Abandoned oil and gas platforms in the North Sea can be profitably converted into production and storage units that convert electricity from offshore wind farms into hydrogen and synthetic gas. That’s the main finding of a new study carried out by the Dutch Energy Delta Institute (EDI). A positive business case can be made for this application if the gas can be sold to a dedicated niche market for green gas, e.g. the chemical industry or the transportation sector, notes the research team led by professor Catrinus Jepma. In this article Jepma and co-author Miralda van Schot explain how the oil and gas platforms in the North Sea could get a new lease on life.
If there is one area where the energy transition is visible in all its drama it is the North Sea region. Here in the North Sea, its shallow Southern part in particular, and the region scattered around it in Norway, Denmark, Germany, the Netherlands, Belgium and the UK, the Changing of the Energy Guard is clearly visible.
Fossil fuels and renewables will not only coexist for some time, but will also need to collaborate in order to secure a sustainable, reliable and affordable energy system
On the one hand there is the declining fossil exploration and production sector. North Sea oil and gas production peaked around 2000, and is now declining to the point that the first of the more than 600 offshore platforms and installations are being decommissioned. These will gradually be followed by the others over the next few decades, unless alternative uses for the platforms and the grids can be found. Add to this the fact that the Dutch government put a production cap on the giant Dutch onshore Groningen field of 27 billion cubic metres (in 2012 production was 52 bcm), with further declines expected in future and you have the picture of a North Sea fossil energy production sector in decline.
Exit fossil fuels
By contrast, renewable energy production is booming, as is shown by what has been achieved already, but even more so by the capacities scheduled to be installed. For example, the current number of about 3,000 offshore wind turbines (or about 10 GW installed capacity) already operative in the North Sea region is expected to increase to anywhere between 19.5 and 28 GW by 2020 (central 2020 scenario by EWEA: 23.5 GW), to rise further thereafter to possibly double that level. In addition, there is the extending hydro energy grid connection between Norway and other North Sea countries (Netherlands, Germany, and possibly UK), large numbers of new solar parks, district heating initiatives, and local as well as industrial biomass facilities typically in the countries around the North Sea. Together, they are turning the North Sea region into a giant New Energy Valley.
One could look at this Changing of the Energy Guard as two guards passing each other: exit fossil fuels, enter renewables. In the long term, this image is probably correct, but in the short and medium term, fossil fuels and renewables will not only coexist for some time, but will also need to collaborate in order to secure a sustainable, reliable and affordable energy system.
A positive business case applies typically if the hydrogen and oxygen generated offshore can be sold to dedicated niche markets, which are looking for ‘green’ gases
One potentially promising new example of a smart North Sea combination of renewable investment with oil and gas production is to use existing offshore installations as locations for new conversion and storage units that are used to enhance the business case and market potential of nearby offshore wind energy. The reason this concept makes sense and could help optimise the energy system is that on the one hand the installations and connecting grids are already there and on the other hand the renewable sources have to cope with intermittency, so backup and storage improves their long-term business case.
By combining the two the fossil installation may get a new purpose and may not have to be decommissioned yet, the existing grid does not need to be written off, new grid investment may not be necessary and the wind energy can be converted in a way that makes it easier to store and to transport, and therefore to sell more of it at a better price.
In a report published in December 2015, the Energy Delta Institute (EDI) presented the findings of a study, commissioned by the Dutch Ministry of Economic Affairs and NOGEPA, on a simulated wind-and-gas-energy-conversion pilot project in the North Sea. In the study, this concept has been worked out by means of an extensive calculation of a virtual pilot investment in an offshore installation capable of turning the nearby offshore wind energy into gas with the help of power-to-gas conversion, and to store, transport, and sell the gas from the offshore platform.
More specifically, in the simulated pilot an offshore oil or gas platform, due to be decommissioned, is used as location to convert power from an adjacent offshore wind park into hydrogen, methane or syngases with the help of an electrolyser and related equipment installed on the platform. The analysis is based on modelling and simulation of risks and barriers, but also looks at business opportunities.
A first question that was addressed was how much energy conversion capacity can realistically be installed on North Sea installations. This obviously depends on the degree to which one would try to convert the intermittent offshore wind energy into a non-intermittent baseload source of energy, and on the demand profiles. In this regard, the study came to the following conclusions.
Given circumstances in the North Sea, to fully stabilise x MW wind capacity output, a electrolyser/fuel cell unit with a capacity of 0.45x MW is required to turn intermittent energy into baseload energy. Assuming max. 20-30 MW conversion capacity per installation would be technically feasible, this would mean, for instance, that the foreseen additional Dutch Energy Agreement’s offshore wind capacity of about 4.5 GW could be fully stabilised with the help of about 60 platforms with 30 MW conversion capacity each. This would seem feasible in the long run, given the number of existing platforms and installations.
Positive business case
Next, it was found that in an area of max. 20 km around the seven planned offshore wind farms in the Dutch part of the North Sea area, some 580 – 870 MW capacity could be made available, potentially converting about a quarter of their generated offshore wind energy.
In addition, with the help of a stochastic net present value (NPV) model (incorporating power market stochastics), for a number of offshore conversion and storage constellations, the business cases were analysed. In doing so, several options were considered.
A major conclusion was that a positive business case applies typically if the hydrogen and oxygen generated offshore can be sold to dedicated niche markets, which are looking for ‘green’ gases (unlike traditional ‘non-green’ hydrogen and oxygen offered on the market). Such destination markets could be the chemical industry or the mobility sector. In fact, a positive NPV even resulted if the hydrogen is injected into the existing natural gas distribution system assuming a grid connection is available. In this case, however, the positive NPV was fairly limited. Options adding a fuel cell to the system, or a methanation unit, turned out not to be economically feasible (yet).
The NPV outcomes for the various options mentioned turned out to be a lot more positive than anticipated, while the technical barriers did not seem to be insurmountable
A realistic case could possibly be for platforms that are abandoned or close to being taken out of production to be used for electrolysis, generating oxygen and hydrogen, which then is used for different destinations: direct sales of hydrogen to the industry and possibly the shipping sector while mixing possible surpluses occasionally into the natural gas system.
The main technical barriers of offshore conversion have to do with safety issues, availability of space on the platforms, and corrosion. Connecting the offshore wind farms via power cables with the platforms may also be complex.
Savings on power grid investment
On the whole, the NPV outcomes for the various options mentioned turned out to be a lot more positive than anticipated, while the technical barriers did not seem to be insurmountable. This was the more surprising since in the study the main externalities – on average expected to be positive due to the savings on power grid investment – were not included in the economic analysis. The NPV outcomes of the options became even more positive in the scenarios in which the following assumptions were made: power prices will become more volatile as the scale of intermittent supply continues to increase; and the ‘green’ nature of gases will in future induce a premium price as compared to fossil gases.
We have already started on a follow-up feasibility study, commissioned by the Netherlands gas innovation platform (TKI Gas) and the Dutch gas transmission system operator Gasunie, to apply the findings to one or two concrete North Sea platforms. This study will be carried out by EDI in cooperation with ECN (Energy research Centre of the Netherlands) and is scheduled to be finalised by the autumn of 2016. In addition, a major international conference on North Sea Smart Combinations is in preparation, and is likely to take place in late Spring of this year (further announcements on this will follow in Energy Post).
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Prof. Catrinus Jepma is professor of Energy and Sustainability at the University of Groningen and senior expert at Energy Delta Institute. Miralda van Schot has a MSc in International Development Economics and is currently employed by Gasunie through the Corporate Master Programme of the University of Groningen.
Energy Delta Institute (EDI) is an international energy business school. Through a variety of energy training courses and networking activities, EDI provides professional support to energy professionals. EDI was founded in 2002 by GasTerra, Gasunie, Gazprom, Shell and the University of Groningen, later joined by A.Hak, EBN and Enagás.
More information about the research can be found on: www.energydelta.org.