World Bank Global Gas Flaring Reduction Partnership Carbon Finance Network Francisco J. Sucre 29 Nov. 2011

Transcription

1 Efforts to improve flare reduction methodologies under the Clean Development Mechanism World Bank Global Gas Flaring Reduction Partnership Carbon Finance Network Francisco J. Sucre 29 Nov. 2011

2 GGFR Partnership involvement in carbon finance Early interest in leveraging carbon finance to help overcome investment barriers and reduce flaring Because projects offer large, real, measurable, and long-term emission reductions To provide early capacity building to partner countries (e.g. Angola, Nigeria, Indonesia, Algeria, Russia, Gabon, Cameroon, Qatar, Ecuador) To understand how flaring reduction carbon offsets work and use the experience to support others To help an industry not strongly engaged with emerging processes To improve and facilitate development of applicable methodologies 2

3 Oil & Gas GHG emission are significant MMtCO 2e ~ 8% of global GHG emissions 1,000 Wasted energy ~550 ~500 Venting (CH 4 ) Fugitives (CH 4 ) Flaring (CO 2 +CH 4 ) Gas treatment (CO 2 ) * Estimates calculated by Carbon Limits, based on data from DMSP/GGFR (2006), EPA (1992/1994/2004), M2M (2008) and IEA (2008). Very low level of accuracy due to absence of aggregated, monitored operational data. 3

4 Origin After consultation, formally established in 2Q of 2009 to: o Foster successful development and registration of CDM/JI flare reduction projects o Engage and communicate with UNFCCC institutions o Promote understanding and awareness of GHG mitigation in the O&G industry Rationale Limited GHG impact in O&G sector by carbon finance (CDM/JI) Existing barriers to methodology use and application Opportunity to promote technical collaboration vis a vis carbon market regulators GGFR well positioned to lead an effective coordination of network 4

5 AM009 AM0037 AM0074 AM0077 Improving CDM flare reduction methodologies Limited GHG impact in O&G sector by carbon finance (CDM/JI) Host Country Negative validation Validation Registered Under Review Issued CERs/ ERUs K GGFR member UAE Equ. Guinea Indonesia India Iran 1 1 Congo DRC 1 1 Ecuador Vietnam Nigeria Qatar Mexico Pakistan 1 1 Azerbaijan Colombia 1 1 China Yemen Thailand 1 1 Oman 1 1 Ghana 2 2 Russia Performance: Limited CDM/JI projects (as end of first Kyoto commitment period approaches) o Good number of countries applying it o Only 55 projects (out of 9,098) o 4 projects with issued credits o CERs issuance delays: average of 24 months

6 Timeline of Activities July, 2008: July, 2009: Submitted formal requests for clarifications to AM0009 v3 (correction to formulas) Submission to UNFCCC EB s call for input on reasons for no/or low application of App. Meth Presented # 5 broad suggestions for improvement of approved methodologies Jan., 2010: Finished identification of 39 issues for methodology improvement (later summarized in 8) July, 2010: Sept, 2010: Dec., 2011: Mar., 2011: Sep., 2011: Technical workshop with UNFCCC Secretariat (presented and discussed complexities of associated gas flaring projects and identified issues to be addressed) Finished two technical supporting documents (monitoring guidelines and glossary of terms) Submit suggestions to improve AM0009 v4 (correction of methane emission factor and monitoring parameters) Technical workshop with UNFCCC Sec. to present ideas and discuss suggested improvements Submitted to the UNFCCC Sec. revisions of AM0037 and AM0077 (and additional explanatory material) 6

7 Some challenges and/or concerns expressed by UNFCCC at 2 nd workshop (some of which still need to be addressed ) o How to deal with a dynamic baseline (not yet done in any methodology) o Determining and accounting for the fuel that is displaced with the recovered gas; how to properly monitor end use o How to use reservoir simulation information o How to accommodate flare avoidance in new fields o How to treat the capacity of the field and infrastructure; conducting sensitivity analysis of existing infrastructure o How to treat gas-to-oil ratio and potential capping of CERs o Generation of too many CERs and fear of gaming o When to determine that an oil field becomes a gas field o Oil field life extension due to CDM project and accommodating non-associated gas in CDM o Handling of unmet (or suppress) demand 7

8 Immediate main challenge: Address the lack of consistency in approaches for baseline identification and quantification between waste gas recovery methodologies Substantive issues: Principles for quantification of net GHG benefits Baseline: Identification and Quantification of BE sources Baseline: EFs for non-individually identified Consumption of project outputs Baseline: EFs for Individually identified consuming project outputs (IICs ) Project: Identification and Quantification of PE sources Outputs that can be generated from recovered gas and their use AG recovery: Alignment with normal oil field development activities Improvement issues: Flexibility and coverage of sources of waste gas, outputs and their applicable end-uses in each methodology 8

9 Source of waste gas: Typical flaring reduction project New infrastructure: End-user(s): Waste gas generating asset Not individually identified (markets) Waste gas generating asset Waste Gas New project Infrastructure Output(s) Waste gas generating asset 1. Put infrastructure in place to link supply with demand 2. Bring several AG sources together to create a larger supply 3. Convert gas into marketable products with better market access/value Wet gas Dry gas By pipeline As CNG (compressed) As LNG (liquefied) LPGs C5+ (NGLs) Chemical products Electricity Individually identified consumers

10 General Proposal Design waste gas recovery methodologies to capture GHG benefits in line with CDM Methodological Approches for Baseline Setting (MABS) (displacement of more GHG intensive output(s) at IICs or non-iics) Specific suggestions : 1. Measurement of project outputs at the relevant exit points from the new project infrastructure (to pre-existing infrastructure, custody transfer point or IICs) as basis for defining baseline emissions 2. Allowing multiple outputs and delivery modes (IICs or non-iics) from the new project infrastructure, each to be treated individually in terms of GHG impacts 3. Determine where/how the displacement takes place inside methodology 4. Determine the applicable EF for each output: Provide default EFs (non-iics) or simple procedures + conservative EFs (IICs) for the production and consumption of comparable outputs to provide the same goods and services as the project output as a complement to complex/detailed methods 5. Total BE = Sum of BE contributions for each output and delivery mode

11 Summary of recommendations SUGGESTIONS: AM09 AM37 AM77 #1: Use project output(s) as basis for BE ( ) #2: Allow multiple ouputs & consumers #3: Determine EF approach inside methodologies #4: Common procedure for EF + default/simple options #5: Allow make-up gas in all methodologies #6: Quality criteria for key «additionality» parameters #7: Applicability conditions to ensure env. integrity #8: Remove requirement of historical flare data ( ) Suggestion introduced ( ) Already present in AM9

12 Potential next areas of work for the GGFR-led CFN Overcoming challenges in verification and MRV for existing operating projects Better understanding of post-2012 CDM market status Understanding, evaluating and engaging (develop protocols, provide case studies such as for CARB) with carbon finance opportunities in emerging carbon trading frameworks, especially for offsets (Australia, NZ, Korea, California, WCI, Japan?, China?) with a view of giving members a clear understanding of the new options emerging for carbon finance Working within emerging NAMAs, in the context of AG (working with a country that could be receptive for a pilot NAMA in AG reduction..?) Studying the scope for bilateral agreements (e.g. Japan is pursuing them in SE Asia and to a lesser extent in South America and Africa). Providing support for small-scale/distributed AG-to-power utilization solutions, perhaps on a PoA basis in certain regions (eg. Nigeria, Uzbekistan, etc.) Providing a collective forceful response from GGFR members to the CDM EB s call for input and sharing of experiences

13 GGFR s Vision is Thank you! Further information: fsucre@worldbank.org 12/2/