SPE 86603
Integrating Greenhouse Gas Emissions Management Into Capital Projects Planning
John Cain, Jonathan Grant, John Shinn, Michael Milliet and Arthur Lee/ChevronTexaco
Copyright 2004, Society of Petroleum Engineers Inc.
This paper was prepared for presentation at The Seventh SPE International Conference on
Health, Safety, and Environment in Oil and Gas Exploration and Production held in Calgary,
Alberta, Canada, 29–31 March 2004.
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Abstract
Issues of international interest, economics, energy technology
and public perception drive the complexity of the climate
change issue for businesses and industries. Since 2002,
ChevronTexaco has compiled comprehensive annual
emissions inventories of its worldwide operations and interests
using the SANGEA™ system. At the same time,
ChevronTexaco made a public commitment to integrate
greenhouse gas emissions management into its business
planning processes. This paper describes ChevronTexaco’s
process and tools for integrating greenhouse gas emissions
management into the planning and review of new projects.
The tools include a screening tool, to quickly and with
minimal data estimate the potential impact of greenhouse gas
emissions on a project's economics, and the more rigorous
ChevronTexaco Projector, for detailed greenhouse gas and
criteria pollutant emission projections. The tools also include
a mitigation options planning tool and a tool for evaluating the
greenhouse gas implications of potential mergers, acquisitions,
and divestitures. Finally, a capital projects GHG evaluation
flowchart provides guidance regarding when each tool should
be applied, with the recommendations made appropriate
according to the potential significance of greenhouse gas
concerns for the specific project.
The tools and flowchart are innovative applications in
greenhouse gas emissions management. They allow capital
project teams to quickly determine the magnitude of potential
greenhouse gas concerns for their projects, and then tailor
their analyses appropriately. This assures that any capital
project team, regardless of whether greenhouse gas emissions
are a major issue or a relatively insignificant issue for their
project, will devote the appropriate level of effort, at the right
times, and with the necessary support tools, to evaluating
potential greenhouse gas emissions impacts and benefits from
greenhouse gas emissions reductions.
ChevronTexaco Climate Change Action Plan
ChevronTexaco is responding to the concern about climate
change with a four-fold plan of action. We are:
1) Reducing emissions of greenhouse gases and
increasing energy efficiency: Our goal is to reduce
emissions per unit output from operations. We inventory
our emissions and use innovative technologies to
continually improve the energy efficiency of our existing
operations, new projects and products. We are
incorporating greenhouse gas emission assessments into
our capital project evaluations.
2) Investing in research, development and improved
technology: We invest in research to: improve
understanding of global climate change; to identify
mitigation strategies; and to improve the cost
effectiveness of mitigation technology. We develop and
apply cost-effective technologies that reduce the carbon
emissions of producing, delivering and consuming our
products.
3) Pursuing business opportunities in promising
innovative energy technologies: Our research and
business units are actively evaluating and investing in
advanced energy technologies that have the potential of
being commercially viable and beneficial to the
environment.
4) Supporting flexible and economically sound policies
and mechanisms that protect the environment: We
respect the varied views of partner nations on this
complex issue. We assist government policy development
and decision making on energy issues and participate
constructively in dialogue with a broad range of
stakeholders on this complex challenge. We support the
development and use of international mechanisms such as
Emissions Trading, Clean Development Mechanism and
Joint Implementation, which provide flexible, market-
based, economically sound means to reduce emissions.
Consistent with this action plan, ChevronTexaco policy
requires that greenhouse gas issues be incorporated into
capital project planning. Identifying and evaluating potential
greenhouse gas issues up front, before a facility is constructed,
allows concerns to be addressed during project design, so that
potential liabilities can be minimized. Understanding possible
impacts to the economics of the project (i.e., one measure
would be the net present value or NPV of the project) also
allows project teams to evaluate and choose among competing
projects and project alternatives. For these reasons, fully
2 SPE 86603
considering potential greenhouse gas issues in capital projects
is a key piece of ChevronTexaco's overall greenhouse gas
management strategy.
ChevronTexaco Process for Integrating Greenhouse
Gas Emissions Management Into Capital Projects
Planning
ChevronTexaco has developed a process and set of tools to
help capital project teams integrate greenhouse gas emissions
management into project planning and review. The tools
include a screening tool to quickly estimate, with minimal
data, the potential impact of greenhouse gas emissions on a
project's economics, and the more rigorous ChevronTexaco
Projector, for detailed greenhouse gas and criteria pollutant
emission calculations. The tools also include a mitigation
options planning tool and a tool for evaluating the greenhouse
gas implications of potential mergers, acquisitions, and
divestitures. Finally, a capital projects GHG evaluation
flowchart provides guidance regarding when each tool should
be applied, with the recommendations made appropriate
according to the potential significance of greenhouse gas
concerns for the specific project.
The GHG evaluation flowchart is shown in Figure 1.
Capital projects in ChevronTexaco are managed according to
the ChevronTexaco Project Development and Execution
Process (CPDEP), which consists of five phases:
1) Identify and assess opportunities
2) Generate and select alternative(s)
3) Develop preferred alternative(s)
4) Execute
5) Operate and evaluate
Capital project teams begin their GHG analyses in Phase 1 or
early Phase 2, as soon as enough information is available to
allow greenhouse gas emissions to be estimated. The
Screening Tool allows a team to quickly develop a rough
greenhouse gas emissions projection. It then guides them
through an assessment of other factors which can affect the
importance of greenhouse gas issues for their project. The
output of the screening assessment is a categorization of the
potential GHG impact on the project as “minimal,” “small,”
“medium,” or “large.”
If the potential impact is minimal, then no further
greenhouse gas analysis is recommended. On the other hand,
if the potential impact is large, then additional greenhouse
analysis should be an integral part of the project development
effort, and should begin early in CPDEP Phase 2, while the
various project alternatives are being considered. For projects
with potential GHG impacts which fall between these
extremes, further GHG analysis should either be performed to
help select the preferred project alternative either in late
CPDEP Phase 2 (for medium potential impact projects), or as
a final check once the project design is nearing completion in
CPDEP Phase 3 (for small potential impact projects).
ChevronTexaco Projector and the Greenhouse Gas
Mitigation Tool are available to assist with this further GHG
analysis. ChevronTexaco Projector is an EXCELTM-based
tool for rigorous greenhouse gas emissions calculations. The
methodologies are consistent with the API Greenhouse Gas
Compendium and with ChevronTexaco's SANGEATM
Inventory System. The Greenhouse Gas Mitigation Tool
summarizes and reviews greenhouse gas mitigation
technologies for petroleum industry operations, providing cost
estimates and recommended practices for both upstream and
downstream projects.
At the end of CPDEP Phase 3, once the project design has
been completed, the greenhouse gas analysis is documented on
ChevronTexaco's GO-36 Appropriation Request form and
reviewed by the appropriate decision-making body.
The following sections provide more details about the
individual tools.
Greenhouse Gas Screening Tool
The range of greenhouse gas emissions from ChevronTexaco
projects varies from negligible to very large. For some
projects greenhouse gas management is a key value driver,
while for others it is a relatively minor issue.
The Greenhouse Gas Screening Tool is used by all capital
projects to conduct a preliminary greenhouse gas screening
assessment during CPDEP Phase 1 or 2. One of the purposes
of this assessment is to quickly screen out those projects for
which greenhouse gases are not a significant issue. This
preliminary assessment is performed for all projects,
regardless of size or the expected level of greenhouse gas
concern.
The output of the Greenhouse Gas Screening Tool is
guidance regarding the likely magnitude of greenhouse gas
concerns for the project. If the concerns are non-negligible, the
tool gives the project team direction regarding when (Phase 2
or Phase 3) a more detailed greenhouse gas assessment should
be performed.
As shown in Figure 2, use of the Screening Tool involves
four steps. First, a project team checks to see if their project is
listed on either the Exclusion or the Inclusion list. The intent
of the Exclusion list is to minimize the work required for types
of projects which historically have had minimal greenhouse
gas emissions. For example, instrumentation, routine
maintenance, and R&D projects are on this list. Projects with
total expected capital requirements of less than $5 million are
also listed. In general, teams working on these types of
projects are not expected to do rigorous greenhouse gas
analysis.
However, some projects which involve greenhouse gas
reductions should conduct rigorous greenhouse gas analysis,
even if they are listed on the Exclusion List because of project
size or another factor. Such projects may have opportunities
related to carbon trading. For these exceptions to the
Exclusion List there is an Inclusion List, the purpose of which
is to assure that teams working on projects which reduce
greenhouse emissions properly analyze and document those
reductions. For example, renewable energy projects are
included on the Inclusion List.
The next step for project teams is to estimate the
greenhouse gas emissions expected from their projects. The
Screening Tool provides a set of order-of-magnitude emission
estimating factors to allow teams to quickly assess the
magnitude of emissions expected from their projects. For
example:
SPE 86603
• Burning 1 MM scfd of fuel gas produces 20,000 tonnes of
CO2E emissions per year;
• Importing 1 MW-hr of electricity increases the project's
GHG inventory by 0.6 tonnes CO2E emissions.
The resulting emissions estimate is not meant to be precise.
Its purpose is to help the team quickly assess how significant
an issue GHG emissions might be for the project, and provide
direction regarding how extensive further greenhouse gas
evaluation should be.
Following the order-of-magnitude GHG emissions
estimate, project teams look at the sensitivity of the host
government to greenhouse gas and related issues, and the
appropriate cost of carbon to use for translating the estimated
GHG emissions into a potential NPV impact. The Screening
Tool provides guidance that countries which have ratified the
Kyoto Protocol and additional specific countries (e.g.,
Australia) should be considered to have high GHG policy
sensitivity, with a cost of carbon of $20/tonne. For other
countries a cost of carbon of $5/tonne can be used, but in no
case should the cost of carbon be lower than $5/tonne. Project
teams are encouraged not to rely solely on the Screening Tool,
but to assess the sensitivities of their host governments to
determine if alternative cost of carbon values, not lower than
$5/tonne, are more appropriate.
Using the emissions estimate, the cost of carbon, and
other project information, the project team then determines the
potential NPV impact of greenhouse gas emissions.
Finally, the Screening Tool provides an approximate
indication of the significance of greenhouse gas emissions for
the project. If projected emissions are greater than 500,000
tonnes CO2E per year, or if the potential NPV impact is
relatively high, the significance of the greenhouse gas issue
for the project is classified as "large" and extensive further
analysis recommended beginning in early CPDEP Phase 2, as
various broad project alternatives are being developed. On the
other hand, if emissions are less than 50,000 tonnes CO2E per
year, the significance of the greenhouse gas issue for the
project is classified as "minimal" and no further analysis is
recommended.
If emissions fall between 50,000 and 500,000 tonnes CO2E
per year, then the significance is either "medium" or "small,"
depending on NPV impact, host government greenhouse gas
policy sensitivity, and any other considerations the project
team believes are relevant. Further greenhouse gas analysis is
recommended beginning either in late CPDEP Phase 2, as the
broad project alternatives are being evaluated, or in CPDEP
Phase 3, as the preferred alternative is being developed.
ChevronTexaco Projector
SANGEATM Projector is an EXCELTM-based tool for rigorous
greenhouse gas emissions calculations. The methodologies
are consistent with the API Compendium of Greenhouse Gas
Emissions Estimating Methodologies for the Oil and Gas
Industry and with ChevronTexaco's SANGEATM Inventory
System. The ChevronTexaco Projector was designed
specifically for capital project applications. Whereas the
SANGEATM Inventory System has documentation and audit
capabilities which facilitate its use for inventorying emissions
3
from existing operations on a monthly basis, SANGEATM
Projector is streamlined to be used for quickly evaluating
multiple scenarios.
ChevronTexaco Projector has modules for calculating
emissions from the various sources associated with petroleum
operations, for example combustion, flaring, fugitives,
hydrogen production, and electricity and steam import/export.
There is also a miscellaneous module for users to directly
input emissions not covered by any of the other modules.
Additionally, ChevronTexaco Projector has a variety of
features to assist project teams with various aspects of their
greenhouse gas evaluation, including drop boxes for unit
conversions and a sheet for NPV evaluation.
Figure 3 shows a ChevronTexaco Projector results sheet
for a hypothetical scenario.
Greenhouse Gas Mitigation Tool
The Greenhouse Gas Mitigation Tool helps teams identify and
evaluate opportunities to mitigate greenhouse gas emissions
from their projects. As well as providing information on the
applicability and costs of various technologies, it also outlines
a general approach to assessing mitigation options for capital
projects:
1) understanding the drivers for GHG reductions;
2) estimating the expected GHG emissions from the project,
and the distribution of those emissions among individual
sources;
3) reviewing potential GHG mitigation options, focusing on
the largest sources;
4) considering "outside-the-fence" options which could
provide emissions offsets;
5) identifying those GHG mitigation options which are
justified.
This generic approach is widely applicable across the range of
projects with which ChevronTexaco is typically involved.
Although the specific mitigation measures which would
be appropriate for any given project cannot be determined a
priori, a number of "key" measures are typically attractive for
petroleum industry projects. The Mitigation Tool identifies the
following key measures for controlling greenhouse gas
emissions from upstream operations:
• Installing the measuring devices necessary to quantify
greenhouse gas emissions, especially from potentially
large sources;
• Minimizing venting and flaring by capturing and using or
reinjecting gas wherever it is economically feasible (if
this is not possible, flaring is preferable to cold venting);
• Maximizing energy-efficiency by building co-generation
of power and heat, installing energy-efficient equipment
(e.g. pumps and compressors with variable speed drives),
and assuring that proper maintenance and operating
procedures are in place;
• Minimizing methane fugitive emissions, especially
leakage from gas compressors by installing low-leakage
seals and assuring that proper inspection and maintenance
procedures are in place;
4 SPE 86603
• Including flash gas separators on glycol dehydrators, and
using the gas as supplemental fuel in the glycol
regenerator reboilers;
• Avoiding high bleed pneumatic devices, and instead using
low- or no-bleed pneumatics, compressed air driven
pneumatics, or electronic devices.
The Mitigation Tool also identifies several key measures
for controlling greenhouse gas emissions from downstream
operations:
• Maximizing energy efficiency, by
o Installing energy-efficient equipment, such as pumps
and compressors with variable speed drives, and
assuring that proper maintenance and operating
procedures are in place;
o Using pinch analysis and/or other tools to optimize
energy utilization; and
o Recovering waste heat (e.g., cogeneration);
• Attempting to find an outlet other than venting for the
carbon dioxide from hydrogen production;
• Minimizing methane fugitive emissions, particularly from
gas pipeline systems;
• Installing the measuring devices necessary to quantify
greenhouse gas emissions, especially from potentially
large sources.
Greenhouse Gas Analysis for Mergers, Acquisition,
and Divestitures
Potential acquisitions present challenges on the amount of
emissions data that can be provided to or estimated by new
business developers. Certain data may not be available until
the due diligence stage near the end of the acquisition process.
This situation poses a unique challenge for greenhouse gas
emissions evaluation.
The Mergers, Acquisitions, and Divestitures Tool
provides guidance on addressing greenhouse gas
considerations in potential mergers, acquisitions, and
divestitures. The Tool makes references to order-of-
magnitude estimating factors in the Screening Tool,
recommends the use of simple ratios or other approximate
means to project emissions as well as estimating historical
emissions, and recommends a survey of contractual and
regulatory obligations for emissions limits, emissions
reduction requirements, and banked emissions credits attached
to the business being acquired or divested.
Summary
ChevronTexaco has developed a process and set of tools for
integrating greenhouse gas emissions management into the
planning and review of new projects. The tools include a
screening tool, a more rigorous calculation tool, a mitigation
options planning tool and a tool for evaluating the greenhouse
gas implications of potential mergers, acquisitions, and
divestitures. A GHG evaluation flowchart provides guidance
regarding when each tool should be applied, with the
recommendations varying according to the potential
significance of greenhouse gas concerns for the specific
project.
The tools and flowchart allow capital project teams to
quickly determine the magnitude of potential greenhouse gas
concerns for their projects, and then tailor their analyses
appropriately. This assures that any capital project team,
regardless of whether greenhouse gas emissions are a major
issue or a relatively insignificant issue for the project, will
devote the appropriate level of effort, at the right times, and
with the necessary support tools, to evaluating the potential
greenhouse gas emissions impacts or benefits from greenhouse
gas emissions reductions.
Nomenclature
CO2E = CO2 equivalent GHG emission (tonnes)
CPDEP = ChevronTexaco Project Development and
Execution Process
GHG = Greenhouse gas
NPV = Net present value ($)
SPE 86603 5

Figure 1. Capital Projects GHG Evaluation Flowchart

Begin CPDEP
Phase I for Capital
Projects

GHG Evaluation Tools

No GHG “Minimal”
CPDEP Phase 1 analysis
- GHG Management Primer required “Small”
- Screening Tool Screening
CPDEP Phase 2 Tool
- Screening Tool
- GHG Projector
- GHG Mitigation Planning Tool
“Large” “Medium”
- Example Project GHG
Evaluations
- Contact GHG Management
Expert Resource GHG analysis integral GHG analysis of
- Mergers & Acquisitions Tool to early examination of key project
alternatives - alternatives -
Early Phase 2 Late Phase 2

CPDEP Phase 3
- SANGEA™ Inventory System
- GHG Projector Detailed GHG
- Mitigation Planning Tool Document analysis in analysis of chosen
- Example Project GHG GO 36 or AR forms alternative -
Evaluations Phase 3
- GHG Forecasting

Minimal: <50M tonnes CO2e / year Capture GHG learnings

Small: depends on NPV impact and Lessons
and improved Look back
location learned
processes
Medium: depends on NPV impact and
location
Large: >500M tonnes CO2e / year
SANGEA™ is a trademark of ChevronTexaco Corporation
6 SPE 86603

Figure 2. Greenhouse Gas Screening Flow Chart

1a. Is Project on Inclusion

List?

No further
1b. Is Project on Exclusion YES analysis
List?
required
NO

2. Estimate Project
Emissions <50,000
tCO2e/yr

>50,000 tCO2e/yr

3. Assess National Policy

Sensitivity

E.g. No Kyoto E.g. Kyoto Target

Target $20 / tCO2e
$5 / tCO2e

4. Assess Impact on
Project NPV

50,000 - 500,000 tCO2e/yr

>500,000 & low to moderate NPV impact:
tCO2e/yr or high NPV further analysis recommended,
impact: extensive further beginning in either late Phase 2
analysis recommended or Phase 3, depending on level of
beginning in early vulnerability (NPV impact,
Phase 2 local politics, etc.)
SPE 86603 7

Figure 3. Hypothetical Results From ChevronTexaco Projector

User Input Information and Results Intermediate Calculations

Results For Project

CH4 CO2 N2O NOx CO VOC SOx CO2eq

Combustion 5 260,863 5 463 162 9 1 262,545
Flares 56 12,754 0 7 38 25 6 14,002
Venting 0 0 0 0 0 0 0 0
Flashing emissions 187 0 0 0 0 752 0 3,917
Transport and Storage 64 0 0 0 0 360 0 1,336
Acid Gas Removal 0 0 0 0 0 0 0 0
Coke Combustion 0 0 0 0 0 0 0 0
Fugitives 22 0 0 0 0 13 0 463
Imported Power 0 0 0 0 0 0 0 0
Exported Power 0 -13,043 0 -23 -8 0 0 -13,127
Glycol dehydrator 9 0 0 0 0 14 0 186
Hydrogen Plant 0 0 0 0 0 0 0 0
Miscellaneous Sources 0 0 0 0 0 0 0 0
Sulfur Recovery Plants 0 0 0 0 0 0 0 0
Actual Annual Energy Usage
10,901
(MMBTU/DAY)
Total tonnes per year 342 260,574 5 447 192 1,173 7
CO2 Equivalent (tonnes/yr) 7,179 260,574 1,569 0 0 0 0 269,322
CVX CO2 Equivalent (tonnes/yr) 3,590 130,287 784 0 0 0 0 134,661