In Ecuador, Innovation Leads to Significant CO2 Reduction

A remote oil-producing region. Limited financial resources. A lack of infrastructure. These are just some of the broad challenges Ecuador faced as it explored ways to optimize its valuable natural oil and gas resources while ensuring the country preserved its diverse and unique Amazonian ecosystem.

By global standards, Ecuador’s oil industry is relatively modest. Proven oil reserves are approximately seven billion barrels, ranking the country 20^th globally. Notwithstanding this modest ranking, the oil sector plays a prominent role in the country’s politics and economic welfare, accounting for about 50 percent of Ecuador’s export earnings and about one-third of all tax revenues.

Ecuador’s major oil fields are located within the Amazon region, where spectacular biodiversity and fragile ecosystems are treasured and admired around the world. Because of technical and economic challenges, associated natural gas from oil production, was vented and flared rather than utilized, releasing significant amounts of CO₂ and other pollutants into the atmosphere. According to the United States National Oceanic and Atmospheric Administration, in 2011 Ecuador vented and flared more than 400 million cubic meters of natural gas. The government recognized something had to be done to harness and utilize this valuable resource.

Traditionally, the oil industry has found it difficult to implement gas flaring solutions that satisfy the diverse array of stakeholders. So it is with this backdrop that the government developed a plan for its oil and gas sector while also being vigilant about the dynamic and inseparable interplay between environmental concerns and petroleum production, most of which is controlled and operated by its national oil company, Petroamazonas EP.

“Our country is one of the world’s most environmentally and biologically diverse sites on the planet. Keeping our air, water and land clean is not just a consideration for us, it is the basis from which we operate,” said Oswaldo Madrid, CEO of Petroamazonas EP. “At the same time, the government’s policies have motivated our company to develop a new oil industry business model to ensure our natural resources are not wasted.”

Petroamazonas EP began the process by issuing a mandate for a team to develop a business plan, including strategies, technical solutions, business models and implementation structures to mitigate the perceived conflict between the need for energy and the threat to responsible environmental stewardship.

In came a new energy model: Optimización Generación Eléctrica y Eficiencia Energética, also referred to as the OGE&EE project. At a cost that exceeds USD 1.2 billion, it addressed both utilization of flared natural gas and the need for cleaner, more efficient power generation. OGE&EE consists of:

• new power generation facilities that utilize unstable and unreliable associated gas, replacing over 150 existing power generation units burning diesel;
• associated gas handling and transportation facilities that allow for this fuel to be converted into electricity;
• waste heat recovery systems to optimize exhaust heat; and
• mostly underground power distribution lines to interconnect various oil fields and production facilities, which then provide power to the surrounding communities.

The OGE&EE team, together with various Original Equipment Manufacturers, developed innovative technologies and systems to overcome technical and economical hurdles and challenges, some of which were new to the oil industry. One of these projects consisted of developing a fuel-flexible power generation solution that can burn either associated gas or crude oil, or a mixture of the two, thereby guaranteeing stable power supply even when associated gas supply is unstable and uncertain.

OGE&EE is a project of massive proportions. In terms of geographical scope, it covers approximately 25,000 square km, equivalent to 10 percent of the entire country’s territorial area. Over 300 people are part of the project team and an estimated 2,000 jobs have been created during the construction phase. OGE&EE also required the cooperation of numerous organizations and stakeholders, including an array of government agencies, oil companies, local communities, equipment manufacturers and suppliers, contractors, and financial institutions.

A second phase of the OGE&EE project is now well underway.

“Given the success of the first phase, the government has issued another mandate to extend the approach to all oil field operations and to all operators,” said Madrid.

Based on the amount of associated gas to be utilized, approximately 5 million tons of CO₂ will be reduced over 10 years with the project. It is also estimated to generate USD 730 million in savings for the government.