Climate change issues in Oil

1
Climate change issues inOil Gas Sector

• A sectoral discussion on Environmental issues,
  GHG emissions, GHG abatement opportunities, Role
  of CDM

2
Contents

• Environmental issues for the Indian Oil Gas
  Sector
• GHG Emissions from various industries sectors
• Climate Change Enhanced Greenhouse Effect
• Flexibility Mechanisms under The Kyoto Protocol
  CDM
• Potential GHG abatement projects, CDM
  methodologies and UNFCCC registrations
• Carbon transactions
• Way forward - Carbon footprint

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Environmental 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 Impacts
• Aquatic Impacts
• Terrestrial Impacts
• Ecosystem Impacts
• Potential Emergencies

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Potential Environmental Impacts
Environmental Impact Environmental Impact
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 gases Combustion processes in diesel engines and gas turbines Fugitive gases from loading operations and tank and losses from process equipments Airborne particulates from soil disturbance during construction Particulates from other burning sources The 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 water Drilling fluids, cuttings and well treatment chemicals Process wash and domestic wastes Cooling water Spills and leakage The 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 Impacts
Aquatic Impacts
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Potential Environmental Impacts
Environmental Impact Environmental Impact
Potential impacts to soil arise from two basic sources Physical disturbance as a result of construction Contamination resulting from spillage and leakage or solid waste disposal The 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 to Spillage of fuels, gases, oil, chemicals and hazardous materials Oil or gas well blowout Explosions Fires War Sabotage Natural 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 Impacts
Ecosystem Impacts
Potential Emergency
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Initiatives 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.

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GHG 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
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Climate 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 vegetation
• Increased storm surges
• Sea level rise (parts of Maldives Bangladesh
  might submerge in next 50 yrs)
• Risks which will affect the profitability of the
  Oil Gas industries

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Glimpse of Climate change Risks

• Physical Risks
• Global warming poses threat of sea level rise,
  hurricanes/ other natural calamities for
  especially those situated in the coastal regions.
  
• Coastal EP facilities, Refineries can face huge
  damage due to cyclones and hurricanes

Climate Change Risks for Oil Gas Sector

• Business Risks
• Extreme weather conditions resulting in increased
  energy cost, higher contingency requirement
  resulting in erosion of profit margins

• Competitiveness Risks
• Effect 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

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Kyoto Protocol and CDM

• Legally binding emission reduction targets for
  GHGs only for Annex-1 (i.e., developed )
  countries
• Aim of reducing overall GHG emissions by at least
  5.2 below 1990 levels in 2008-2012 commitment
  period

Developed Country Govt/ Pvt. Sector
Kyoto protocol - Establishes three mechanisms to
supplement national actions to achieve real, long
term, measurable and cost effective GHG
reductions
Carbon Credits
Sale proceeds
Clean Development Mechanism (CDM)
Developing Country GHG Abatement Project
International Emission Trading (IET)
Joint Implementation (JI)

• Carbon credits are measured in terms of Certified
  Emission Reduction (CER)
• One CER equals 1 MT CO2 equivalent

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CDM Process Availing Carbon Credits
CDM PROJECT PROMOTER
Project Identification
CDM Documentation
CER
ERPA
Project Construction
Validation by DOE
Endorsement by DNA
BUYER OF CER
Project operation
Registration with UNFCCC
Generation of Carbon credits
PIN Project Identification Note PDD Project
Design Document ERPA Emission Reduction Purchase
Agreement DOE Designated Operational Entity DNA
Designated National Authority
Verification/ Certification by DOE
UNFCCC / EB Issues CERs
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Potential GHG abatement Projects in Upstream Oil
Gas Sector
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Potential GHG abatement projects in Upstream Oil
Gas Sector

• 1. Installation of Gas Recovery Facilities to
  prevent emission of methane/CO2 to the atmosphere
• Installation of compressors to recover low
  pressure (LP) gas and compress the same for
  further distribution
• Installation of ejector systems which uses the
  motive force to suck LP gases which were
  previously flared
• Installation of separators to separate gas at
  various pressures and recover very low pressure
  gas that was previously flared
• Up-gradation of process gas compressors (PGC)
• Optimal utilization of gas for internal
  consumption in gas lift wells/ gas re-injection
• Laying 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 Offshore
• A 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.

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Potential GHG abatement projects in Upstream Oil
Gas Sector...(contd)

• 3. Recovering Vapors from Storage Tanks
• Recovery 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.

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Other 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
  plant
• Power factor improvement at oil installations
• Reduction in gas pipe leaks
• Fuel switch from fossil fuels to other cleaner
  fuels like natural gas
• Captive power generation by utilizing natural gas
• Oil tank head vapor recovery system

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Potential GHG abatement projects in Downstream
Oil Gas Sector
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Potential GHG abatement projects in Downstream
Oil Gas Sector

• 1. Energy efficiency Improvement measures in the
  existing system
• Steam 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 efficiency
• Steam optimization by installation of Dry-ejector
  system instead of steam-jet ejector in VDU
• In 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.

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Potential GHG abatenment projects in Downstream
Oil Gas Sector Petrochemical Units

• Energy efficiency Improvement in the existing
  systemcontd
• Installation of mist cooling tower instead of
  conventional cooling tower
• A 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 technology
• Energy 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 refractory
• Replacement of conventional refractory with
  ceramic fibre insulation to reduce heat loss in
  furnace

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Few more potential areas in refinery units where
CDM may be applicable

• 2. Flare recovery system
• utilization to cater to heat demand of refinery
• utilization in boilers/ Gas Turbine
• 3. Fuel switch projects
• Fuel switching in furnace, heater etc
• Fuel switch in the thermal energy generation
  system/ cogeneration/ self generation equipments
• Optimization in H2 recovery from off gases from
  CRU, VGO hydro-treater etc
• 4. Application of Advanced Processes
• Use of new generation catalysts which reduces
  coke deposition on the catalyst
• Application of energy-efficient Solvent
  De-asphalting technology instead of
  energy-intensive Cracking/Coking technology

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Few more potential areas in refinery units where
CDM may be applicable.... (contd)

• Novel bio-catalytic processes with very low
  energy consumption
• Application of membrane separation technology
  instead of conventional separation techniques
• H2 generation in the refinery through natural gas
  reforming instead of naphtha reforming
• Gas-to-Liquid (GTL) technology for production of
  petroleum fuel/Lube oil/Wax from Natural Gas
• Integrated Gas Combined Cycle (IGCC) based power
  generation from vacuum residue/ petroleum coke
  higher power generation efficiency with
  generation of H2 as by product
• Steam-injection in Gas Turbine
• 5. Alternative Fuels/ Energy
• Bio-diesel
• Efficient generation of H2 and utilization
• Renewable energy wind power/ hydro power/ solar
  power etc.
• 6. Transportation project
• Changes in the mode of transportation of
  petroleum products e.g. from road to rail/
  pipeline
• Energy efficiency improvement in the intermediate
  pumping stations of crude/ product pipelines

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CDM methodologies available for the Oil Gas
Sector
AM0009

• Recovery and utilization of gas from oil wells
  that would otherwise be flared or vented

AM0018

• Steam optimization systems

AM0037

• Flare (or vent) reduction and utilization of gas
  from oil wells as a feedstock

AM0055

• Baseline and Monitoring Methodology for the
  recovery and utilization of waste gas in refinery
  facilities

AM0077

• Recovery of gas from oil wells that would
  otherwise be vented or flared and its delivery to
  specific end-users

AMS-III.P

• Recovery and utilization of waste gas in refinery
  facilities

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Registered CDM projects in the Oil Gas Sector
from India

• GHG emission reduction through the installation
  of energy efficient vacuum creating system in the
  vacuum distillation column of petroleum refinery
• Methodology used AM0018

Essar Oil Limited

• Flare gas recovery project at Uran plant, Oil and
  Natural Gas Corporation (ONGC) Limited
• Methodology used AM0037
• Flare gas recovery project at Hazira Gas
  Processing Complex (HGPC), Hazira plant, Oil and
  Natural Gas Corporation (ONGC) Limited
• Methodology used AM0037
• Up-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-D
• Waste heat recovery from Process Gas Compressors
  (PGCs), Mumbai high south (offshore platform) and
  using the recovered heat to heat process heating
  oil
• Methodology used AMS-II.D

Oil and Natural Gas Corporation (ONGC) Limited

• NRL -Captive power generation by recovery and
  utilization of the waste energy (thermal and
  pressure) of HP steam
• Methodology used ACM0004

Numaligarh Refinery Limited
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Registered CDM projects in the Oil Gas Sector
from India

• Bharat Petroleum Corporation Limited (BPCL)s
  Wind Power Project, India
• Methodology used AMS.I-D

Bharat Petroleum Corporation Limited

• GHG 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.D
• Flare Gas Recovery and Utilization of Recovered
  Flare Gas for process heating requirements at
  IOCL, Haldia Refinery
• Methodology used AMS-III.P
• Flare Gas Recovery system (FGRS) at Barauni
  Refinery of Indian Oil Corporation Limited
• Methodology used AMS.III-P

Indian Oil Corporation Limited

• Oil India Limited (OIL) Greenhouse Gas Emission
  Reduction through Recovery and Utilization of
  Flare Gas
• Methodology used AM0009

Oil India Limited
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Carbon transactions
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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 Transactions
Allowance based Transactions (EUA)
Project based Transactions (CER,ERU)
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Carbon transaction options

• Forward transaction
• Ensures guaranteed carbon revenue
• Advance possible, but modalities still uncertain
• Could be fixed price or market-linked
• Possible to put floor and ceiling
• Guaranteed quantity or best effort basis
• Spot transaction
• Transaction on issuance of CERs
• Till today, has resulted in better rate
• Has been more popular in India so far
• Combination of Forward and Spot
• Usually when large quantum of CERs available
• (say gt100,000 p.a.)

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Carbon Finance Opportunities

• Project finance
• Investors from Europe, Japan interested in
  financing CDM, especially RE projects
• Right on CERs (full / partial) imperative
• Transaction cost finance
• Buyers ready to pick up full/part of transaction
  cost
• CER price usually discounted

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VER market.

• Voluntary market
• Essentially a non-compliance market
• Driven by social responsibility
• Market is emerging not stable yet
• Transacted comodity VER Verified Emission
  Reduction
• From registered projects outside crediting period
• From non-registered projects
• Prices lower compared to CERs
• Opportunities are yet to be assessed

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CDM Value Accretion Curve
PDD Project Design Document
PIN Project Idea Note
UNFCCC United Nations Framework Convention on
Climate Change
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CDM Transaction Cost

• Documentation cost
• Expenses incurred in documentation, Consultants
  fee
• Validation cost
• Fee payable to DOE for validation
• Registration fee to UNFCCC
• For 15k CER/y Nil
• For gt 15k CER/y _at_ 0.1 USD for first 15k CERs
• _at_ 0.2 USD for balance CERs
• CER verification charges
• Fee 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 adjusted
• Adaptation Fund
• 2 CERs deducted by UNFCCC at issuance

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Summary

• Climate 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.

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Carbon footprint - key starting step
Carbon footprint has the power to influence all
decisions on climate change strategy
Establishing carbon footprint
Map carbon footprint
Determine boundary
Develop carbon inventory
Capacity building
Determine carbon emissions
Enablers
Identify key sources of GHG emissions
Identify and decide Organizational and
Operational Boundary
Select the GHG emission calculation
approach Developing customized modules and
inventory manuals
Provide Training on the implementation of
inventory manuals Demonstrating the use of
customized modules
Collecting activity data and emission
data Applying customized calculation tools for
estimating GHG emissions
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WBCSD WRI Protocol. The framework for GHG
Accounting
GHG ACCOUNTING REPORTING PRINCIPLES
ACCURACY
RELEVANCE
COMPLETNESS
TRANSPARENCY
CONSISTENCY
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Determining Organizational Boundary
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Determining Operational Boundary
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Identifying and calculating GHG emissions
37
Key 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.