To meet emission reduction goals as oil demand remains significant, governments around the world are increasingly turning to carbon pricing through either a tax levied on CO2 emissions or the implementation of an emissions trading system. If more countries turn to a carbon tax or the demand for and price of carbon emission credits continue to soar, the oil industry will increasingly look to benchmark the CI of their assets and reduce upstream emissions.
The lowering of the CI of existing crudes by oil producers and the pursuit of low-CI crudes by refiners will become more important as policies targeting emissions continue to take effect. Oil producers have already started selling carbon-neutral crudes with emissions being offset from the use of carbon credits. And, crude buying strategies particularly in light of the crude disruptions caused by the Russian war in Ukraine, will have major impacts on and implications for the current profitability and future sustainability of businesses.
The current study begins with the net-zero carbon goals of various countries around the world as well as the emissions reduction targets of global oil producers. It also provides a listing of the carbon taxes that have been implemented and descriptions of the China National emissions trading system (ETS), the EU ETS, the California Cap-and-Trade Program, the Regional Greenhouse Gas Initiative, and the Korea ETS.
The study also identifies low-CI crudes located throughout the world and discusses the factors affecting crude CI including energy consumption in production, flaring, fugitive and venting methane emissions, and the use of renewable energy as a power source for oil fields. Energy consumption is affected by the density and viscosity of the crude, the depth and pressure of the reservoir, and the techniques used for the extraction of oil from aging fields and unconventional resources. Flaring during production is also a main driver for a high CI. However, is not unavoidable in crude oil production. With the proper gas handling infrastructure in place, companies can eliminate routine flaring and instead capture and utilize gas from their oil wells or reinject it in order to enhance oil recovery. And, methane leak detection and repair programs can be utilized to minimize fugitive and venting emissions.
Also provided are estimates of the well-to-refinery CI in 2015 of 8,966 active oil fields using the Oil Production Greenhouse Gas Emissions Estimator open-source model developed at Stanford Univ. And, the study examines the connection between well-to-refinery CI and profitability and assesses how demand drops would impact CI. Finally, it describes recent sales of carbon-neutral crudes by Lundin, Occidental Petroleum, Sinopec, and SOCAR.
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Adobe Acrobat (.pdf) file
