THE REDUCTION OF UPSTREAM GREENHOUSE GAS EMISSIONS FROM FLARING AND VENTING Report by the International Council on Clean Transportation to the European Commission Directorate-General for Climate Action Reduction of upstream greenhouse gas emissions from flaring and venting AUTHORS The International Council on Clean Transportation: Chris Malins, Stephanie Searle, Anil Baral, Sebastian Galarza, Haifeng Wang. Energy-Redefined Ltd.: Gary Howorth ACKNOWLEDGMENTS With thanks to Wojciech Winkler and Lars Müller (DG Clima); Nic Lutsey (ICCT); Francisco Sucre (World Bank); Anders Pederstad and Olga Gassan-zade (Carbon Limits); and the Association of Oil and Gas Producers. SUGGESTED REFERENCE ICCT (2014). Reduction of Upstream Greenhouse Gas Emissions from Flaring and Venting. Authors: Chris Malins, Stephanie Searle, Anil Baral, Sebastian Galarza, Haifeng Wang, Gary Howorth. Washington D.C.: The International Council on Clean Transportation. ABOUT THIS REPORT This document and the content contained herein are provided under service contract Clima.C.2/SER/2013/0032r for the benefit of the European Commission. There are no intended third party beneficiaries, and the ICCT accepts no liability to any third party for any defect, deficiency error or omission related to this document. Errors and omissions excepted, the content of this document is correct as of 20 October 2014 to the best of the ICCT’s knowledge. © International Council on Clean Transportation (ICCT), 2014. ii Contents List of tables .................................................................................................................. x List of figures .............................................................................................................. xii Abbreviations used .................................................................................................... xv Overview: venting and flaring reduction opportunities ...................................... xix Executive summary ................................................................................................. xxiii ES.I. Measurement, reporting and verification ........................................................ xxiv ES.I.i. The CDM options (Option 1 and Option 2) ............................................... xxiv ES.I.ii. The prescriptive option (Option 3a) ............................................................ xxv ES.I.iii. Implementing measure requirements (Option 3b) .............................. xxvii ES.II. The size of the potential for emissions reductions .................................. xxviii ES.III. Required measures to implement each option ........................................... xxxi ES.III.i. The ETS-CDM option ......................................................................................... xxxi ES.III.ii. The standalone CDM option ...................................................................... xxxii ES.III.iii. The prescriptive option .............................................................................. xxxii ES.III.iv. Implementing measure requirements .................................................. xxxiii ES.III.v. Member State Implementation ................................................................ xxxiii 1. Project scope and objectives ............................................................................... 1 2. Task 1: Methodology to assess and credit emissions reductions from gas flaring or venting ............................................................................... 6 2.1. Summary of Task 1 ........................................................................................................... 6 2.2. Task 1a: Baseline and delta calculation .................................................................... 9 2.2.1. Baseline and delta calculation under the CDM options ............................. 9 2.2.2. Baseline and delta calculation under the prescriptive option .............. 16 2.2.3. Baseline and delta calculation under the implementing measure requirements .......................................................................................... 21 2.2.4. Flare gas measurement vs. project gas capture measurement ........................................................................................................... 25 2.3. Task 1b: Reporting regime ......................................................................................... 27 2.3.1. Reporting regime under the CDM options .................................................. 27 2.3.2. Reporting regime under the prescriptive option ....................................... 31 2.3.3. Reporting regime under the implementing measure requirements ........................................................................................................... 36 iii" Reduction of upstream greenhouse gas emissions from flaring and venting 2.3.4. Reporting requirements for upstream emissions reductions under the California LCFS .................................................................................. 39 2.4. Task 1c: Methodological validation ........................................................................ 40 2.4.1. Results of stakeholder consultation ............................................................... 40 2.4.2. Satellite measurement of flared volumes ..................................................... 41 2.5. Task 1d: Flare efficiency improvements ............................................................... 42 2.5.1. Review of Flaring Efficiency Studies ............................................................. 44 2.5.2. Flare efficiency improvements under the prescriptive option ......................................................................................................................... 55 2.5.3. Flare efficiency improvements under the implementing measure requirements ......................................................................................... 56 3. Task 2: Cost and size of the reduction potential ........................................... 58 3.1. Summary of Task 2 ....................................................................................................... 58 3.2. Task objectives: the effects of cost on the size of the potential ................ 61 3.3. Literature review on the cost and size of the reduction potential .................................................................................................................... 62 3.3.1. ICF, 2013 .................................................................................................................... 62 3.3.2. ICF, 2014 .................................................................................................................... 64 3.3.3. Johnson & Coderre, 2012 .................................................................................... 65 3.3.4. Ecofys, 2009 ........................................................................................................... 66 3.3.5. Ecofys, 2001 ............................................................................................................. 67 3.3.6. GE Energy, 2010 ..................................................................................................... 68 3.3.7. Carbon Limits, 2013 .............................................................................................. 69 3.3.8. PFC Energy, 2007 ................................................................................................. 70 3.3.9. PA consulting Group, 2006 ................................................................................ 71 3.3.10. Summary of literature review on the cost and size of the reduction potential ................................................................................................ 71 3.4. Barriers to engagement in CDM .............................................................................. 74 3.4.1. Demonstration of additionality ........................................................................ 74 3.4.2. Inconsistency between methodologies and treatment of additionality ............................................................................................................. 75 3.4.3. Length of project registration process ......................................................... 76 3.4.4. Cost of CDM process ............................................................................................ 77 3.4.5. Government stake in gas recovery projects ............................................... 79 iv " 3.4.6. Infrastructure ........................................................................................................... 80 3.4.7. CER credit value ...................................................................................................... 81 3.4.8. Other barriers .......................................................................................................... 82 3.5. Calculation of the cost and size of the reduction potential ......................... 85 3.5.1. The ICF analysis ..................................................................................................... 85 3.5.2. Potential under the ETS-CDM option ............................................................ 88 3.5.3. Potential under the standalone CDM option .............................................. 88 3.5.4. Reanalysis of ICF’s MAC curves with consideration of barriers related to the additionality requirement ..................................... 88 3.5.5.