Presentation on theme: "Climate change issues in Oil & Gas Sector"— Presentation transcript:
1Climate change issues in Oil & Gas Sector A sectoral discussion on Environmental issues, GHG emissions, GHG abatement opportunities, Role of CDM
2Contents Environmental issues for the Indian Oil & Gas Sector GHG Emissions from various industries & sectorsClimate Change – Enhanced Greenhouse EffectFlexibility Mechanisms under The Kyoto Protocol & CDMPotential GHG abatement projects, CDM methodologies and UNFCCC registrationsCarbon transactionsWay forward - Carbon footprint
3Environmental issues for the Indian Oil & Gas Sector The Oil & Gas Sector has a variety of impacts on the environment. These impacts depends upon the stage of the process, the size and complexity of the project, the nature and sensitivity of the surrounding environment and the effectiveness of planning, pollution prevention, mitigation and control techniques.The major areas of environmental concern includes :Atmospheric ImpactsAquatic ImpactsTerrestrial ImpactsEcosystem ImpactsPotential Emergencies
4Potential Environmental Impacts Atmospheric issues are attracting increasing interest from both industry and government authorities worldwide. The potential impacts mainly arises due to exploration & production, refining operations etc. The primary sources of atmospheric emissions from oil and gas operations arise from:Flaring, venting and purging gasesCombustion processes in diesel engines and gas turbinesFugitive gases from loading operations and tank and losses from process equipmentsAirborne particulates from soil disturbance during constructionParticulates from other burning sourcesThe main areas of impact are ozone depletion, GHG emissions leading to increased global warming, NOx and SOx emissions, SPM emissions etc.The principal aqueous waste streams resulting from exploration and production operation are:Produced waterDrilling fluids, cuttings and well treatment chemicalsProcess wash and domestic wastesCooling waterSpills and leakageThe major impact of the waste streams arise from the toxicity, high pH and salt content of chemicals used as drilling fluids which may result in pollution of ground and surface waters. Impacts may result particularly where ground and surface waters are utilized for household purposes or fisheries and especially ecologically sensitive areas are affected.Atmospheric ImpactsAquatic Impacts
5Potential Environmental Impacts Potential impacts to soil arise from two basic sources:Physical disturbance as a result of constructionContamination resulting from spillage and leakage or solid waste disposalThe potential impacts arising from the poor design and construction includes soil erosion due to soil structure, changes in surface hydrology and drainage patterns, increased salination and habitat damage, reducing the capacity of the environment to support vegetation and wildlife etc.Plant and animal communities may be directly affected by changes in their environment through variations in water, air and soil quality and through disturbance by noise. Such changes may directly affect the ecology: for example, habitat, food and nutrient supplies, breeding areas, migration routes etc. The effect is upsetting of the nutrient balances and microbial activity of the soil.The major environmental impact occurs in this case due toSpillage of fuels, gases, oil, chemicals and hazardous materialsOil or gas well blowoutExplosionsFiresWar & SabotageNatural disaster and their implication on operation e.g. flood, earthquake, cyclone.The major impact of these emergency events include large GHG emissions, ozone depletion, changes in soil structure and character, habitat and vegetative damage.Terrestrial ImpactsEcosystem ImpactsPotential Emergency
6Initiatives towards reducing atmospheric impacts Among all the different environmental impacts, the major focus lies on Atmospheric Impact caused by Oil & Gas Industry.One of the major sources of Atmospheric Impact caused by Oil and Gas Industry is the flaring and venting of gases. So the principle target for emission reduction is in this domain.Various technological initiative have been introduced to reduce emissions as a result of combustion process related to power production. More efficient gas turbines have been developed together with improved turbine maintenance regimes. Efficiency improvements may also result from gas turbine optimization considerations. Other technologies to improve fuel efficiency include: steam injection, combined cycle power generation, pump and compressor optimization, waste heat recovery and the application of energy conservation principles.Improvements in the technologies have resulted in reduced emission from the different sources. The reduction of GHG emissions directly leads to reduction of global warming. These process improvement/energy efficiency measures causing emission reduction can be directly accounted for and thus can be considered as CDM projects.
7GHG Emissions from various industries & sectors GHG emissions associated with industry (including energy utilization) represent about 21% of world GHG emissions.The Oil & Gas and Chemical industries are among the major emitters of GHGs.Source: CAIT, IEA, 2004a, Hendriks
8Climate Change – Enhanced Greenhouse Effect Human activities like deforestation or heavy fossil fuel use are increasing the concentration of Greenhouse Gases (‘GHGs’) in the atmosphere.GHGs trap heat energy in the Earth's lower atmosphere, like a thick blanket round the planet.This enhances the green house effect, resulting in commonly known “Climate Change” or “Global Warming”Climate Change leads to:Rise in average global temperature (expected to go up by 1-4 Celsius in next 100 years)Changes in vegetationIncreased storm surgesSea level rise (parts of Maldives & Bangladesh might submerge in next 50 yrs)Risks which will affect the profitability of the Oil & Gas industries
9Glimpse of Climate change Risks Physical RisksGlobal warming poses threat of sea level rise, hurricanes/ other natural calamities for especially those situated in the coastal regions.Coastal E&P facilities, Refineries can face huge damage due to cyclones and hurricanesClimate Change Risks for Oil & Gas SectorBusiness RisksExtreme weather conditions resulting in increased energy cost, higher contingency requirement resulting in erosion of profit marginsCompetitiveness RisksEffect on Gross Refining Margin. As energy costs increase, Oil industries using conventional and carbon intensive energy sources will see a reduction in the GRM.Regulatory risks‘Carbon ’tax’ implementation on states by Central government can affect profitability of the Oil & Gas sector
10Kyoto Protocol and CDM Developed Country Govt/ Pvt. Sector Legally binding emission reduction targets for GHGs only for Annex-1 (i.e., developed ) countriesAim of reducing overall GHG emissions by at least 5.2% below 1990 levels in commitment periodDeveloped Country Govt/ Pvt. SectorKyoto protocol - Establishes three mechanisms to supplement national actions to achieve real, long term, measurable and cost effective GHG reductions:Sale proceedsCarbon CreditsClean Development Mechanism (‘CDM’)Developing Country GHG Abatement ProjectInternational Emission Trading (‘IET’)Joint Implementation (‘JI’)Carbon credits are measured in terms of Certified Emission Reduction (‘CER’)One CER equals 1 MT CO2 equivalent
11CDM Process : Availing Carbon Credits 1ProjectImplementation2Kyoto Approvals3CER TransactionProjectIdentificationCDM Documentation*CDM PROJECT PROMOTERCERProjectConstructionValidation by DOEEndorsement by DNAERPAProjectoperationRegistrationwith UNFCCCBUYER OF CERGeneration ofCarbon credits*PIN: Project Identification Note*PDD: Project Design DocumentERPA: Emission Reduction Purchase AgreementDOE: Designated Operational EntityDNA: Designated National AuthorityVerification/Certification by DOEUNFCCC / EBIssues CERs
12Potential GHG abatement Projects in Upstream Oil & Gas Sector
13Potential GHG abatement projects in Upstream Oil & Gas Sector 1. Installation of Gas Recovery Facilities to prevent emission of methane/CO2 to the atmosphereInstallation of compressors to recover low pressure (LP) gas and compress the same for further distributionInstallation of ejector systems which uses the motive force to suck LP gases which were previously flaredInstallation of separators to separate gas at various pressures and recover very low pressure gas that was previously flaredUp-gradation of process gas compressors (PGC)Optimal utilization of gas for internal consumption in gas lift wells/ gas re-injectionLaying pipelines from gas rich areas to areas where there is scarcity of gas but greater demand (by identifying potential consumers).2. Common Grid of Power at OffshoreA common grid of power is setup by achieving interconnectivity across various process and well platforms.This interconnectivity can be achieved by laying submarine cables and transferring surplus power (NG based) to the shore for sale.The project replaces more carbon intensive power source (DG based) to relatively cleaner (NG based) power.
14Potential GHG abatement projects in Upstream Oil & Gas Sector...(contd) 3. Recovering Vapors from Storage TanksRecovery and utilization of vapors, previously being vented out from oil storage tanks, using ejector system.4. Carbon Capture & Storage (CCS)Capture of CO2 from large stationary sources, transportation of the gas to an appropriate injection site where it is pumped and stored into underground geological formations such as natural gas and oil fields.Storage may also be combined with Enhanced Oil Recovery (EOR) or Enhanced Gas Recovery (EGR)This also results in energy consumption reduction of oil and gas recovery from the wells.
15Other Potential GHG abatement projects in Upstream Oil & Gas Sector Facilities for reduction of gas flaring through ejectors/compressors/separators/pipeline etc.Waste heat recovery at oil production facilities.Energy efficiency improvement in gas processing plantPower factor improvement at oil installationsReduction in gas pipe leaksFuel switch from fossil fuels to other cleaner fuels like natural gasCaptive power generation by utilizing natural gasOil tank head vapor recovery system
16Potential GHG abatement projects in Downstream Oil & Gas Sector
17Potential GHG abatement projects in Downstream Oil & Gas Sector 1. Energy efficiency Improvement measures in the existing systemSteam generation and distribution system up-gradation-Enhanced heat utilization through installation of centralized flash steam recovery system to recover steam condensate-Flash steam utilization in vapour absorption chiller to produce refrigeration effect-Better steam trap management to reduce heat loss-Improvement in the cogeneration/ self generation efficiencySteam optimization by installation of Dry-ejector system instead of steam-jet ejector in VDUIn Dry-ejector system vacuum gas oil is used as motive liquid and circulated in the system. This reduces generation of LP steam which is required as motive fluid in conventional steam-jet ejector. An unique technology.
18Potential GHG abatenment projects in Downstream Oil & Gas Sector & Petrochemical Units Energy efficiency Improvement in the existing system…contdInstallation of ‘mist cooling tower’ instead of conventional cooling towerA much lower cooling water temperature can be achieved through ‘mist cooling tower’. This improves heat recovery and reduces cooling water requirement hence lower pumping energy etc. Not a common practice in large-scale hydrocarbon industries.Heat integration through the application of state-of-the-art pinch technologyEnergy efficiency improvement through optimization of heat exchanger network in CDU/VDU/pre-heat train of distillation units etc. Optimization of HEN is performed using Pinch Analysis.New generation refractoryReplacement of conventional refractory with ceramic fibre insulation to reduce heat loss in furnace
19Few more potential areas in refinery units where CDM may be applicable 2. Flare recovery systemutilization to cater to heat demand of refineryutilization in boilers/ Gas Turbine3. Fuel switch projectsFuel switching in furnace, heater etcFuel switch in the thermal energy generation system/ cogeneration/ self generation equipmentsOptimization in H2 recovery from off gases from CRU, VGO hydro-treater etc4. Application of Advanced ProcessesUse of new generation catalysts which reduces coke deposition on the catalystApplication of energy-efficient Solvent De-asphalting technology instead of energy-intensive Cracking/Coking technology
20Few more potential areas in refinery units where CDM may be applicable Few more potential areas in refinery units where CDM may be applicable.... (contd)Novel bio-catalytic processes with very low energy consumptionApplication of membrane separation technology instead of conventional separation techniquesH2 generation in the refinery through natural gas reforming instead of naphtha reformingGas-to-Liquid (GTL) technology for production of petroleum fuel/Lube oil/Wax from Natural GasIntegrated Gas Combined Cycle (IGCC) based power generation from vacuum residue/ petroleum coke – higher power generation efficiency with generation of H2 as by productSteam-injection in Gas Turbine5. Alternative Fuels/ EnergyBio-dieselEfficient generation of H2 and utilizationRenewable energy – wind power/ hydro power/ solar power etc.6. Transportation projectChanges in the mode of transportation of petroleum products e.g. from road to rail/ pipelineEnergy efficiency improvement in the intermediate pumping stations of crude/ product pipelines
21CDM methodologies available for the Oil & Gas Sector AM0009Recovery and utilization of gas from oil wells that would otherwise be flared or ventedAM0018Steam optimization systemsAM0037Flare (or vent) reduction and utilization of gas from oil wells as a feedstockAM0055Baseline and Monitoring Methodology for the recovery and utilization of waste gas in refinery facilitiesAM0077Recovery of gas from oil wells that would otherwise be vented or flared and its delivery to specific end-usersAMS-III.PRecovery and utilization of waste gas in refinery facilities
22Registered CDM projects in the Oil & Gas Sector from India Essar Oil LimitedGHG emission reduction through the installation of energy efficient vacuum creating system in the vacuum distillation column of petroleum refineryMethodology used: AM0018Oil and Natural Gas Corporation (ONGC) LimitedFlare gas recovery project at Uran plant, Oil and Natural Gas Corporation (ONGC) LimitedMethodology used: AM0037Flare gas recovery project at Hazira Gas Processing Complex (HGPC), Hazira plant, Oil and Natural Gas Corporation (ONGC) LimitedUp-gradation of Gas Turbine 1 (GT 1) and Gas Turbine 2 (GT 2) at co-generation plant of Hazira Gas Processing Complex (HGPC) of Oil and Natural Gas Corporation Limited (ONGC)Methodology used: AMS.II-DWaste heat recovery from Process Gas Compressors (PGCs), Mumbai high south (offshore platform) and using the recovered heat to heat process heating oilMethodology used: AMS-II.DNumaligarh Refinery LimitedNRL -Captive power generation by recovery and utilization of the waste energy (thermal and pressure) of HP steamMethodology used: ACM0004
23Registered CDM projects in the Oil & Gas Sector from India Bharat Petroleum Corporation LimitedBharat Petroleum Corporation Limited (BPCL)’s Wind Power Project, IndiaMethodology used: AMS.I-DIndian Oil Corporation LimitedGHG emission reductions through pre-heat train optimization in the CDU and VDU of Digboi Refinery,, Indian Oil Corporation Limited (Assam Oil Division)Methodology used: AMS-II.DFlare Gas Recovery and Utilization of Recovered Flare Gas for process heating requirements at IOCL, Haldia RefineryMethodology used: AMS-III.PFlare Gas Recovery system (FGRS) at Barauni Refinery of Indian Oil Corporation LimitedMethodology used: AMS.III-POil India LimitedOil India Limited (OIL) – Greenhouse Gas Emission Reduction through Recovery and Utilization of Flare GasMethodology used: AM0009
25Carbon transactions Carbon Transactions carbon transactions are purchase contracts whereby one party pays another party in exchange for a given quantity of GHG emission reductions, either in the form of allowances or “credits” that the buyer can use to meet its compliance objectives vis-à-vis greenhouse gas mitigation.Payment for emission reductions can be made using one or more of the following forms: cash, equity, debt, or in-kind contributions such as providing technologies to abate GHG emissions.Carbon TransactionsAllowance based Transactions (EUA)Project basedTransactions (CER,ERU)
26Carbon transaction options… Forward transactionEnsures guaranteed carbon revenueAdvance possible, but modalities still uncertainCould be fixed price or market-linkedPossible to put ‘floor’ and ‘ceiling’‘Guaranteed’ quantity or ‘best effort’ basisSpot transactionTransaction on issuance of CERsTill today, has resulted in better rateHas been more popular in India so farCombination of ‘Forward’ and ‘Spot’Usually when large quantum of CERs available(say >100,000 p.a.)
27Carbon Finance Opportunities… Project financeInvestors from Europe, Japan interested in financing CDM, especially RE projectsRight on CERs (full / partial) imperativeTransaction cost financeBuyers ready to pick up full/part of transaction costCER price usually discounted
28VER market…. Voluntary market Essentially a non-compliance market Driven by social responsibilityMarket is emerging… not stable yetTransacted comodity: VER = Verified Emission ReductionFrom registered projects outside crediting periodFrom non-registered projectsPrices lower compared to CERsOpportunities are yet to be assessed
29CDM – Value Accretion Curve PIN = Project Idea NotePDD = Project Design DocumentUNFCCC = United Nations Framework Convention on Climate Change
30CDM Transaction Cost Adaptation Fund Documentation costExpenses incurred in documentation, Consultant’s feeValidation costFee payable to DOE for validationRegistration fee to UNFCCCFor 15k CER/y : NilFor > 15k CER/y 0.1 USD for first 15k CERs@ 0.2 USD for balance CERsCER verification chargesFee payable to DOE for verification (every time)Share of Proceeds (SoP)Charged by UNFCCC every time during issuance of CERs, calculated same way as Regn Fee. Regn fee paid, if any is adjustedAdaptation Fund2% CERs deducted by UNFCCC at issuance
31SummaryClimate change and global warming: major threat to the Oil & Gas industries.The Oil & Gas sector will be a significant part of an evolving solution to the CO2 challenge and certainly drive the ushering of a cleaner hydro carbon age in future.Companies have already started pursuing strategies to position themselves in the cleaner, more sustainable and low carbon growth trajectory by conscious reorganization of their product portfolio and restructuring of their multi-location operations.Big Oil Companies like British Petroleum is planning to invest USD 8 billion in low carbon power and alternative energy business over the next decade and aims at USD 1 billion of operating profit by 2015 from this business only.Adoption of the right strategy for mitigating long term climate change risks can provide distinct competitive advantage.Companies seeking to develop their strategies should first analyze their ‘value-at-stake’ or ‘value-at-risk’ under a variety of scenarios from current and emerging policies to reduce carbon emissions.
32Carbon footprint - key starting step Carbon footprint has the power to influence all decisions on climate change strategyEstablishing carbon footprintMap carbonfootprintDetermineboundaryDevelopcarboninventoryCapacitybuildingDeterminecarbonemissionsEnablersIdentify key sources of GHG emissionsIdentify and decide Organizational and Operational BoundarySelect the GHG emission calculation approachDeveloping customized modules and inventory manualsProvide Training on the implementation of inventory manualsDemonstrating the use of customized modulesCollecting activity data and emission dataApplying customized calculation tools for estimating GHG emissions
33WBCSD & WRI Protocol…. The framework for GHG Accounting GHG ACCOUNTING & REPORTING PRINCIPLESACCURACYRELEVANCECOMPLETNESSTRANSPARENCYCONSISTENCY
37Key Performance Indicators PRODUCTIVITY/EFFICIENCY RATIOS:-Express the value or achievement of a business divided by its GHG impact.-Increasing efficiency ratios reflect a positive performance improvement.-Examples of productivity/efficiency ratios include resource productivity (e.g., sales per GHG) and process eco-efficiency (e.g., production volume per amount of GHG).INTENSITY RATIOS (normalized” environmental impact data):-Express GHG impact per unit of physical activity or unit of economic output.-A physical intensity ratio is suitable when aggregating or comparing across businesses that have similar products. An economic intensity ratio is suitable when aggregating or comparing across businesses that produce different products. A declining intensity ratio reflects a positive performance improvement.-Many companies historically tracked environmental performance with intensity ratios.-Examples of intensity ratios include product emission intensity (e.g., tonnes of CO2 emissions per electricity generated); service intensity (e.g., GHG emissions per function or per service); and sales intensity (e.g., emissions per sales).PERCENTAGES (Percentage Indicator):-Ratio between two similar issues (with the same physical unit in the numerator and the denominator).-Examples of percentages are current GHG emissions expressed as % of base year GHG emissions.
38Thank you Indra Guha Senior Manager Climate Change and Sustainability ServicesMobile: