Three Point Energy Inc.

How an Oil and Gas Company Can Reduce The Power Cost Per BOE

noreply@blogger.com (Chris Hamilton) — Tue, 08 Dec 2009 20:30:00 +0000

How can a company potentially reduce their electricity cost per barrel of oil equivalent (BOE)?

By using a turbine to generate electricity to be used internally or sold back into the grid.

First things first, in the example here, it is a conventional oil well in the Western Canadian Basin (British Columbia, Alberta, Saskatchewan and Manitoba). The well also has to have the right conditions:

Proper temperature on water cut from the wells production, which should be at least 95 degrees Celsius
Flare from gas on well with proper consistency
A way to boost water temperature to the appropriate level to drive a turbine, which could be solar or a combination of solar and gas
Solar with storage unit to keep a consistent heat for a 24 hour period

In order to show how to reduce the electricity cost, the following example will be used:

Background:

The average oil well in the Western Canadian Basin produces 40 barrels of oil equivalent per day (BOED)
Average Q2 2009 operating costs for 80 publicly listed juniors and intermediates with conventional production in Western Canada is $12.57/BOE
Power costs can range between 20% and 40% of overall operating costs depending on the location of wells
This would be between $2.51/boe and $5.03/boe for the electricity portion of the operating costs

Assumptions:

Assume that a well site uses an electric 20 HP motor - or a combination of 20 HP's
20KW electric turbine will be used to provide the electricity.
Assume this turbine would have yearly costs of $15,000
Assumption that there is a readily available heat source that provides the optimal heat, either flared gas, ground water, solar, etc.

Results:

At 25% of overall costs associated with electricity, this would be equal to $3.14/BOE
By using a turbine on site to create the electricity required, the new cost for electricity is $1.03/BOE, which is 67.3% lower than the current rate.
If electricity cost are 40% of the overall operating costs, then this would be equal to $5.03/BOE
The savings from using a turbine would be $1.03, 80% less which is equal to a $4.00/BOE savings

Based on an average oil well with 40 barrels per day production and a 10 reserve life index, the life time savings would be $3,121,000 if you were to save 80% on $5.03/BOE electricity costs.

Based on the average oil production of 83 TSX listed conventional oil and gas companies, their average oil production is 4,401 BOED. On the low end, they could be adding on average, $9,286 per day in profit and on the high end, $17,604 per day in profit if they were to implement a turbine technology. Given an 80% savings or $4.03/BOE, on all of this production with a reserves life of 10 years, then the overall savings would be $353,400,300.

There are a lot of wasted opportunities for harnessing potential sources for electricity generation in oil and gas operations, all of which can help reduce the operating costs for these companies.

Three Point Energy Inc. assists companies with profitable green projects. Three Point Energy Inc. can be contact at info@threepointenergy.com.

How to Save Up To 42% On Eligiable Costs For Green Energy Projects

noreply@blogger.com (Chris Hamilton) — Mon, 09 Nov 2009 01:09:00 +0000

There are a few different government programs that you can access to help offset the costs of green electricity initiatives or environmental projects, such as waste heat recovery. The one that I am writing about here is the Scientific Research and Experimental Development (SRED) program. This is a program that is run by the Government of Canada through the Canadian Revenue Agency and provides either tax credits or a refund depending on the type of company you are. I won't be going into the corporate structures and how they work with SRED (some detail is provided below), but if you are interested, please contact me at chris@threepointenergy.com and I will get you a contact that you can talk to about this.

The following information comes from Wikipedia:

"SR&ED expenditures (already deducted against revenue) may qualify for investment tax credits (i.e., a reduction in income taxes payable), cash refunds, or both. Qualifying expenditures may include wages, materials, machinery, equipment, travel and training expenses, property taxes, utility expenses some overhead, and SR&ED contracts from the following activities:

- Experimental development
- Applied research
- Basic research
- Support work

In order to claim such expenditures, an assessment on scientific or technological eligibility of the claimed activities needs to be performed, according to three criteria:

- Scientific or technological advancement
- Scientific or technological uncertainty
- Scientific and technical content"

SRED can be a great way to offset the costs of green energy projects that you plan to undertake. Depending on the legal structure of your company, credits can be up to 35%. For a Canadian Privately Controlled Company (CPCC), the Credits on the first $2M of eligible costs on a project are 35% and 20% on the rest. For other corporations and such, there is a 20% credit on all eligible costs on the project.

In addition to this, the different provinces have territorial tax credits. For example, Alberta and British Columbia have 10% credits. When you take this into effect and you are a Canadian Privately controlled company, then the blended rate that you can achieve on a project that is $2M and below is 42%.

Example:

Say you have a $2M project and you are an Alberta based CPCC and 4% of the project costs are eligable for a combined 42% tax credit, then your $2M project is now $1,664,000 and you saved yourself $336,000 or 17% by applying for SRED. Right out the gate your project will pay for itself quicker. At $75/MWH on a 1 MW turbine, a $2M project would have a simple payback of 3.17 years. With SRED applied under these circumstances, the the simple payback would be in 2.64 years instead of 3.17 years.

The Government of Canada does provide a self assessment tool to see what areas of your project might be included in a SRED claim. This information Can be found here.

Obviously with this incentive and others can have a significant impact on any environmental or green project that you may be undertaking. To understand how SRED can play into your projects please contact Three Point Energy and we will be more than happy to assist you in getting started.

Three Point Energy Inc. assists companies with profitable green projects. Three Point Energy Inc. can be contact at info@threepointenergy.com.

Flare from Gas Plants in Alberta - How Much Potential Electricity is Wasted

noreply@blogger.com (Chris Hamilton) — Sun, 11 Oct 2009 12:46:00 +0000

This is probably a little known fact, outside of the oil and gas industry, or people who live in Western Canada. There is a lot of gas that is flared because it can not be processed. Typically it is because of safety reason, if something somewhere in the process stops or slows down, the gas that comes into the facility from the field level needs to be flared as it can't be processed.

In fact, based on August 2009 figures, companies flare on average $457,720 worth of gas a day based on $5/mcf for the month of August. This is equal to 91,544 mcf/day. If this flare were to be harnessed, assuming that it is a constant flare and the gas would be of good enough quality to drive a turbine, then in August 2009, the total flare would have been able to produce 508MW/h of electricity or the equivalent of providing enough electricity for about 400,000 homes. Pretty significant when you think about it. This would be equal to producing enough electricity for most or all of the residences in Calgary or Edmonton, assuming 1 residential location per 3 to 4 people.

Biggest offender is a large Canadian based oil and gas company with about 51 MW/h, which would be almost enough to provide electricity for about 40,000 homes per year or probably a city the size of Red Deer.

Over all, if you were to harness this flare for power it would allow for the reduction of approximately 768,970,746 pounds of CO2 from a coal powered electricity plant or 490,676,572 pounds of CO2 from a gas fired electricity plant, just for the month of August 2009, there are still another 11 months in the year.

So by harnessing even a portion of the flare from gas from facilities, oil and gas companies could have another revenue stream that is highly profitable. You have to ask yourself, why haven't they?

How an Oil and Gas Company Can Potentially Offset the Costs of British Columbia's Carbon Tax

noreply@blogger.com (Chris Hamilton) — Sat, 26 Sep 2009 19:29:00 +0000

There is a new major expense that is impacting operating costs for oil and gas companies operating in British Columbia. It is the BC Carbon Tax that applies to the purchase and use of fossil fuels in the province of British Columbia. The tax rate starts at $15/tonne in 2009 and increases energy year by $5/tonne until 2012 when the rate will be $30/tonne.

As of July 1 2009, British Columbia's carbon tax rate on 1 Gigajoule of natural gas is $0.7449 or $0.709 per mcf. In 2010 the tax will be $0.945/mcf, in 2011 it will be $1.18/mcf and it will finally top out at $1.41/mcf in 2012.

Considering that the 2010 strip forward on natural gas is $6.05/mcf Canadian (as of October 3rd, 2009), this would mean that the tax on any gas consumed would be equal to almost 12% of the price. On the current AECO spot price of $2.66/mcf Canadian on October 3rd, 2009, this would represent a tax rate of almost 27%.

Another view on this is that the tax for 2009 is also equal to a 9% additional cost on the average operating costs of $7.63/mcf (based on National Energy Board figures for 2008). If the operating costs were to remain flat at $7.63 until 2012, then the new carbon tax would represent 12.4% additional costs in 2010, 15.5% in 2011 and 18.6% in 2012.

As it relates to oil and gas companies, in their operations, one the of largest consumers of natural gas will be their compressors for pipelines. The average size of a compressor on a pipeline is BC is 970 HP and based on initial calculations, the carbon tax would be approximately $57,000 this year, going to $142,000 in 2012.

Most oil and gas companies currently look at paying the tax as their only option, but there is another option that is available to offset the new tax. It involves harnessing waste heat from compressors and utilizing it to create electricity that can be used to offset the new costs of the carbon tax.

This would be accomplished by harnessing the waste heat to drive a turbine/generator to create electricity that could drive a supplemental electric compressor or this electricity can be sold back into the grid to create a revenue stream that can offset a portion or all of the carbon tax costs.

There is a double positive effect in harnessing waste heat to create electricity. One, you can generate a revenue stream on the electricity sold and two, you will receive carbon offset credits that have a value on the open market. Currently these credits are going for $15/tonne and this is approximately equal to the amount you would receive from generating 1 MW of green electricity.

If an oil and gas company understands the financial impact of the new carbon tax as it relates to their business, then they can start looking for waste heat in their operations to generate green electricity projects to assist with offsetting part or all of the new costs associated with the BC Carbon tax.

Three Point Energy Inc. assists companies with profitable green projects. Three Point Energy Inc. can be contact at info@threepointenergy.com.

Introducing Three Point Energy Inc.

noreply@blogger.com (Chris Hamilton) — Sat, 26 Sep 2009 13:57:00 +0000

Three Point Energy Inc., a Calgary Alberta based company, was started to assist companies with profitable green projects for generating electricity to offset operating costs or to add revenue in addition to providing valuable carbon offset credits.

Originally Three Point Energy looked at projects in the Canadian Oil and Gas industry, but has looked at other industries such as commercial and industry facilities where waste heat can be used to generate electricity.

Three Point Energy acts as a project manager to identify projects, create a feasibility study, determine the appropriate technology and provide ongoing support.

If you have any questions, please feel free to contact us at info@threepointenergy.com.