Source:RoldanandPena,CNH,2014
Sta/s/csonAPGflaring
Onthecompaniesinvolved
S FlaringandVen/ng(F&V)from2004-2013
S Chartdepictsrisinggasflaringun/lthe2008Energyreform,followedbydecliningflaringpostreformyears
mmcfd
S Theabovefigureshowsvalueofflaredgasfrom1999to2009withPemex’sCantarellfield(largestoilfieldinMexicobyoverallproduc/on)(top)andwithoutCantarell(bodom):clearlyCantarellisthebiggestfieldcontribu/ngtoflaring.
S Valueofgasflaredandventedin2009stoodat14,050millionpesos(overUS$1billion)whichwasabout46%ofthevalueofoverallAPGproduced.
Thesta/s/csofAPGflaringinMexico
Sta/s/csonAPGflaring
Onthecompaniesinvolved
Source:EstradaEstrada,CNH,2011
S ThechartabovedepictsAPG(blue),NAG(green)producedandgasflared(red)from1960-2009inmmcfd.Notethatmostofthegasproducedinthecountrysince1979hasbeenAPG.
S Asof2009,gasflaredmadeup26%ofAPGproduced,downfrom31%in2008butsignificantlyhigherthansingledigitfiguresbetween2004and2006.
S Thechartinthenextslideshowsanetimprovementpost2008.S Infact,thecurveofgasflaredfollowsthelifeoftheCantarelloilfield(with
exploita/onthatstartedin1979andadeclineofoil-to-gasra/othatstartedin1997)andPemex’seffortstoreduceflaring.Seeslide8forfurtherexplana/on.
Associated,NonAssociatedgasproduc/onandgasflared1960-2009
Thesta/s/csofAPGflaringinMexico
Sta/s/csonAPGflaring
Onthecompaniesinvolved
Source:EstradaEstrada,CNH,2011
Flaring–past,currentandforecast
Thesta/s/csofAPGflaringinMexico
Sta/s/csonAPGflaring
Onthecompaniesinvolved
Source:EstradaEstrada,CNH,2011
mmcfd
S Since1979,oneofthemainreasonsforCantarell'sprolificoilproduc/onratewastheexistenceofagiantnaturalgascapthatmaintainedpressureoverthereservoirun/labout1997.Whenthereservoirpressurestartedtofall,Pemexdecidedtousenitrogentoenhancetheoilrecovery–aprogramthatstartedin2000.Thatworkedwellun/l2006.Then,injec/ngnitrogenwasnolongerenoughandsoPemexhadtoincreasetheextrac/onofAPGintheso-called,transi/onzonebetweengasandoil,inthefieldtomaintainthelevelofoilproduc/on.However,thegaswaspollutedwithnitrogenandcouldneitherbesoldnorre-injectedsoin2004PEMEXbegantheconstruc/onofanitrogenplantthatreachedacapacityof420MMCFDin2008.Thatcapacitywass/llbelowtheneedsgeneratedbythequan/tyofextractedAPGso,in2008,theflaringfromthefielddras/callyincreased.Tocopewiththeincreasingtrendinflaring,andunderthepressureofCNHsetupin2008,Pemexinvestedincompressionequipmenttoincreasethere-injec/on(seefurtheron).
FlaringanduseofAPGattheCantarellfield
Sta/s/csonAPGflaring
Onthecompaniesinvolved
Thesta/s/csofAPGflaringinMexico:WhoisInvolved?
S ThemainplayerintheoilindustryinMexicoisstate-ownedPetroleosMexicanos(PEMEX).
S PemexownsMexico‘slargestfield,Cantarellfield,whichissituatedsome80kmoffshoreintheBayofCampecheandconsistsof4mainfields:Akai(thelargest),Nohoch,ChacandKutz.
S Thena/onaloilcompany,PEMEX,isthelargestinMexico,andbymandateofthelate2013EnergyReform,ithasendeditsmonopoly,allowingforeigninvestment,althoughitremainsthestate-ownedcompany.
Sta/s/csonAPGflaring
Onthecompaniesinvolved
Whatisthelegalandfiscalframeworkinplacetostopflaringandincen/vizeAPGuse?
Agencies
Legalframework
Fiscalframework
Governmentins<tu<onsinvolvedinregula<onofoilproduc<on/flaring
Descrip<on
ComisionNacionaldeHidrocarburos(CNH)
Regulatorinenergysector,newlyestablishedin2008tosupportregulatorymandateofSENER
SecretariadeEnergia(SENER)
TheMinistryofEnergy,chargedwithmanagingandregula/ngallenergyresourcesinthecountry
SecretariadeHaciendayCreditoPublico(SCHP)
TheSecretariatofFinanceandPublicCredit,regulatesfiscalmaderswithrespecttohydrocarbonuse,includingAPG
Whatisthelegalandfiscalframeworkinplacetostopflaringandincen/vizeAPGuse?
Agencies
Legalframework
Fiscalframework
S Priortothe2008establishmentofCNH,previousregula/onconsideredgasflaringasaneededprac/ce.
S Therewasalackofspecificregula/onfortrackingtechnicalthresholdsforgasflaringandven/ngissues.
S Anyobliga/onsassumedbyMexicoweretheconsequenceofinterna/onalcommitmentsandwithoutanylegalcommitments.
S A‘ProgramtoReduceGreenhouseGasesMexico(GEIMexico)’was,ineffect,promotedbyajointcollabora/onoftheMinistryofEnvironmentalProtec/on(SEMARNAT),theWorldResourcesIns/tute(WRI),theWorldBusinessCouncilforSustainableDevelopment(WBCSD),andtheMexicanBusinessCouncil(CCE).
Regula<on/PoliciesonGasFlaring/AGuse
Descrip<on
2008EnergyReform/Ongoingreforms
Aseriesofpolicychangesintheenergysectoroccurredaround2008.TheCNHhasissuedtechnicalguidelinesfortheavoidanceandreduc/onofnaturalgasflaringandven/ng.AlthoughtheseguidelinesareonlymandatoryforPemex,Pemexincludesthenecessaryprovisionsinitscontractswithprivatecontractorsensuringthattheycomplywiththeseguidelines.Energyreformsarecurrentlyinprogresswithimproved,strictergasflaringregula/onexpected.
Resolu<onCNH.06.001/09 CNHpublishestechnicalspecifica/onstoreduceflaringandven/ngofgasinE&Poilandgasopera/ons.Non-compliancewiththosespecifica/onstriggercorrec/veproceduresandpossiblysanc/ons.
Whatisthelegalandfiscalframeworkinplacetostopflaringandincen/vizeAPGuse?
Agencies
Legalframework
Fiscalframework
Regula<on/PoliciesonGasFlaring/AGuse
Descrip<on
TechnicalprovisionsfortheuseofAPGintheexplora<onandextrac<onofhydrocarbons–January2016
InJanuary2016CNHissuedmandatorytechnicalguidelinesforthemaximiza/onoftheuseofAPG.CNHrequiresfromtheoperatorstoincludeaplanfortheuseofAPGwithinthedevelopmentplanfortheexploita/onofhydrocarbons.Thisplanwillestablishayearlyobjec/vefortheuseofAPGfromexplora/ontoclosuretobecalculatedaccordingtoaprescribedformulaandtobeapprovedbyCNH.Preferablywithin3yearsofexploita/on,theuseofAPGneedstoreach98%.Theguidelinesexplainthattheoperatorsmustperformallac/onsandinvestmentstoputinplacethetechnicalandopera/onalcapacitynecessarytoobtainmaximumu/liza/onandconserva/onoftheAPG.TheguidelinesspecifythattheoperatorwillbeabletoexploittheAPGforauto-consump/on,opera/onswithintheareaof��contractualassignment,fuelforturbines,compressors,motors,amongotherspneuma/cdevicesorinanyotherwaytogeneratepowerforthebenefitsoftheoperator.Thesolu/onfortheuseofAPGwillhavetoproceedfromaneconomicandtechnicalanalysistakingintoaccountthecomposi/onandvolumeofAPG,theproximityoftheprocessing,transporta/onanddistribu/oninfrastructure,thevalueofthegasandthevalueofthenecessaryinvestmentstousetheAPG.Inaddi/onits/pulatesthefollowingmeasurestobeadoptedbythecontractor(Fluenta,2016):• Thecapacityofflareandventgasmetersmustbesizedaccordingtotheexpectedamount
ofgastobeemidedorflared;• Themaximumallowablemeasurementuncertaintyforgasflaring/ven/ngmeasurement
systemscannotexceedplusorminusthreepercent;• Indirectes/ma/onofgasvolumesmustbemadeinaccordancewithgasoilra/oaccoun/ng
orbyusingsystembalanceorsimula/on.Theinstalla/onofallgasandventmetersshouldbeincompliancewithmanufacturerspecifica/ons;
• Measurementandmonitoringofflareandgascomposi/onmustbeconductedeitherbysamplingforlaboratoryanalysisorwithinstalledcon/nuousanalysers;
• Whenthereisasignificantamountofliquidinthegasesbeingvented,operatorsmustinstallaseparatoralongsidealiquidmeter.
Accordingtotheseguidelines,incoopera/onwithCNHPemexwillhavetoreworkonallitsplansfortheuseofAPG.Thenon-compliancewiththosespecifica/onswillbesanc/onedaccordingtothedisposi/onsoftheHydrocarbonsLawsorthespecificcontracts.
Whatisthelegalandfiscalframeworkinplacetostopflaringandincen/vizeAPGuse?
Agencies
Legalframework
Fiscalframework
FiscalFrameworkonGasFlaring/AGuse
Descrip<on
Nonelisted
Whatisthelegalandfiscalframeworkinplacetostopflaringandincen/vizeAPGuse?
Agencies
Legalframework
Fiscalframework
APG-usecasestudy:Cantarell
S In2008,Pemexinvestedalmost$3bninnewwellinstalla/onanddesalina/onanddehydra/onplantsdesignedtoregulateitsdecreasingoilproduc/on.Atthesame/me,gasflaringreduc/onturbocompressors,gasreinjec/on,andanitrogenrecoveryunitwereinstalledattheCiudadPemex,TabascoGasProcessingCenter,contribu/ngtothereduc/oninflaringfromtheCantarellsite,inpar/cular,post2008–aninvestmentofmorethan$1.6billionfrom2005to2012.
S APGusewasaccomplishedthroughop/miza/onofinfrastructureand“distribu/ngthegasstreamforar/ficialliu,reservoirreinjec/onanddeliveryforindustrialconsump/on”(Lozano,2012).
S Reportedly,thecompanyiscurrentlyinves/nganextra$976milliontowardsitsgasflaringreduc/onefforts.
Reinjec/onandEnhancedOilRecovery(EOR)
GastoLiquids
PowerGenera/on(IPP)
Challenges
CNH’sstrategy:theCantarellCaseExample
Source:EstradaEstrada,CNH(2011)
Reinjec/onandEnhancedOilRecovery(EOR)
GastoLiquids
PowerGenera/on(IPP)
Challenges
ImprovedtechnologyatCantarell
Source:Lozano,2012
Reinjec/onandEnhancedOilRecovery(EOR)
GastoLiquids
PowerGenera/on(IPP)
Challenges
Pemex’sinvestmentsforsustainedgasu/liza/on
Source:Lozano,2012
Reinjec/onandEnhancedOilRecovery(EOR)
GastoLiquids
PowerGenera/on(IPP)
Challenges
Risinggasu/liza/onandimprovedcapacitysince2008
Source:Lozano,2012
S Gasu/liza/onincreasedby24%,from74%in2008to98%in2012,duetoPemex’ssignificantinvestmentsingashandlingandreinjec/oncapacity.
Reinjec/onandEnhancedOilRecovery(EOR)
GastoLiquids
PowerGenera/on(IPP)
Challenges
APG-usecasestudy:Perseus/Greyrock
Reinjec/onandEnhancedOilRecovery(EOR)
GastoLiquids
PowerGenera/on(IPP)
Challenges
S ProjectPar<cipantso CompañiaPetroleraPerseusS.A.deC.V.(Perseus),anindependentMexicanoilandgas
explora/onandproduc/oncompany,andGreyrockEnergy,Inc.,aspecialistintransformingflaregas,bio-gas,naturalgasornaturalgasliquidsintodieselfuelthatcanbeusedlocallyorcanbeeasilytransportedtomarket.
S ProjectDescrip<onandMo<va<ono InMay2016,PerseusandGreyrocksignedajoint-venturetocollaboratetoprovide
solu/onsforflaringusingGreyrock’sFlare-to-Fuels™systems.
o InJuly2016GreyrockwasrecognizedbytheWorldBank’sGlobalGasFlareReduc/on(GGFR)Partnershipas“thetopsolu/onforelimina/onofflaregasworldwide”(Greyrock).
S AssociatedGasUseo Greyrockdevelopedasystemtoconvertflaregasintodieselfuel.
o “Greyrocksystemsaremodular,easilytransportableandremotelycontrolledfortheproduc/onof5to50barrelsperdayofcleanfuelsfromflaregas.Systemscanbedeployedinparallelasneededtoprocesslargerflaregasvolumes”(Greyrock).
o AccordingtoGreyrock,thissystemreduces“thecomplexityandcostsassociatedwithtradi/onalnatural-gas-to-liquidsprocessesbybypassingtheintermediatehydrocarbonwaxthatnormallyneedstoberefinedintofinishedproducts”(Greyrock).
o Thesesystemsaretobelocatedatthewellpad.Thefuelsproducedcaneitherbeblendedwithoilatthewellpadorprocessedfurther.Thedieselthatisproduced“featureshighcetane,nosulfurandgoodlubricity.”AccordingtoGreyrock,thesedieselfuelsdonotrequirefurtherrefiningandupgradingasopposedtothosecomingfromFischer-Tropschbasedtechnologies.
Whatenergyneedscouldtheflaredgassa/sfy?
Reinjec/onandEnhancedOilRecovery(EOR)
GastoLiquids
PowerGenera/on(IPP)
Challenges
S Mexico’suseofAPGhasbeenmainlyinreinjec/onbutthismightchange.
S Drivingdomes/cdemandforgasisthedemandforpowergenera/oninacountywherefossilfueledpowerplantsprovidemostofthegenera/oncapacity.
S Andmo/va/nggas-basedpowerdemandareprivateandindependentlyoperatedpowerplants,whosegasconsump/onisan/cipatedtoincreaseata7.9%averageannualrate,from1.6Bcf/din2012to4.9Bcf/din2027,accordingtoaU.S.EnergyInforma/onAdministra/on(EIA)report.
S Inlightofthisgrowingdemand(asMexicohasbegunimpor/nggas-impor/ng1.8Bcf/dasof2013)andtheSecretaryofEnergyIntegralFuelpolicystressingtheuseofdomes/cgas,partlythroughtheconstruc/onofgasfiredcombinedcyclepowerplants,APGhasthepoten/altomeetasignificantamountofMexico’sgasneedsincomingyears.
S Howevermoreinvestmentingasgatheringfacili/esandgastransmissionlinesisneededtoconnecttheSouth/Southeastfieldstothefarconsump/oncentersintheNorth/Northeast.
Challengesandopportuni/es:Newchallengesincurrentlyproducingoilfieldsandfuturechallenges
S Project-relatedchallengesforflaringandAPGuseiden/fiedbyCNH:S ChicontpecBasin(petroleumsystemoffieldsscaderedovera
3800km2areainthestatesofVeracruz,PueblaandHidalgo):Controllingthelargeamountsofflaredgasatthisgroupofsparselydistributedoilfieldsrequiresmoregatheringsystemsandsolu/onstousetheAPGinplaceorforthesurroundingcommuni/es.Giventhetechnicalandgeologicalchallengesofthisbasin,thecurrentoilproduc/onishowevernotatcapacity.
S Withthe2016technicalguidelines,CNHisseekingtoimplementnewmethodsofmeasuringtheflaringandven/ngofAPG,toimprovethecertaintyandmeasurabilityforthehandlingofgasandtomovetowardspreven/veregula/onspromo/ngtheu/liza/onofgasbeyondreinjec/onthatcannotabsorballtheAPGgeneratedbynewfields.
Reinjec/onandEnhancedOilRecovery(EOR)
GastoLiquids
PowerGenera/on(IPP)
Challenges
References
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