Oil & Gas Producer Finds Success Through Decommissioning Wells

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Oil & Gas Producer Finds Success Through Decommissioning Wells

MARKETS: ENVIRONMENTAL | COMMODITY: VOC & NOX ERCs | CLIENT: OIL & GAS OPERATOR

Situation

Oil and gas producers regularly face requirements to plug idle wells. This longstanding member of the oil and gas exploration community had numerous idle wells that were triggering the plugging requirement. The producer realized quickly that plugging these wells will be costly but necessary to remain compliant with government requirements. The oil and gas producer sought out environmental alternatives to reduce the cost burden associated with decommissioning the company's wells. However, they lacked a clear perspective on the emission reduction credit (ERC) markets as well as the drivers impacting the well decommissioning process.

While the company weighed their available options, the highly complicated and costly decommissioning procedure made the path to meeting requirements in a cost-effective manner, seem impossible. The company planned to begin decommissioning their idled wells while still entertaining a creative way to offset the costs associated with well plugging.

Solution

In non-attainment areas of the country, there’s an opportunity to generate ERCs based on NOX and VOC emissions derived from the equipment that operated the well, but this opportunity is highly time-sensitive and has a specific administrative process; hurdles that many producers are not aware of. AEGIS partnered with the oil and gas producer to outline the fundamentals of the ERC markets, revenue opportunities associated with decommissioning wells, and strategies that would enable comprehensive compliance with regulations. A dedicated AEGIS expert was assigned to define the company’s goals, potential opportunities, and develop a clear strategy for generating ERCs through the decommissioning process.

AEGIS identified a revenue source and managed the process from start to finish on the ERC generation and monetization. With the company’s approval, AEGIS worked with the state air agency to identify and apply for the VOC and NOX ERCs generated from the permanent reduction of emissions associated with the equipment operating the well.

Outcome

With AEGIS’ assistance, the oil and gas producer was able to generate and register 7 tons of VOC ERCs and with an additional 0.5 tons of NOX credits. This amounted to approximately $700,000 for the company, which easily covered the $50,000 cost of plugging the well. While decommissioning and plugging wells is a costly effort, credits that AEGIS identified and guided the company through registering significantly reduced the financial burden associated with the process. This activity also allowed the company to meet its ESG goals of permanently reducing emissions.

With AEGIS’ environmental expertise, the oil and gas producer was able to make fast, sophisticated decisions that maximized the company’s effectiveness and gave it the flexibility to take on further projects. This was all accomplished at a fraction of the time and cost that would have been incurred with an in-house program.

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