July 14, 2022

E&P carbon footprinting and auditing - how to do it yourself

Future Energy Partners can run workshops for your company to help you determine which emissions are material in your footprint, how to put together your model to measure / assess / reduce them, how to provide evidence to banks and others, and develop organisational capacity. If you would like to discuss further, please let us know here.

We are hearing that "margin ratchets" are being included in contracts for bank financing for E&P companies now almost as a routine.

This means that the price of interest on your borrowing increases if you do not meet ever improving targets on CO2 efficiency.

The amount of difference it typically makes on interest rates is not huge - we hear 0.05 to 0.1 per cent typically - but enough to make people pay attention.

That leads to the question - how should these improvements be achieved and proven?

The default option may be to go to a carbon footprinting and audit company. A quick Google search would drive you towards well known companies with expensive office buildings, like DNV, Lloyd's Register / Vysus, TUV, Bureau Veritas, Genesis Petroleum. The price is unlikely to be cheap. Do you have to do it this way?

Instead, perhaps with a bit of assistance, you could do it yourself.

You need a model which captures most of your emissions, a means of calculating them, and a means of showing what you have calculated, perhaps with live access to your data to anyone you authorise to see it.

Where are your biggest emissions? To work that out you need engineers with oil and gas expertise - or perhaps just graduate engineers. Being an E&P company, presumably you already employ them.

Your emissions probably cover an 80:20 rule where 80 per cent of your emissions come from 20 per cent of data sources. You want to capture this 80 per cent. For example, if you were calculating the emissions associated with a flight, the main number would be fuel use divided by the number of seats.

Then perhaps a rough estimate is sufficient for the other big emissions and adjustments, which could be construction of the plane, lifecycle emissions of providing aviation fuel, operation of the airport, allowance for empty seats, allowance for high altitude emissions being worse.. aircraft crew travel, food, construction of the airport.. you end up with emissions which are very tricky to calculate meaningfully and make little material difference to the final number.

When it comes to E&P emissions there are a bewildering array of standards, such as from the Global Reporting Initiative and the Sustainability Accounting Standards Board. But, for now, you probably won't be required to follow any of them to the letter. You can take whatever elements you find useful from any of them in stating your case. For now, what's important is 'showing your workings out', rather than following any complex standard.

For example, if you want to take your CO2 sequestration services sold to a third party as an offset against the CO2 emissions from the use of your fuels, it is easy to argue that this is reasonable, even though it isn't specified in any standard.

And underneath it all, you need a digital system for managing your own emissions data, supporting your decisions, and sharing with your stakeholders. This can show what your emissions are, according to the method you have decided upon, and how emissions are reducing, and even how they will reduce. Your stakeholder can scrutinise this and ask whatever questions you want. If as a result of this scrutiny you decide to add another data element, your digital system needs to be flexible enough to allow this.

[This is a good argument, by the way, for putting together your own digital system, perhaps made of commercial elements, but not buying a fully inclusive carbon modelling software - which might make you more constrained to the emissions the software developer has decided to include].

Future Energy Partners can help you run workshops to determine what emissions you want to include and how to manage them, and how to put together the model. If you would like to discuss further, please let us know here..

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