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Shell, Exxon tap 'California's largest solar energy project' to pump oil

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An artist rendering of Aera Energy and GlassPoint Solar's Belridge Solar project in California.

Source: Business Wire

Aera Energy LLC, a joint venture of Exxon Mobil Corp. and Royal Dutch Shell plc, plans to harness steam and power from a massive hybrid solar thermal and photovoltaic, or PV, project planned in California to enhance heavy oil extraction at one of the nation's oldest and most productive fields. Aera and privately-held technology developer GlassPoint Solar Inc., which counts Shell among its strategic investors, hope to break ground on the project in the Belridge oilfield near Bakersfield in 2019 and begin production as early as 2020, pending financing and permitting, the companies said.

"This is an entirely new market for solar," John O'Donnell, GlassPoint vice president of business development, said in an interview. "The solar industry and oil industry are working side by side to change the way oil is produced today."

Touted as "California's largest solar energy project," the Belridge Solar facility, announced Nov. 29, would rely on GlassPoint's parabolic trough reflectors, enclosed in glasshouses to protect against wind and dust, to concentrate sunlight to generate 850 MW of thermal energy that will produce 12 million barrels of steam per year. The project would include a 26.5-MW PV power plant.

The solar-generated steam and power would reduce Aera's current use of natural gas for oilfield operations by 4.87 Bcf per year, helping the company, which accounts for roughly a quarter of California's oil production, slash its greenhouse gas emissions in line with the state's target to cut emissions 40% by 2030 from 1990 levels. While the solar thermal technology is "directly competitive with natural gas," according to O'Donnell, and is ideal for areas with high solar irradiance and heavy oil resources, California's cap-and-trade program and low-carbon fuels standard are critical to making the project happen.

"This project provides an opportunity to reduce the number of allowances [to emit greenhouse gases] that need to be purchased," Aera Energy CEO Christina Sistrunk said in an email. She cited both programs as instrumental in making solar steam cost competitive and providing the "regulatory certainty" the company required to "make the long-term commitment to this innovative technology."

The companies declined to discuss the project's capital cost, financing or ownership structure. "Our role is building the system," O'Donnell said. "There's a series of these coming. We see a lot of opportunity."

'The big leagues'

The Belridge project builds on a 300-kW thermal pilot project the company completed nearby in 2011. GlassPoint also completed a 7-MW thermal system in Oman in 2013, where a 1,021-MW thermal project is under construction, with the first phase already online and a second phase on track for completion next year. Petroleum Development Oman, the country's national oil company, is the customer and an investor in GlassPoint.

"This marriage between solar and oilfield services is a creative example of decarbonization technology coming to the aid of a traditionally carbon-intensive industry," investment analysts with Raymond James & Associates, said in a Nov. 30 note to clients, calling solar steam for enhanced oil recovery ready for "the big leagues" and "bearish for natural gas demand."

Winning Aera Energy as a customer is a strong "seal of approval" for the technology's commercial viability, the analysts said, adding that solar enhanced oil recovery operations can compete even with gas prices in the range of $3/Mcf to $4/Mcf. While the project "will not single-handedly transform the gas market," they noted California's enhanced oil operations alone account for 1% of total U.S. gas demand.

Another prospective customer, the analysts said, was Chevron Corp. From 2011 to 2014, Chevron hosted a solar enhanced oil recovery pilot project in Coalinga, Calif., relying on BrightSource Energy Inc.'s power tower technology to supply 29 MW of thermal energy.