INTERVIEW: Orcadian CEO says innovation the key to unlocking new heavy oil, limiting emissions

UK independent Orcadian Energy aims to unlock its 79 million-barrel Pilot heavy oil project, one of several in the UK that have lain dormant for decades, using innovations such as polymer injection that can also limit operational emissions, CEO Stephen Brown says.

London-listed Orcadian's Pilot Field is one of a number of heavy oil projects under consideration by the UK oil industry, likely boosted by recent successful developments and as the authorities put renewed emphasis on energy security in the wake of the Russia-Ukraine war.

However, Brown, who has been promoting the Pilot project for several years and modifying the designs in consultation with potential partners, says the industry needs to be bolder in embracing newer technologies that can make such projects viable and, amid scrutiny from regulators and investors, limit the emissions from the production process.

"We're going to simplify, but we also need companies to say actually, if we're going to make progress, we need to adopt some of these new technologies," he told S&P Global Commodity Insights in a recent interview. "Most of the oil companies have become very risk-averse; they're very cautious about deploying new technologies."

"The reality is if we're going to produce oil and gas in a more environmentally friendly way, we have to do it differently from the way we did in the past."

Brown's efforts come after independent EnQuest brought the Kraken heavy oil field on stream in 2017 and Norway's Equinor started up the UK Mariner heavy oil field in 2019. Both produce "ultra-heavy" crudes with an API gravity of under 15 degrees, while a third relatively heavy oil field, Gannet E, was brought back into production in 2018 by Tailwind Energy, backed by trading company Mercuria.

Such developments have pushed UK heavy oil production to over 100,000 b/d, or around 250,000 b/d if the medium-heavy Clair and Schiehallion hubs operated by BP are included.

Amid pressure to reduce emissions from production processes the more recent heavy oil developments score relatively well compared with mainstream North Sea fields, according to benchmarking by S&P Global Commodity Insights.

And EnQuest says Kraken crude is sought as a blending component for making low-sulfur bunker fuel, without it needing to be refined. EnQuest is considering two more heavy oil developments, Bentley and Bressay, which it may tie to the Kraken facilities.

Floating wind turbine

Brown, who early in his career was involved in BP's Harding heavy oil development, says prospects have been lifted by the successful use of polymer injection to help push heavy oil through reservoirs — pioneered in the UK by Chevron at the Captain field — as well as at the Pelican Lake and Milne Point fields in Canada and Alaska respectively.

Polymer injection can not only speed up a field's productivity, but limit emissions compared with traditional methods that involved water injection, he said.

"There are two things you get from polymer flood: one is you get more oil, that's great," he said. "But you also get it in much, much less time, and with much, much less water [injection]. So your energy consumption to get that oil out is dramatically reduced."

Brown also highlighted plans for a floating wind turbine to provide power at the Pilot Field, with gas-fired generation as a backup, as well as another planning revision made in 2021 to reduce the use of process heat in separating oil from water.

Helped by these, the field should have emissions per barrel of some 2.6 kg, about an eighth of the North Sea average, he said.

Orcadian is seeking a partner for the project, with the total price tag estimated at $1 billion. Shell has provided some financing and Orcadian has a marketing agreement with the major for the first 12 million barrels, Brown said.

An Energy Profits Levy introduced in May 2022 and viewed as a windfall tax by critics could actually boost the project's prospects as it includes an 80% relief on oil and gas investments, he argued. "It's a massive incentive to invest in new projects in the UK continental shelf — that's the investment the UK Continental Shelf needs," Brown said.

However, persuading potential partners to embrace unfamiliar technology remains a challenge, he said, noting the company has removed from its plans one proposed technology, the use of low-salinity water injection, in response to criticism of too great complexity.

Israeli-owned Ithaca Energy did decide to move ahead with Stage 2 of the polymer injection project at Captain after taking over from Chevron as operator in 2019, however, in Brown's view, "most of the oil companies have become very risk-averse; they're very cautious about deploying new technologies," he said.

'Creaking' infrastructure

Brown questions one proposed approach to reducing the emissions of the UK's upstream oil and gas sector, which is thought to account for 10% of the country's power generation emissions: plans to link offshore oil and gas facilities to what he called a "creaking" national grid via subsea cables, as Norway has done.

While Orcadian is one of a number of companies planning to integrate oil and gas facilities to wind turbines, they would be advised to retain in situ hydrocarbon combustion as a back-up power source rather than resorting to an expensive cable from shore, he said.

In proposing new cables from shore "you're relying on the grid to provide backup power when the wind's not blowing," Brown said. "The grid will be under significant pressure [at such times] and you're adding another 200-300 MW of additional demand to a system that is creaking — genuinely creaking."

"It seems to me like the industry has got a notion that a 1 GW cable from shore to the Central North Sea is a strategic asset — this is a deeply flawed concept," he said, adding that Carbon Capture and Storage might offer a less costly solution to operational emissions.