Download Potential GHG abatement Projects in Upstream Oil & Gas Sector

Climate change issues in
Oil & Gas Sector
A sectoral discussion on Environmental issues,
GHG emissions, GHG abatement opportunities,
Role of CDM
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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Climate Change issues in Oil & Gas Sector
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 :
1.
Atmospheric Impacts
2.
Aquatic Impacts
3.
Terrestrial Impacts
4.
Ecosystem Impacts
5.
Potential Emergencies
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Climate Change issues in Oil & Gas Sector
Potential Environmental Impacts
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:
Atmospheric Impacts
►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
Aquatic Impacts
►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.
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Climate Change issues in Oil & Gas Sector
Potential Environmental Impacts
Environmental Impact
Potential impacts to soil arise from two basic sources:
Terrestrial Impacts
►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.
Potential Emergency
Ecosystem Impacts
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
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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.
Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
GHG Emissions from various industries &
sectors
GHG emissions associated with industry (including energy utilization) represent about 21% of world GHG emissions.
GHG Emissions from various industries
Petroleum,
Petrochemic
als &
Chemicals
23%
Others
44%
Cement
18%
Iron & Steel
15%
GHG Emissions associated with
Industry
CO2 and non
CO2
Emissions
from
industrial
processes
16%
Indirect CO2
Emissions
from
electricity &
heat
consumption
35%
The Oil & Gas and Chemical industries are among the major emitters of GHGs.
Source: CAIT, IEA, 2004a, Hendriks
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Climate Change issues in Oil & Gas Sector
Direct Fossil
Fuel
Consumption
49%
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:
►
►
►
►
►
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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
Climate Change issues in Oil & Gas Sector
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 E&P facilities, Refineries can face huge damage due to cyclones and
hurricanes
Business Risks
Climate
Change
Risks for
Oil & Gas
Sector
►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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Climate Change issues in Oil & Gas Sector
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
Kyoto protocol - Establishes three mechanisms to
supplement national actions to achieve real, long term,
measurable and cost effective GHG reductions:
Clean Development Mechanism (‘CDM’)
International Emission Trading (‘IET’)
Joint Implementation (‘JI’)
Developed Country
Govt/ Pvt. Sector
Sale proceeds
Carbon
Credits
Developing Country
GHG Abatement
Project
Carbon credits are measured in terms of Certified Emission Reduction (‘CER’)
One CER equals 1 MT CO2 equivalent
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Climate Change issues in Oil & Gas Sector
CDM Process : Availing Carbon Credits
1
Project
Implementation
Project
Identification
Project
Construction
Project
operation
2
Kyoto Approvals
3
CDM PROJECT
PROMOTER
CDM
Documentation*
Validation
by DOE
Endorsement
by DNA
Registration
with UNFCCC
CER Transaction
CER
ERPA
BUYER
OF CER
Generation of
Carbon credits
Verification/
Certification by DOE
UNFCCC / EB
Issues CERs
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Climate Change issues in Oil & Gas Sector
*PIN: Project Identification Note
*PDD: Project Design Document
ERPA: Emission Reduction
Purchase Agreement
DOE: Designated Operational Entity
DNA: Designated National Authority
Potential GHG abatement Projects in Upstream
Oil & Gas Sector
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Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
Potential GHG abatement projects in Downstream Oil & Gas
Sector
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Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
Potential GHG abatenment projects in Downstream
Oil & Gas Sector & Petrochemical Units
1.
Energy efficiency Improvement in the existing system…contd
►
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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Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
CDM methodologies available for the Oil &
Gas Sector
AM0009
AM0018
AM0037
AM0055
AM0077
AMS-III.P
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►
Recovery and utilization of gas from oil wells that would otherwise be
flared or vented
►
Steam optimization systems
►
Flare (or vent) reduction and utilization of gas from oil wells as a
feedstock
►
Baseline and Monitoring Methodology for the recovery and utilization
of waste gas in refinery facilities
►
Recovery of gas from oil wells that would otherwise be vented or
flared and its delivery to specific end-users
►
Recovery and utilization of waste gas in refinery facilities
Climate Change issues in Oil & Gas Sector
Registered CDM projects in the Oil & Gas
Sector from India
Essar Oil Limited
►
GHG emission reduction through the installation of energy efficient vacuum
creating system in the vacuum distillation column of petroleum refinery
Methodology used: AM0018
Oil and Natural Gas
Corporation (ONGC)
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 cogeneration 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
►
►
►
►
Numaligarh
Refinery Limited
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►
NRL -Captive power generation by recovery and utilization of the waste energy
(thermal and pressure) of HP steam
Methodology used: ACM0004
Climate Change issues in Oil & Gas Sector
Registered CDM projects in the Oil & Gas
Sector from India
Bharat Petroleum
Corporation Limited
►
Bharat Petroleum Corporation Limited (BPCL)’s Wind Power Project, India
Methodology used: AMS.I-D
Indian Oil
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
►
►
Oil India Limited
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►
Oil India Limited (OIL) – Greenhouse Gas Emission Reduction through
Recovery and Utilization of Flare Gas
Methodology used: AM0009
Climate Change issues in Oil & Gas Sector
Carbon 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 Transactions
Allowance based
Transactions (EUA)
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Project based
Transactions (CER,ERU)
Climate Change issues in Oil & Gas Sector
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 >100,000 p.a.)
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Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
CDM – Value Accretion Curve
VALUE
Approximately 10 months, variable depending on type of project
T
100%
Key step
P
0%
1.
PIN Issued
PIN = Project Idea Note
Page 29
2.
PDD Prepared.
3.
Host Country Approval
PDD = Project Design Document
4.
PDD
Validation
finalised
5.
Registration
with
UNFCCC
6.
Construction
UNFCCC = United Nations Framework Convention on Climate Change
Climate Change issues in Oil & Gas Sector
7
Issua
CE
CDM Transaction Cost
 Documentation cost
Expenses incurred in documentation, Consultant’s fee
 Validation cost
Fee payable to DOE for validation
 Registration fee to UNFCCC
For 15k CER/y : Nil
For > 15k CER/y : @ 0.1 USD for first 15k CERs
@ 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
Page 30
Climate Change issues in Oil & Gas Sector
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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Climate Change issues in Oil & Gas Sector
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
emission
s
Enablers
Identify key
sources of GHG
emissions
Page 32
Identify and
decide
Organizational
and Operational
Boundary
Select the GHG
emission
calculation
approach
Developing
customized
modules and
inventory
manuals
Climate Change issues in Oil & Gas Sector
Determin
e
carbon
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
WBCSD & WRI Protocol…. The framework
for GHG Accounting
GHG ACCOUNTING & REPORTING PRINCIPLES
ACCURACY
RELEVANCE
TRANSPARENCY
Page 33
Climate Change issues in Oil & Gas Sector
COMPLETNESS
CONSISTENCY
Determining Organizational Boundary
Approach
Company selects an approach for consolidating GHG emissions and
then consistently applies the selected approach to define those
businesses and operations that constitute the company for the purpose
of accounting and reporting GHG emissions.
Control approach
Equity share approach
• A company accounts for GHG emissions from
operations according to its share of equity in the
operation.
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• A company accounts for 100% of the GHG
emissions from operations over which it has
control.
• Does not account for GHG emissions from
operations in which it owns an interest but has
no control (Financial or Operational).
Climate Change issues in Oil & Gas Sector
Determining Operational Boundary
Page 35
Climate Change issues in Oil & Gas Sector
Identifying and calculating GHG emissions
Page 36
Climate Change issues in Oil & Gas Sector
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.
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Climate Change issues in Oil & Gas Sector
Thank you
Indra Guha
Senior Manager
Climate Change and Sustainability Services
[email protected]
Mobile: 9871430769