mark.davis@capterio.com +44 7552 050 089 Source: 0 CONFIDENTIAL AND DRAFT
Capterio is a project developer focussing on monetising flared gas Monetising flared gas to create value, reduce pollution and improve reputations We bring together assets, technologies and financing We invest in on-the-ground flare monetisation projects, powered by data and AI ▪ Dr Mark Davis ▪ Brian Hepp ▪ John-Henry Charles ▪ Dr Stuart Lake XXX ▪ CEO ▪ COO ▪ Commercial analyst ▪ Senior Advisor ▪ Geophysicist ▪ Process engineer ▪ Geologist ▪ Geologist www.capterio.com Source: Capterio 1 CONFIDENTIAL AND DRAFT
Agenda Gas flaring today: what and why Solving gas flaring: how The role of the geoscientist in gas flaring 2 CONFIDENTIAL AND DRAFT
The climate crisis is an unprecedented challenge. Oil and gas companies have a key role … and many are leading the path to net zero ▪ Global warming has already reached +1.1 degrees, driven mostly by CO2 ▪ We emit more than 40 Gt of CO2 per year (34 Gt from energy) ▪ 4 ways to reduce emissions 1 – Reduce demand 2 – Change how we power our lives – Scale up a “carbon management” 3 industry 4 – Tackle “other” emissions ▪ Oil and gas industry must – and wants – to be part of the solution ▪ COVID-19 is accelerating the imperative and arguably is a “fire drill” for change Source: McKinsey article: Climate math: What a 1.5-degree pathway would take?, 5 May 2020; BP Statistical Review of World Energy (2020) 3 CONFIDENTIAL AND DRAFT
Flaring is a major source of economic and environmental waste ▪ Flaring is the deliberate combustion of waste natural gas, Part of the solution is usually “associated gas” from oil (conceptually) production here ▪ Flaring generally happens because dealing with the gas (disposal, or to a useful product) is often or sometimes deemed uneconomic ▪ Flaring is a large source of economic and environmental waste and is becoming increasingly unacceptable ▪ Few regions report data publicly Source: Capterio 4 CONFIDENTIAL AND DRAFT
Flaring is a major source of economic and environmental waste Source: Capterio Global Flaring Intelligence Tool (GFIT), NOAA 5 CONFIDENTIAL AND DRAFT
There was a time when exploration success symbolised by flaring … Source: Newspaper article, Q1 2020 6 CONFIDENTIAL AND DRAFT
Flaring is a major source of emissions and revenue loss CO2 Gas volumes Revenue CO2e emissions CH4 BCMe per year US$ billion p.a. Billion tonnes p.a. End use gas 3,929 432 7.2 Flared gas 18 145 161 16 1.2 174 2 16 21 0.3 0.9 1.2 focus Flared liquids 3 15 0.03 Vented gas 9 82 4.7 4 Leaked gas 34 1.9 432 19 14 465 Total 3,929 145 146 4,220 15.0 +33 7.2 +7.8 +291 (7%) Note: gas assumed at global average of $3/MMBTU and oil at $40/bbl. CO2e emissions from methane estimated using a multiple of 84 of that of CO2, based on a 20-year timescale. Assume combustion efficiency is 90% at flares, due to incomplete combustion & natural gas is predominantly methane. Assuming 15 barrels of liquids are emitted per mmscf of gas. Source: BP Statistical Review of World Energy (2020); World Bank / GGFR (2019); IEA World Energy Outlook (2020); Capterio estimates 7 CONFIDENTIAL AND DRAFT
Our research identifies 3 “root causes” to gas flaring ▪ Flaring is often not reported, or not reported 1 Lack of reporting consistently, especially for “non operated” ventures Not ▪ Flaring is rarely metered, so it is estimated at best (and sufficiently on Lack of quantification frequently found to be underestimated) the radar (of operators and / ▪ Seen as an inconvenience and “ignored” (or “denied”) or the Other priorities more critical regulator) ▪ Other priorities loom higher on the radar ▪ Fiscal terms (especially under a PSC) are often are a Fiscal terms unattractive 2 disincentive Why does Perceived to ▪ Perception that solutions are too high cost (or that only flaring occur be Lack of cost-effective solutions high-tech solutions will work) today? uneconomic ▪ Current fines (where present) are insufficient to change Existing penalties ineffective behaviour (and/or are underpaid) 3 ▪ Operators and equity partners see higher returns Lack of financing elsewhere (and have limited budgets) Lack of resources ▪ Many other “more pressing” topics, and “small projects” Limited bandwidth are not their niche Source: Capterio 8 CONFIDENTIAL AND DRAFT
Countries have widely-differing performance on gas flaring Gas flaring compared to oil production Gas flaring Scf per barrel of production per day, coloured by rank of absolute flaring volume bcf/d, 2018 Russia 2.1 650 Flaring intensity Iraq 1.7 scf / bbl 600 Iran 1.7 USA 1.4 550 mmscf/d million bbl/d scf / bbl % % Algeria 0.9 Production volume 500 Intrinsic Approach from operator to Waste disposal 1 2 3 Venezuela 0.8 scaling factor gassiness utilize produced gas method Nigeria 0.7 450 How much oil How gassy is the What proportion of gas is not How much non-utilised resource is being resource? productively utilised? gas is flared? Libya 0.5 produced? i.e. what is the i.e. how much is not used for i.e. how high is 400 resource provenance, EOR, power generation etc. combustion efficiency Mexico 0.4 maturation history 350 Angola 0.3 Oman 0.2 300 Saudi 0.2 Low flaring intensity 250 Egypt 0.2 can be achieved with Malaysia 0.2 200 the right policy and Indonesia 0.2 practices 150 Kazakhstan 0.2 Ø 140 China 0.2 100 Congo 0.2 50 Turk’stan 0.1 Gabon 0.1 0 India 0.1 Algeria Iran Russia United States China Canada Netherlands Canada 0.1 Venezuela Oman Mexico Denmark Azerbaijan Norway UK 0.1 Libya Nigeria Angola Saudi Arabia All others 1.4 Iraq United Kingdom Source: Capterio analysis; World Bank; BP Statistical Review of World Energy. Excluding Yemen, Syria, Gabon, Cameroon, Uzbekistan 9 CONFIDENTIAL AND DRAFT
Norway and Netherlands have lowest flaring intensities in Europe Gas flaring Gas flaring compared to oil production Venting Venting compared to oil production Scf per barrel vs million barrels per day Mmscf/d Scf per barrel vs million barrels per day Mmscf/d 113 25 UK 122 UK 27 87 x6 x9 17 Norway 18 Norway 3 Denmark 10 Denmark 2 From 11 flares Netherlands 1 10 10 Netherlands 1 1 Mainly from UK Denmark Norway Netherlands UK Denmark Norway downstream gas and onshore conventional Source: IEA, BP Statistical Review, World Bank GGFR, Capterio 10 CONFIDENTIAL AND DRAFT
Gas consumers will increasingly be choosing “lower emission” gas Gas flaring scale (volume flared) and intensity (flares per barrel of oil production) map Europe import 320 BCM Natural Gas Key: per barrel oil Flare rate L, H H, H 145 scf/bbl L, L H, L 195 mmscf/d Flare volume Source: Capterio analysis; World Bank; BP Statistical Review of World Energy 11 CONFIDENTIAL AND DRAFT
There are several advantages of flare optimisation projects ▪ Reduced risk of accidents | Healthier operating Safer operating environment conditions Lower emissions ▪ Lower emissions of CO2, CH4, NOx, SOx, black carbon Reduced emissions ▪ More product to sell, better uptime, greater reserves Higher revenue and field life, better market access Flare monetisation Improved ▪ Lower powergen costs, lower downtime & maintenance, projects financial Lower costs longer equipment life, lower penalties, lower risk deliver value performance through … ▪ Improved access to financing, investability and lower Improved financing Higher NPV, IRR cost of capital ▪ Improved reputation with NOC, government and better Improved license to operate community relations ▪ Better internal company perception / Better motivated staff Improved staff satisfaction with lower turnover Improved reputation ▪ Greater market share (or pricing potential) associated with Greater market access lower supply-chain emissions ▪ Improve country / NOC reputation | Stimulate new capability / industry development | Create jobs in this an Trigger wider benefits other sectors | Attract greater in-country investment Source: Capterio 12 CONFIDENTIAL AND DRAFT
Agenda Gas flaring today: what and why Solving gas flaring: how The role of the geoscientist in gas flaring 13 CONFIDENTIAL AND DRAFT
There are many technologies that can reduce gas flaring, but to solve it, we need to address each of the root causes • EOR | Disposal | Storage Reinjection main Local focus operations • Operations | Services Powergen ▪ Many companies • Pipeline | Virtual pipeline | CNG Raw gas assume that Flare gas “leading solutions technology” is • Condensate | LPG | GTL | LNG Liquids required to Saleable solve flaring product • Methanol | Ammonia | Urea Petrochemicals ▪ But technology is, in general, • Cement | Fertiliser | Bio services Products not the issue in non-OECD countries • Computing | Other Other Source: Capterio 14 CONFIDENTIAL AND DRAFT
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