DATA 606

Winter 2024

Analysing the Dynamics of Oil and Gas Production in Alberta

Luke Bramfield

Ethan Burke

Riki Enquist

Niza Ngwira

February 19th, 2024

The oil and gas industry plays a pivotal role in Canada’s economy, contributing significantly
to its GDP, employment and energy sector. Canada, one of the world’s largest producers in
oil and natural gas, has its operations spread across various provinces, with Alberta being the
centre of the oil sands industry. This sector has complex operations and a significant
environmental footprint, making proper management and regulatory oversight a necessity.
The evolution of technologies and environmental policies has led the industry to more
sustainable efforts, emphasising resource management and efficiency, along with reduced
environmental impact. This project aims to understand the dynamics of the oil and gas
industry, specifically production, and battery gas flaring and venting in Alberta. Through
statistical analysis, we aim to discover insights into operational efficiency, resource
management and environmental sustainability within the oil and gas industry here in Alberta.

Background

If you live in Alberta, you probably know someone or have worked yourself in the oil and gas
industry. Energy is the largest export by percentage in Canada and employs 207 thousand
people in Canada and 85 thousand in Alberta alone. Alberta's oil sands have the fourth-largest
proven oil reserves in the world, after Venezuela, Saudi Arabia and Iran. However, this
subject manner also attracts negative media attention.

The association between oil production and negative environmental effects is readily
apparent, where in the process this environmental damage occurs warrants closer
examination. Within the context of Alberta's oil and gas industry, gas—predominantly
methane—emerges due to the geological conditions and the extraction techniques employed.
Methane is noted for its significant warming potential, an aspect critical to environmental
harm. Key upstream sources of methane emissions include venting and flaring, processes
utilised by operators to manage gas waste on-site. While a substantial portion of excess gas is
either sold or repurposed, circumstances arise necessitating venting and flaring.

The flaring of gas, which involves burning the methane gas. contributes to climate change
and impacts the environment through the emission of CO2, black carbon and other pollutants.
It also wastes a valuable energy resource that could be used to advance the sustainable
development of producing countries. Venting however involves the controlled release of
gas/methane directly into the atmosphere. The “0 Routine Flaring by 2030” initiative to
eliminate routine flaring by 2030 underscores a concerted effort by governments and oil
companies to address and mitigate the environmental repercussions of such practices. The
Alberta Energy Regulator (AER) enforces stringent regulations over these activities,
highlighting the critical focus on minimising environmental harm. This oversight is vital in
steering the industry towards more sustainable operational practices, aligning with broader
environmental protection objectives. We will look at this problem from a data-driven
viewpoint in this project.
The Dataset

The data came from the Alberta Energy Regulators (AER) ST60: Crude Oil and Crude
Bitumen Batteries Monthly Flaring, Venting, and Production Data. Directive 60 lays out the
"requirements for flaring, incinerating, and venting in Alberta at all upstream petroleum
industry wells and facilities''. Submission to the AER is obligatory thus giving us access to
population data. The data is released to the public in monthly installments, and we
downloaded and compiled 64 CSV files giving us a time series dating from 2018-08-01 -
2023-12-01.

Descriptive Statistics

To begin our analysis we want to get an understanding of the distribution of the variables of
interest.

Analysis

a. Analysis of In-situ vs Ex-situ Operations

In an effort to explore different types of batteries, we decided to focus on in-situ oil sands, an
important area in the changing world of oil sands development. Our study looks at two main
ways to get oil from oil sands: in-situ and ex-situ. These methods are chosen based on how
deep the bitumen, a type of heavy oil, is found. The in-situ method is used for oil that's more
than 75 metres deep and doesn't involve moving the earth on top of it. One of the most
common ways to do this is with Steam Assisted Gravity Drainage (SAGD). This method uses
two horizontal wells drilled close to each other. Steam is sent into the upper well to heat the
bitumen, making it thinner so it can flow down to the lower well, where it's pumped up to the
surface.

On the other hand, the ex-situ method is for getting to oil sands that are closer to the surface.
It involves removing the top layer of earth to reach the oil sands directly. In our data, we
called everything that isn't in-Situ as ex-situ, and that's how we sorted it. This method usually
uses big mining operations with large shovels and trucks to take away the earth and get to the
sand that has bitumen in it. While it works well for deposits near the surface, it can harm the
environment a lot because it changes large areas of land.

Our goal with this analysis is to compare in-situ and ex-situ methods of getting oil and gas
from oil sands. We also want to look at the environmental impact, especially how much gas is
flared and vented by each method.
In analyzing the environmental impacts of gas flaring and venting in in-situ versus ex-situ oil
sands operations, we found notable differences between the two methods. Our data reveals
that in-situ processes predominantly flare excess gas, indicating an effort to minimize
methane emissions by combusting them, while venting is less common. In contrast, ex-situ
operations tend to vent more gas into the atmosphere, raising concerns about methane release.
This pattern suggests that in-situ methods might employ more effective gas management
practices, possibly due to their more recent development compared to the traditional ex-situ
techniques. The environmental challenges highlighted by the high levels of flared and vented
gases in ex-situ operations underline the urgent need for better management of by-product
gases in oil sands extraction.
Considering these findings, our study directs to comparing oil and gas production volumes
across the two types of operations. The analysis of oil production trends over time reveals a
clear distinction: in-situ operations show fluctuating production volumes, which could be
attributed to the intricate nature of underground conditions impacting the effectiveness of
steam-assisted extraction. On the other hand, ex-situ operations maintain a steadier output,
likely benefiting from easier access to shallower deposits and a simpler extraction technique.
The examination of oil and gas production together, particularly through stacked bar visuals,
underscores that while ex-situ operations lead in gas production, a trend consistent with
earlier observations on flaring and venting, oil production presents a more evenly matched
scenario between the two methods.

b. Flaring and Venting

We wanted to investigate how the quantity of emissions differed between systematic vs.
random flaring and venting practices among oil and gas producers. To achieve this, we used
the Ljung-Box test which checks for repeating patterns or autocorrelations in time series data.
This method statistically quantifies the degree to which current flaring or venting practices
are related to previous months. To do this, it aggregates autocorrelations of the data at
different lags and compares this sum to a chi-squared distribution to determine if the
observed patterns are statistically significant.
The P-values obtained from the Ljung Box test reveal a bimodal distribution, which indicates
significant differences in the operational practices of producers regarding their flaring and
venting habits. This distribution suggests that producers tend to follow one of two patterns:
either they flare or vent consistently or they do so occasionally/randomly.

From these violin plots, it becomes evident that producers who engage in consistent flaring
activities emit, on average, four times the pollutants compared to their counterparts who flare
transiently. This disparity suggests that a more judicious approach to flaring could
significantly reduce the environmental impact of these operations. Instead of adopting a
routine of continuous low output, flaring, producers should opt to only flare when absolutely
necessary. Looking at the violin plots for venting, the pattern holds, just at a reduced level.
While the venting is lower volume, with the greenhouse warming potential of methane being
eighty times that of CO2, these values dwarf the flaring in terms of environmental impact.
While reducing venting is great, wiping it out altogether would be optimal which is simply
not an option for many smaller producers who simply do not have flaring stacks. Perhaps a
retirement of all batteries that don't contain flaring stacks would be diligent to eliminate this
problem.
By evaluating the box plots and violin plots, which compare both producers and locations, it
appears no discernible pattern or trend is correlating directly with either the producers
involved or the locations of their operations. This indicates that behaviors around venting and
flaring are battery-dependent, rather than dependent on company-wide or location-based
phenomena.

c. Calculating Operational Efficiency

In our assessment of operators within Alberta's oil and gas sector, we created an efficiency
metric calculated as the ratio of oil produced to the combined volume of gas flared and
vented. This metric serves as an indicator of how effectively an operator manages natural
resources. Some issues we ran into are some of the operators 0 values for gas venting and
flaring, complicating the analysis. Despite these anomalies, a significant portion of oil
production is attributed to operations involving flaring and venting as shown in Figure 1.
Therefore, our analysis proceeded by excluding null, NA, and zero values to maintain data
integrity.
 Figure 1c

Here (Figure 2), we have efficiency versus oil production data, represented through a scatter
plot, indicating a subtle correlation between these variables. This initial observation suggests
a potential linkage worth further investigation.

Figure 2c

To continue this analysis, we focused on identifying the operators with the highest and lowest
efficiency scores, to find the "dirtiest" and "cleanest" producers (Figure 3). This classification
is based on their relative levels of gas flaring and venting compared to oil production. This
comparison allows us to highlight the operators with the greatest room for environmental
improvement and those experienced in combining operational efficiency with environmental
care.
 Figure 3c: Top 5 operators with the lowest and highest score.

High Efficiency Operators: This group exemplifies that oil production can be achieved
without causing significant environmental harm. Medium Efficiency Operators: By
integrating practices from the more efficient operators, they can significantly improve both
their production and environmental footprint. Low Efficiency Operators: There exists
potential for these operators to adopt more environmentally friendly and efficient methods,
and the performance of this group highlights the urgent need for intervention.

Figure 4c

The trend analysis (Figure 4) reveals that environmental conscientiousness and oil production
do align. There is a visible correlation between increased efficiency and oil production,
suggesting that larger operators, by virtue of their scale, may have optimized their processes
to reduce gas flaring and venting more effectively than their smaller counterparts.

Lastly, we plotted the distribution of oil production across three efficiency groups in Figure 5,
with significant differences evident among them especially between low and high efficiency
groups. Notably, the medium efficiency group displays a distinct split in its value
distribution, suggesting that its lower half aligns more closely with the low efficiency group
while its upper half approaches the high efficiency group. This pattern implies that operators
within the medium group tend to exhibit characteristics akin to the more extreme efficiency
groups, rather than occupying a moderate middle ground. Meaning most operators are very
clean or very dirty.

Figure 5d

One major insight from this analysis is that operational efficiency and environmental
responsibility are not mutually exclusive in Alberta's oil and gas industry. By emulating the
practices of the most efficient operators and addressing the inefficiencies of the least
efficient, the sector can pave the way towards a sustainable future. Achieving this goal
displays a commitment to innovation and a dedication to continuous improvement.

Conclusion

In conclusion, our analysis has provided depth to an issue often approached from a surface
level understanding. It is a major issue and a black eye on the industry and one that will need
to be addressed rapidly.

Oil Production, gas flared, and gas vented involve a complexity of economic incentives,
operations, technology, and geology. When viewing these variables in aggregate as a function
of time, they move together, closely. When assessing the associations between these variables
in a linear model the implications are not as straightforward. There is statistical evidence to
suggest that oil produced, and gas produced, and their interaction contribute to increased
levels of gas Flared in a log-log model. However, as the assumptions of the regression are
violated, we can not trust the coefficient estimates. Additionally, the geographical analysis
showed clear differences in these variables and their proportions. This further supports the
finding that there are other factors at play not included in the analysis and applying broad
generalizations to make inferences about the population of batteries may not be the best
approach.
Moreover, Producers who flare continuously burn four times more gas than those who flare
occasionally, and that behaviors leading to flaring and venting are battery dependent rather
than on producer or location-based factors. Ex-situ operations, which benefit from direct
access to shallower deposits, lead in gas production and contribute to higher rates of flaring
and venting. This is contrasted with in-situ production, where variability is largely due to the
challenges posed by subsurface conditions affecting steam-assisted extraction. Operational
efficiency and environmental stewardship are not mutually exclusive; it is entirely feasible to
maintain environmental consciousness while ensuring effective oil production. These insights
form the basis of a strategic approach to reducing venting and flaring and the understanding
of their importance.

Due to the nature of this very rich data set, there is more room for statistical investigation.
Further analysis of different regions, vendors, and the behavior of variables could be
explored. Time series models could be applied to test for seasonality. The upstream Oil and
Gas Industry is busiest during the cold months when the ground is hard versus during spring
break up when the ground is soft. Another potential application would be a zero inflated
Poisson negative binomial regression. Due to the large occurrence of zeros in the dataset this
model may be appropriate if we could firm the zeros can be modeled independently. As in,
whether the battery is currently operational or not. This notion seems reasonable especially as
the variables that report actual quantities appear to follow a log-normal distribution. The
model could be useful for predicting not what amount will a battery vent or flare but how
many batteries are anticipated to vent or flare.