Re-Purposing Old Oil And Gas Wells: Turning A Liability Into An Asset

Abstract

There are roughly 450,000 petroleum wells in the province of Alberta, 155,000 of which are no longer producing and waiting to either be reactivated for production or permanently plugged and the land reclaimed. Although provincial government regulations stipulate no restriction for when the plugging and remediation must occur, the financial liability, estimated by the CD Howe Institute to be as high as $8 billion, remains. Meanwhile, these non-producing wells can be prone to fluid leakage, which can contaminate water and soil, pose asphyxiation or explosion hazards, and contribute to greenhouse gas emissions. Exacerbating these issues is that an increasing number of oil and gas wells are becoming “orphans”; that is, the ownership entity has become insolvent, leaving the well with no financially responsible owner. Thus, it falls upon other industry firms, the province, and its taxpayers to pay for their monitoring and eventual cleanup. As energy prices continue to languish, the risk of further insolvencies and increasing numbers of orphan wells is likely to rise. While low-volume wells are frequently left in the inactive state in hopes that improving economic conditions will allow resumption of profitable production, it has been shown that even with a drastic increase in resource prices inactive wells tend to be left inactive. Rather than continue to spend money to monitor these inactive wells and wait for the inevitable remediation costs, converting old petroleum wells into geothermal wells that produce heat and electricity has the potential to create transformative change for Alberta’s energy sector, simultaneously mitigating a liability and helping achieve The Alberta Climate Leadership Plan goal of replacing 5000 megawatts of coal-generated electricity with power coming from renewable sources by the year 2030. My research will answer: 1) Under which conditions can petroleum wells be repurposed, in an economically feasible manner, to generate geothermally produced electricity? 2) What policies are required to be drafted by regulators to facilitate this transition to geothermal production? I will draw upon economic datasets from historical plugging and reclamation costs to model the impact that several key factors, such as well age, materials used in well construction, downhole geology, and others to determine the impact each of these variables has on the cost of abandoning and remediating a petroleum well. Then I will use this model, along with expected revenue generation from estimated geothermal potential to categorize the wells according to their net economic feasibility. In interest of simplicity and creating a tractable model, my efforts are focused in the Rocky Mountain/Foothills region surrounding Hinton, Alberta. With these estimates, I will create a template that can be applied to any petroleum well in Alberta in order to quickly project which of them can be economically converted to geothermal energy production. Under a modified policy regime, these converted wells can help the province meet its renewable energy targets and simultaneously turn a liability into an asset.

AAPG Datapages/Search and Discovery Article #90346 ©2019 AAPG European Region, 3rd Hydrocarbon Geothermal Cross Over Technology Workshop, Geneva, Switzerland, April 9-10, 2019