Closing the loop: Bringing the circular economy to the oil and gas sector

The oil and gas value chain has always been a straight line, but the future is circular and sustainable, says Esra Al Hosani, technology specialist at ADNOC Offshore

Esra Al Hosani
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Esra Al Hosani

The oil and gas industry has long struggled with image problems—protestors are a regular sight at the offices of international oil companies—as the public becomes increasingly aware of environmental issues.

“This new generation is not like previous generations,” says Esra Al Hosani, a technology specialist at ADNOC Offshore. “Greta [Thunberg] and her friends, they are really concerned about the environment and they will push very, very hard on oil and gas companies. [Oil and gas firms] need to be ready when this happens, because it will happen.”
Al Hosani recently worked with the University of Cambridge on a thesis studying one potential application of the circular economy to reduce waste in the oil and gas industry. In a circular economy, ‘waste’ products are used to create new, useful products, sometimes across industries. It allows resources to remain in use for the longest period of time, rather than our current linear economy, in which we produce, use, and the dispose of products. She believes it has strong potential for this sector.

“I find this particularly interesting for the oil and gas industry because we have been blamed for so many things, and we try so hard to improve, but that is hard to do when you are dealing with oil and gas,” she says. “We need a different direction, we need different views.”

She notes that smaller initiatives like recycling paper, for example, are well-intended but are not big enough to tackle the real sustainability issues facing the oil and gas sector. Companies should address sustainability by looking at the areas in which they are creating the largest negative impact.

“So far the concept of the circular economy is mostly theoretical,” Al Hosani says. “There is not much practical research, so I decided to try a practical, real-life scenario in the oil and gas industry to study the typical value chain of the oil barrel and see if we can really maximize the value of oil.”

The typical measures to ‘maximise value’ include cutting capital expenditure or reducing headcount, she says, but she believes there is a better solution which also addresses sustainability issues. In her study, Al Hosani contemplates a way to use waste gas and waste water regularly produced during oil production, using ADNOC Offshore as her case study.

“One issue is our waste stream, specifically flared gas and produced water” Al Hosani says. “The oil and gas industry is particularly interesting with regards to energy and water, because it is possibly the only industry that not only uses water, but produces it in mass quantities, and calls it waste. Water can never be ‘waste’. And then they call it waste gas. Energy is never ‘waste’. They are only waste if you limit their potential to your current value chain.”

For many countries, the value chain for gas produced as a by-product of oil production ends with flaring. In a ranking of 2018 gas flaring volume, The World Bank revealed Russia as the world’s top flarer, followed by Iraq (ranked second) and Iran (3). Oman (11), Saudi Arabia (12), the UAE (24), Qatar (27), and Kuwait (29) are all among the top 30 flarers. However, in proportion to the amount of oil produced, Gulf nations on average flare less gas than other countries because they are so rich in oil.

“It is much cheaper to flare gas than to re-inject it, sell it, or save it,” Al Hosani says. “It is understandable that for the short term, especially for shareholders, we need to survive. With oil prices jumping back and forth, huge ambitions can get left behind. But if you give them a tangible result, they might think of it differently.”

She is quick to note that the UAE has a strong record in eliminating routine flaring, but that it is costly to deal with accommodated gas in an environmentally-friendly way, and calls re-injection a “waste of money” if there is no technical need for it to enhance oil recovery. Meanwhile, produced water is disposed of by drilling disposal wells, or by being treated and discharged in the sea.

Al Hosani sees a link between the gas and water produced in the upstream sector, and connects them to form a new value chain leveraging the ideas behind the circular economy.

“In my model, you produce the gas, you use it to power water treatment facilities, and then you ship the clean water—using the same tankers already transporting oil—to places in need,” she says. “I studied Cape Town as a recipient of water because they have a major hub for oil tankers. Our oil tankers go there anyway on their way to other places.”

When she visited Cape Town, South Africa, as part of her study, the government officials she met were anticipating zero water, despite the city’s sophisticated veneer. The Gulf is also in need of fresh water. “If you look into the water crisis, the UAE is at risk, but because we can afford it, we are desalinating seawater. We can afford it right now, but what if we eventually cannot? That is a problem,” Al Hosani adds.

When asked about the cost comparison for the current upstream value chain versus her proposed one, Al Hosani says that was not in the scope of the study—some of that information is confidential and would limit public access to her work. But she is adamant that there are financial advantages to reducing waste and improving sustainability.

“In the oil and gas industry, you are always working with a host country,” Al Hosani says. “You do not know what will happen, and you have to be alert and ready when legislation comes in, for example, saying you are not allowed to flare or you are going to be taxed really high. My study is an invitation for oil and gas companies to study it further.”

Under current market conditions, it would be difficult to convince anyone to approve extra capital expenditure, but the circular economy holds potential for a future with greater collaboration across industries and nations.

“Circular economy is an emerging concept, but it is lagging in many industries because it is daring. It is a big concept,” she says. “The biggest hurdle is that it depends on others, and no one wants to depend on others, especially when developing a company’s strategy. You cannot just depend on others, because that means a lot of work and a lot of alignment. This is why it is lagging.”

She still believes it is the way forward, and there appears to be some support for this higher level of collaboration to improve sustainability. The United Nations’ sustainable development goal 17 is to “strengthen the means of implementation and revitalise the global partnership for sustainable development.”

However, in the second part of her study, Al Hosani found that social acceptance of a circular model was not high. “The social acceptance was a bit on the negative side. People are interested, but they are still waiting for you to do the work, they are waiting for you to do everything and come to them with a ready business plan.”

Al Hosani is currently writing another thesis with Harvard University on corporate sustainability, again focusing on the oil and gas sector. She notes that people immediately link sustainability to the environment, but it actually has a wider scope, and the public has to buy in to make it effective.

“Sustainablity has three pillars: the environment, the social pillar, and the economy. They always have to be together.”

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