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Carbon Monetization for India’s Petroleum Industry.

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Presentation on theme: "Carbon Monetization for India’s Petroleum Industry."— Presentation transcript:

1 Carbon Monetization for India’s Petroleum Industry

2 Outline  About Us  Carbon Monetization

3 We are industry leaders with innovative technology and commercial experience around carbon management Sarasijam Technologies Carbon Management Solutions GTC TechnologyAdi Analytics 1 2 3 Leading global engineering and technology licensing company Reputed India-based energy technology consulting company Management consulting company for energy and chemical industry

4 Sarasijam brings deep oil/gas expertise to help clients solve problems using innovation and technology About Sarasijam Technologies  New Delhi-based consulting firm  Established in 1999 Services Offered  Facilitate sales and operations in India  Lead R&D and develop technologies  Synthesize insight with market reports Domain Expertise  Deep expertise in oil, gas, chemicals, energy, and industrials  Talented, cost-effective staff of PhDs, MBAs, and experts INTERNATIONAL CLIENTS

5 GTC is an established licensor of chemical, refining, and gas processes … About GTC Technology  Houston-based chemical, refining, and gas technology licensor  Foster Wheeler and Glitsch heritage Services Offered  Technology and equipment licensing  Feasibility analysis and engineering  Reliability and maintenance services Domain Expertise  Chemicals and petrochemicals  Natural gas and CO 2 processing  Refining and fuels treatment SELECT LICENSEES

6 … With proven capabilities in project development, R&D, engineering, technical services, and mass transfer equipment Project Development Engineering Licensing Tech Services Research & Development Mass Transfer Solutions & Equipment GTC Technology Feasibility study Basic engineering Detailed engineering Petrochemical Refinery Gas processing Start-up and commissioning Site installation and supervision Operations training Pilot plant testing Mass transfer technology Solvents and catalysts Equity participation Product marketing

7 ADI Analytics is a boutique consulting firm serving clients in both industry and the public sector Driven by hypotheses, data, and analytics Collaborative with client staff Grounded in industry expertise  Evaluate markets and opportunities to grow businesses  Gather and analyze difficult-to-get information to address uncertainty  Identify needs, ideas, and opportunities to optimize costs  Design and implement processes to improve organizations We use a Clear and Robust Approach … … To Deliver Actionable Consulting and Insight


9 … Offering a variety of consulting services to help clients improve their strategy, operations, and technology Build valuation models to analyze investments in capital projects, businesses, or capabilities to estimate economic value, ROI, NPV, IRR, risks, and other metrics Investment Analysis Develop and explore carefully drawn future scenarios to define medium-, long-term visions and pressure-test them through quantitative, analytical models Scenario Planning Advise clients on competencies and improving them with organization and resource alignment to enhance competitiveness, entry barriers, and shareholder value Business Strategy Understand technologies including their business impact, cost, trends, competing options, deployment risk, and commercialization success Technology Assessment Assess organizational goals and “as is” processes to identify gaps and design “to be” processes that fill gaps and achieve target goals Process Design Implement programs for ideation, portfolio development, stage-gate maturation, open innovation, IP management, functional excellence, and talent development Innovation Strategy Conduct in-depth research and analysis to identify new markets or segments, their size, profitability, growth, competitive landscape, client fit, and execution strategy Market Research Benchmark client capabilities, costs, and competitiveness against industry based on public information and rigorous modeling and suggest improvement ideas Competitive Benchmarking

10 Recent clients include the U.S. Department of Energy, a biofuels start-up, and a national oil company  Assess technology pathways and their economics for upgrading bio-crude oil  Scout for emerging technologies to improve economics of bio-crude oil upgrading  Support company’s pricing and regulatory strategy for bio-crude oil VC-Backed Biofuels Start-Up  Develop investment options in the area of carbon capture and storage (CCS)  Reviewed state-of-the-art of CCS technology for use in oil and gas plants  Identified two technology acquisition opportunities National Oil Company  Evaluating life cycle economics of alternative energy technologies  Estimating and analyzing costs of advanced geothermal energy technologies  Developing novel analytics to study and forecast cost implications of innovation

11 Outline  About Us  Carbon Monetization

12 Stabilizing atmospheric carbon at 500 ppmv will require dramatic reductions in CO 2 e emissions over time Stern Review Target of 20 GtCO 2 e Current and Projected CO 2 e Emissions (Gigatons) 68% Reduction 76% Reduction Sources: Stern Review, New York Times

13 It will take a portfolio of technologies and $40-50 trillion to reduce carbon emissions by 50% in 2050 215 Million Sq. M. Solar PV Annually 32 New Nuclear Plants Annually 17,759 Wind Turbines Annually 70% Gain in FuelMileage and 95% Advanced Cars CCS for 55 Coal Plants Annually Double World’s Energy Efficiency 50% Reduction in CO 2 e Emissions by 2050 Sources: Chevron, International Energy Agency

14 Although Copenhagen failed to produce a global accord, several emerging economies pledged voluntary carbon cuts

15 To date, a total of 55 countries have pledged voluntary or mandated cuts in carbon emissions New Zealand Australia China Japan Indonesia South Korea Morocco Sierra Leone Finland Sweden Norway Great Britain Ireland Spain Portugal France Italy Germany Poland Kazakhstan India Russia South Africa Syria Israel Ethiopia Madagascar Democratic Republic of the Congo Romania Greece Costa Rica Brazil Alaska USA Canada Moldova Austria Belgium Bulgaria Cyprus Czech Denmark Croatia Maldives Marshall Islands Georgia Jordan Singapore Macedonia Estonia Hungary Latvia Lithuania Luxembourg Malta Netherlands Slovaki a Slovenia

16 TransportDistributionTotal 6% RefiningE&P Oil and gas companies will be forced to assess and cut greenhouse gas emissions across the value chain … 1% 12%1% 80%100% Combustion / End-Use CO 2 e Emissions Across Oil and Gas Value Chain (Based on Emissions in 2008)

17 Source Category Combustion Vents Area Non-Routine and Indirect Representative Sources  Boilers, heaters, engines, turbines, incinerators, and flares  Vehicles, barges, ships, and railcars  FCC catalyst regeneration, hydrogen plants, and coking units  Storage tanks and loading racks  Fuel gas system and other equipment leaks  Wastewater collection and treating equipment  Equipment blowdown and heater / boiler-tube decoking  Pressure relief valves and emergency shutdown devices  Offsite production of electricity, steam, and hydrogen... But this will be difficult because of the fragmented source of greenhouse gas emissions across the value chain Source of CO 2 e Emissions in Oil Refineries

18 Petroleum companies will have to respond using three levers – corporate strategy, innovation, and carbon markets Key Carbon Monetization Levers Illustrative List Corporate Strategy  Baseline carbon footprint  Benchmark with competitors  Plan strategy through war-games Innovation  Improve and optimize operations  Deploy new technologies  Invest in emerging technologies Carbon Markets  Understand carbon markets  Evaluate and nurture offsets  Develop CDM projects 12 3

19 Corporate strategy must drive carbon monetization initiatives Key Carbon Monetization Levers Illustrative List Corporate Strategy  Baseline carbon footprint  Benchmark with competitors  Plan strategy through war-games 1

20 A four-step approach to develop a corporate carbon strategy Description Understand the current state of an enterprise Identify and invest in “no regret” or low- cost options Engage and monetize through carbon markets Pave path to “low- carbon” future  Estimate company’s carbon footprint  Develop competitive intelligence  Review and project regulatory scenarios  Inventory options to improve operations  Define near-term risks and responses  Deploy engagement and advocacy plan  Identify and engage carbon markets  Inventory near- term projects, e.g., CDM  Pilot 2-3 projects to gain experience  Integrate learnings from initial efforts  Establish long- term carbon strategy  Implement strategy with dedicated team Tasks Initiative ManageBaselineMonetizeAmplify 1324

21 Scenario planning can help explore strategic themes … Break- through! Signposts include many demos, early adoption, and integration with infrastructure Winners are majors with equity in innovators from corporate venture groups Signposts include more voluntary cuts, growth of shale gas, and higher gas penetration Gas Galore! Winners include players with assets producing or using gas Winners include early movers in cleantech Clean Clean Energy! Signposts include public incentives, leapfrogging by BRICs, and price inelasticity Winners include conventional oil and gas majors Signposts include more squabbling, new discoveries, and continued recession Oil is King! Degree of Energy Affordability Degree of Global Cooperation on Carbon

22 Regulatory Scenarios … War games can help companies test efficacy of multiple strategic options Strategy and Operations Stakeholder Impact Oil Major Oil Super Major Ind. Refiner Auto Maker Biofuels Start-Up Electric Utility National Regional Players simulate regulators to draw up likely and unlikely scenarios Financial and shareholder returns are computed using complex models A wide range of stakeholders develop compliance strategies using a menu  Identify and evaluate critical assumptions  Uncover and assess major risks  Develop unconventional strategic paths  Describe show stoppers and fatal flaws  Build new insights and sensitivity

23 Innovation and technology are critical enablers Key Carbon Monetization Levers Illustrative List Innovation  Improve and optimize operations  Deploy new technologies  Invest in emerging technologies 2

24 In upstream, fugitive emissions can be reduced through incremental – but NPV positive – improvements in operations The Problem  Nearly 600,000 pneumatic devices in U.S gas industry …  … Used as liquid level controllers, pumps, and pressure regulators …  …Each emit 100 avoidable tons CO2e/yr of methane The Solution  Replace high-bleed inventory with low-bleed devices  Verify reductions in emissions  Audit and certify emission reductions  Monetize resulting CERs The Opportunity  Developed the first U.S. carbon offset methodology for fugitive methane emission reductions in oil / gas  Established baseline without direct measurements  Piloted retrofit program in Washakie Basin, WY  Measured leaks before and after with a third-party  Completed several hundred retrofits within a month  Observed devices after installation to allay concerns about failures and “upsets”  Planning next phases in Oklahoma and Texas  Auditing emission reductions of 65,000 - 80,000 tons of CO2e per year

25 Similarly, refineries too offer “low-hanging fruit” although deep cuts in greenhouse gas emissions are expensive Carbon Abatement Opportunities in Refineries Life Cycle Cost, $/tCO 2 e Potential Reduction in Refinery CO 2 e Emissions, Percent  Sequester CO 2 from units  Integrate gasification in refining  Export fuel oil  Use cogeneration  Reduce hydrogen use  Clean heaters  Use more exchangers  Recover APH heat  Switch fuel gas There are a number of “no regret” options that can pay off in less than three years

26 Sulfur Recovery Flue Gas (H 2 S, CO 2, HC, etc.) Unit to Polish H 2 S Traces Flue Gas (20-30 ppm H 2 S) Sulfur Boiler Scrubber + Quencher GT-CO 2 Unit Sweet Flue Gas with light hydrocarbons Dryer + Compressor Water Steam N 2 + O 2 CO 2 + N 2 + O 2 CO 2 DMC Unit Pipeline-grade CO 2 Ethylene Oxide + Methanol Dimethyl Carbonate Flue gas desulfurization and feed prep Carbon dioxide capture Carbon dioxide utilization 1 2 3 Process licenses from GTC Technology Since industry prefers integrated solutions, GTC, Sarasijam, and ADI have proposed one for multiple applications

27 In Step 1, flue gas desulfurization improves CO 2 capture performance to produce pipeline-ready CO 2  Commercially proven desulfurization technology –Patented process for medium-scale sulfur removal –Operating commercially at natural gas plant in Germany  Novel reaction chemistry –Modified liquid-phase, non-aqueous Claus reaction –Converts H 2 S into elemental sulfur –Uses mild SO 2 oxidant  Advantages –Compatible with wide pressure range (0.1 to 10+ MPag) –Avoids chronic problems of conventional processes, e.g., plugging, foaming, and high chemical costs –Tolerant to contaminants (e.g., CO 2, SO 2, NH 3, O 2, heavy hydrocarbons) with no operating penalty –Solvent selective to H 2 S and has excess capacity eliminating need to match H 2 S to SO 2 ratio –Low-corrosion carbon steel construction Relevance to CO 2 Streams High Desulfurization Performance Flue Gas Desulfurization

28 In Step 2, CO 2 is captured using the cost-effective, high- performance, and commercially proven GT-CO 2 process  GT-CO 2 process advantages –Higher CO 2 removal (>90%) than regular amines –Packed-bed absorption with blended solvent –High oxygen tolerance suitable for flue gas –Cost-effective due to higher CO 2 capture levels and standard construction material –Higher carrying capacity allows reduced circulation rates and lower energy costs  GTC’s commercial experience –GTC experts have designed, supported, and operated commercial CO 2 capture projects 1980s –Designed the first world-scale CO 2 recovery plant at Lubbock, TX –GTC is a leader in mass transfer equipment, a critical component of the GT-CO 2 technology –GTC has designed commercial absorption and fractionation towers using high-efficiency packing, e.g., world’s largest refinery vacuum tower with a diameter of 17 m Commercial References

29 In Step 3, a phosgene-free, environment-friendly process converts CO 2 to dimethyl carbonate (DMC)  Reaction –CH 2 OCH 2 + CO 2  (CH 2 O) 2 C=O (Ethylene Carbonate) –(CH 2 O) 2 C=O + 2CH 3 OH  (CH 3 O) 2 C=O (Dimethyl carbonate) + HOCH 2 CH 2 OH (Ethylene Glycol)  Process features –High ethylene carbonate (EC) conversion (95-99%) –High EC selectivity (>98%) to dimethyl carbonate (DMC) and ethylene glycol (EG) –Reactive distillation for equilibrium controlled reaction –Based on novel catalysts with high carbon utilization –Uses or produces no hazardous raw materials and intermediates  Commercial experience –Second step producing DMC commercialized –First step producing EC tested at 5 KTA pilot scale 1 2 Two-Step DMC Process

30 DMC is an intermediate used in polycarbonates, lubricants, solvents, fuel additives, and other products UsesFeatures Octane additiveRoad octane 105; high oxygen content, good blending characteristics SolventHigh solvency, thermal stability, and biodegradability; low vapor pressure and toxicity Polycarbonate resin precursor Phosgene substitute Dimethyl Carbonate Dimethyl Carbonate Uses and Features Oxygen Hydrogen Carbon

31 Our integrated solution enables multiple end uses of the recovered CO 2 stream Dryer + Compressor DMC Unit Pipeline-grade CO 2, e.g., for EOR Ethylene Oxide + Methanol Dimethyl Carbonate CO 2 Other products, e.g., urea, fuels, etc. Most CO 2 conversion technologies are at lab-scale; DMC has commercial and pilot-tested components.  Our integrated offering can produce contaminant-free CO 2 … –… Meeting specs for transportation by pipeline or … –… Ready as raw material for conversion to dimethyl carbonate or other products  The optimal end-use of the recovered CO 2 stream should be evaluated in a feasibility study: –Total volume of recovered CO 2 stream –Supply, transportation logistics, and cost of raw materials –Reformed products’ demand, supply, and market dynamics –Ability to generate carbon credits

32 Effective carbon management will require competitive technologies for capture, transport, storage, and utilization Segment Status Transport Carbon Capture  Three processes –Post-combustion –Pre-combustion –Oxy-combustion  No clear winner yet StorageUtilization  Three routes –Pipeline –Ship –Rail  Pipelines are most cost effective  Three sinks –Old oil fields –Coal seams –Saline aquifers  Saline aquifers have the most capacity  Nascent field with multiple paths  Limited R&D effort

33 71 IntegratedCompletedCanceled or Delayed 31 80 Active or Planned Large-scale, integrated Total Projects 87 Carbon capture is advancing through several R&D and pilot and a few commercial projects across the world … 59 210 Global Portfolio of CCS Projects

34 … While carbon storage has a number of options Enhanced Oil Recovery  Uses CO 2 already to increase oil production  Offers financial incentive for injection and storage Depleted Oil and Gas Fields  Creates storage for CO 2 as production declines and formation pressures drop  Enables utilization of existing infrastructure Coal Seams  Utilizes abandoned or unproductive coal seams  Leverages affinity of coal for CO 2 Saline Aquifers  Exploits permeable formations in oceans  Creates use for undeployed formations Low Medium High Low Minimal Potential Knowledge

35 In comparison to carbon capture, transport, and storage, CO 2 utilization has received little attention Segment Status Transport Carbon Capture  Three processes –Post-combustion –Pre-combustion –Oxy-combustion  No clear winner yet StorageUtilization  Three routes –Pipeline –Ship –Rail  Pipelines are most cost effective  Three sinks –Old oil fields –Coal seams –Saline aquifers  Saline aquifers have the most capacity  Nascent field with multiple paths  Limited R&D effort In comparison, CO 2 utilization has received little attention

36 Direct Mineralization Chemical Utilization Chemical Utilization Biological Utilization Utilization of Supercritical CO 2  Aqueous precipitation to carbonates (Calera)  Direct capture and conversion to carbonates (Skyonic)  Catalytic conversion to polycarbonates (Novomer)  Small organic compounds  Electrochemical utilization  Methane reforming  Enzymatic conversion to soluble carbonates (Alcoa)  Algal-based conversion to biofuels (Touchstone, Phycal)  Fixation using algal systems  Utilization in bioreactors  Extraction  Catalysis  Environmental remediation EXISTING EMERGING Several new technologies are emerging for CO 2 utilization

37 Novomer has attracted funding, partners, and recognition around its catalytic route to convert CO 2 to polymers Investors  DSM Venturing  Flagship Ventures  Physic Ventures  OVP Venture Partners  KensaGroup PartnersExternal Recognition  U.S. Department of Energy funding of $18.4 M over multiple phases  MIT Technology Review TR 50  New York State Energy R&D Authority funding of $0.8 M  Eastman Kodak  Albemarle  Praxair  Cornell University Key AdvantagesCommercialization StatusKey Challenges  Uses CO 2 as a reactant …  … Allowing it to compete effectively against plant-based routes  Use of catalyst enables flexibility  Equipped with funds and resources  Difficult to make high MW polymers  Polymer processability and end-use  Catalyst and process scale-up  Catalyst lifetime and stability  Overall process economics  Synthesized in 25 gallon batches  Demonstrated in 500 gallon reactor  Investigating flow process  Using product for adhesives  Testing polymer processing Process RouteCompany EPOXIDES + CO 2 POLYCARBONATES+ CO ACRYLIC ACID 1,3-PROPANEDIOL

38 Calera seeks to convert CO 2 to cement and other usable materials Investors  Khosla Ventures PartnersExternal Recognition  U.S. Department of Energy funding of $19.9 M  Multiple awards in making ‘Green’ building materials  Dynegy  Gruppo de Nora  Bechtel  Peabody Energy Key AdvantagesCommercialization StatusKey Challenges  Utilizes CO 2, …  … Fly ash, and  … Flue gas process heat …  Producing cement and aggregates, excellent for carbon storage  Requires use of extra power …  … Hazardous fly ash and …  … Additional energy inputs for key unit operations of spray drying and aggregate formation  Demo plant in Mass Landing, CA to capture 30,000 tons per year of CO 2  Plant to be expanded to handle 550,000 tons per year of CO 2 from a 100 MWe plant Process RouteCompany CARBONATE PRECIPITATION CEMENT THICKING AND SPRAY DRYING FILL MATERIAL FLUE GAS FLY ASH BRINE POWER + + +

39 Carbon markets are a powerful lever but require engagement to fully exploit their potential Key Carbon Monetization Levers Illustrative List Carbon Markets  Understand carbon markets  Evaluate and nurture offsets  Develop CDM projects 3

40 Carbon markets have enjoyed accelerated growth and are likely to continue growing exponentially … Annual Transactions, Million Tons CO2e Volumes of CO 2 e Reductions (Commitments up to 2012) Sources: The World Bank

41 … Driven by demand from Europe, which is seeking to comply with its emission reduction goals Buyers of CO 2 e Credits (Commitments up to 2012) Sources: The World Bank

42 China – the emerging “Green Giant” – is the predominant supplier of credits Suppliers of CO 2 e Credits (Commitments up to 2012) Sources: The World Bank

43 Energy efficiency and fuel switching were the dominant goals; renewable energy is slowly gaining steam Types of CDM Projects (Commitments up to 2012) Sources: The World Bank

44 The CDM process is suffering from too much success and throughput has fallen due to increased scrutiny … CDM Project Pipeline Activity (Commitments up to 2012) Sources: The World Bank

45 … Increasing the time a project spends at each stage and decreasing actual credits delivered to the market CDM Projects – Days in Each Step (Commitments up to 2012) Projected Delivery of CERs (Commitments up to 2012) Sources: The World Bank

46 Carbon markets responded to the recession with a sell-off of allowances, flight to security, and reduced projects demand Carbon Credit Markets (European Union Emission Trading System) Sources: The World Bank

47 Engaging carbon markets will require a strong understanding of both the CDM project development process and … CDM Project Development and Credit Monetization Process

48 … Insight into factors that shape carbon credit pricing CDM Certification Impacts on CER Price (Carbon Credit, $/ton) CDM Certification Impacts on CER Price (Carbon Credit, $/ton)

49 Summary  Carbon reduction in the oil and gas industry is challenging …  … But can be achieved through strategy, innovation, and carbon markets  Scenario planning and war gaming are two tools to develop carbon management strategies  Innovation will occur at the incremental and disruptive levels –Incremental innovations will drive operational improvements and integrated solutions –Disruptive innovations are still in the pipeline  Finally, the industry must engage carbon markets and build experience to derive value

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