The Coming Boom in the “Counterstream” Business

You know about upstream, midstream, and downstream. Now, get ready for the coming age of "counterstream" which will leverage many of the industry's existing engineering skillsets.

Source: Shell.

Many opportunities lie under the surface of the earth, not only oil and gas for extraction.

In the same way that tight-gas technology of the 1970s and 1980s unlocked the US shale revolution, the accumulated expertise of our extraction industry forms the foundation for key components of new energy.

Besides other surface and subsurface applications, I propose that “counterstream” is the opening business of carbon capture and storage (CCS) and that it may be the first up in the next long-term boom in the industry.

The governments and populations of the rest of the world recognize the danger from a shifting climate and have made more aggressive commitments to the energy transition than the US has. The sums to be invested globally are estimated to run from $3 trillion to $6 trillion for each of the next 30 yearsas the world changes its infrastructure and its habits—a shift as profound as any in the modern age.

Academics and researchers have tried to scout out “pathways” to a low-carbon world using economic models to advise governments and industry on which actions offer the best chance—still not a guarantee—of dodging the worst damage to our other infrastructure and thus, to humanity. The most widely known and respected orienteering comes from the OECD’s International Energy Agency (IEA).

The IEA’s route for worldwide net zero by 2050 calls for a decline of about 5% of oil production per year, exiting 2050 at around 25 million B/D. But it also calls for major contributions, directly and indirectly, from the subsurface: CCS, geothermal, and possibly hydrogen.

To be clear, other elements of new energy require our industry’s skills found on the surface of the earth.

Wind and solar require leases or contracts with governments as well as skills in large, heavy, and remote construction projects. Offshore wind requires engineering and construction similar to offshore rigs.

Existing pipeline technology and even rights of way will be used to move first carbon dioxide and eventually hydrogen. The same established technology used to purify wellhead natural gas to pipeline specifications seems to remain the best choice for capturing carbon dioxide from flue gas streams.

Drilling engineers can obviously deploy their skills to drill for geothermal energy, and not just in volcanic areas and plate margins.

Besides the production of steam directly—some of which involves fluid flow in porous media as water is cycled through the hot rock—two other types of geothermal energy can use the Earth’s nearly infinite and carbon-free heat in the same sedimentary basins where we now operate.

Some research is investigating storing solar power as excess geothermal heat for recovery after dark. Fortunately, we have reservoir simulators that can calculate those solutions.

Geothermal energy may also call upon completions engineers to create the fracture network required for heat transfer in situ, or to increase the flow rates of sub-boiling water.

Some pioneering companies are even looking into using the balloon effect that is associated with hydraulic fracturing in nonpermeable zones as another way to store energy cheaply. Completions engineers can make those calculations well.

If fireflooding can be optimized, then reservoir engineers may eventually use the technique to produce hydrogen. The more I read, the more possibilities I find.

Still, I propose the best and most immediate opportunity is the “counterstream” business.

The upstream sector finds and collects the hydrocarbons before they flow through midstream to be put to valuable use by downstream. Then the waste products need to counterflow back to their origins for permanent storage. Forests, peats, and pastures store hydrocarbons, but permanent geologic sequestration remains the highest quality and thus most valuable process. Though somewhat dependent on price, permanent storage can also be started and scaled with current technology.

The IEA’s net-zero pathway calls for injecting significantly more carbon dioxide each day in 2050 than the world’s sum of produced oil in 2019. Capture will range from fossil fuels to industry to direct from the air, and the vast majority of that will come from projects not yet built.

The target requires increasing injection by three orders of magnitude over current levels—the equivalent of increasing production from 1,000 B/D of crude to nearly 2 million B/D.

Fortunately, the oil business stands able to serve. Besides delivering the hydrocarbons that continue to serve human needs, we can use the same process technologies, the same rights of way, the same pipeline and drilling technology, the same reservoirs, the same subsurface engineering, and even the same engineering tools to keep the carbon out of the atmosphere.

We could well be called “energy engineers,” or maybe “subsurface engineers,” as petroleum becomes only one, rather than the only, source.

As it stands today, US federal tax credits place an opportunistic bounty of up to $2.78/Mcf ($50/tonne) on carbon dioxide, significantly higher than it was at the start of the Trump administration.

Bipartisan legislation in 2017 approximately tripled the previous incentive, and the recent US infrastructure bill includes the SCALE Act to promote CCS.

Elsewhere, 61 national and subnational jurisdictions have taken the additional step of imposing market-based incentives on carbon, either through cap-and-trade or carbon taxes. The countries range from tiny Singapore, to wealthy Sweden, and to titanic China which launched its trading system last year.

Even if the US government does not catch up with these leaders in the near future, the voluntary carbon markets are being born and nourished.

Nongovernmental organizations have tabulated that more than 3,000 companies have made commitments to becoming carbon neutral and, separately, that national neutrality pledges cover now more than 75% of global emissions. Commitments to act by 2030 remain much lower, and follow-through remains unproven.

Still, all the momentum points in one direction.

If companies and countries that have pledged to become carbon neutral try to follow through, then they will need some way to get there even while continuing to use fossil fuels, and the options are limited.

Forests offer a vulnerable and ultimately temporary source of carbon storage. The processes for conversion of carbon to useful solids remain in development or testing.

On the other hand, our industry knows everything we need to know to lock carbon away permanently. If the growing number of commitments translate to growing actions, then companies, people, and governments will soon pay us to do it.

For Further Reading

BloombergNEF. Getting on Track for Net-Zero by 2050 Will Require Rapid Scaling of Investment in the Energy Transition Over the Next Ten Years

Great Plains Institute. Before & After: How the FUTURE Act Reformed the 45Q Carbon Capture and Storage Tax Credit

IEA. COP26 Climate Pledges Could Help Limit Global Warming to 1.8 °C, But Implementing Them Will be the Key

IEA. Net Zero by 2050

JPT. China Launches Carbon Trading Market.

The United Nations Framework Convention on Climate Change. Race To Zero Campaign

US EIA. Geothermal explained: Where geothermal energy is found