Carbon Monetization for India’s Petroleum Industry
Jan 15, 2016
Carbon Monetization for India’s Petroleum Industry
Outline
About Us
Carbon Monetization
We are industry leaders with innovative technology and commercial experience around carbon management
Sarasijam Technologies
Carbon Management
Solutions
GTC Technology Adi Analytics
1
2 3
Leading global engineering and technology licensing company
Reputed India-based energy technology consulting company
Management consulting company for energy and chemical industry
Sarasijam brings deep oil/gas expertise to help clients solve problems using innovation and technology
About Sarasijam Technologies
New Delhi-based consulting firm Established in 1999
Services Offered Facilitate sales and operations in India Lead R&D and develop technologies Synthesize insight with market reports
Domain Expertise
Deep expertise in oil, gas, chemicals, energy, and industrials
Talented, cost-effective staff of PhDs, MBAs, and experts
INTERNATIONAL CLIENTS
GTC is an established licensor of chemical, refining, and gas processes …
About GTC Technology
Houston-based chemical, refining, and gas technology licensor
Foster Wheeler and Glitsch heritage
Services Offered Technology and equipment licensing Feasibility analysis and engineering Reliability and maintenance services
Domain Expertise Chemicals and petrochemicals Natural gas and CO2 processing Refining and fuels treatment
SELECT LICENSEES
… With proven capabilities in project development, R&D, engineering, technical services, and mass transfer equipment
ProjectDevelopment
Engineering
Licensing
Tech Services
Research & Development
Mass Transfer
Solutions & Equipment
GTC Technology
• Feasibility study• Basic engineering• Detailed engineering
• Petrochemical• Refinery• Gas processing
• Start-up and commissioning• Site installation and supervision• Operations training
• Pilot plant testing
• Mass transfer technology• Solvents and catalysts
• Equity participation• Product marketing
ADI Analytics is a boutique consulting firm serving clients in both industry and the public sector
Driven by hypotheses, data, and analytics
Collaborative with client staff
Grounded in industry expertise
Evaluate markets and opportunities to grow businesses
Gather and analyze difficult-to-get information to address uncertainty
Identify needs, ideas, and opportunities to optimize costs
Design and implement processes to improve organizations
We use a Clear and Robust Approach …
… To Deliver Actionable Consulting and Insight
We specialize in energy, chemicals, and industrials with expertise across the value chain …
MARKETS OPERATIONS FUNCTIONS
OIL & GAS
GASOIL REFINING DISTRIBUTION
UTILITIES & INDUSTRIALS
COAL UTILITIES CARBONAUTO
RENEWABLES & CLEANTECH
GEOTHERMALBIOMASS WINDSOLAR
… Offering a variety of consulting services to help clients improve their strategy, operations, and technology
Build valuation models to analyze investments in capital projects, businesses, or capabilities to estimate economic value, ROI, NPV, IRR, risks, and other metrics
Investment Analysis
Develop and explore carefully drawn future scenarios to define medium-, long-term visions and pressure-test them through quantitative, analytical models
Scenario Planning
Advise clients on competencies and improving them with organization and resource alignment to enhance competitiveness, entry barriers, and shareholder value
Business Strategy
Understand technologies including their business impact, cost, trends, competing options, deployment risk, and commercialization success
Technology Assessment
Assess organizational goals and “as is” processes to identify gaps and design “to be” processes that fill gaps and achieve target goals
Process Design
Implement programs for ideation, portfolio development, stage-gate maturation, open innovation, IP management, functional excellence, and talent development
Innovation Strategy
Conduct in-depth research and analysis to identify new markets or segments, their size, profitability, growth, competitive landscape, client fit, and execution strategy
Market Research
Benchmark client capabilities, costs, and competitiveness against industry based on public information and rigorous modeling and suggest improvement ideas
Competitive Benchmarking
Recent clients include the U.S. Department of Energy, a biofuels start-up, and a national oil company
Assess technology pathways and their economics for upgrading bio-crude oilScout for emerging technologies to improve economics of bio-crude oil upgradingSupport company’s pricing and regulatory strategy for bio-crude oil
VC-Backed Biofuels Start-
Up
Develop investment options in the area of carbon capture and storage (CCS) Reviewed state-of-the-art of CCS technology for use in oil and gas plants Identified two technology acquisition opportunities
National Oil Company
Evaluating life cycle economics of alternative energy technologies Estimating and analyzing costs of advanced geothermal energy technologies Developing novel analytics to study and forecast cost implications of innovation
Outline
About Us
Carbon Monetization
Stabilizing atmospheric carbon at 500 ppmv will require dramatic reductions in CO2e emissions over time
55
62
85
2008 2030 2050
Stern Review Target of 20 GtCO2e
Current and Projected CO2e Emissions(Gigatons)
68% Reduction
76% Reduction
Sources: Stern Review, New York Times
It will take a portfolio of technologies and $40-50 trillion to reduce carbon emissions by 50% in 2050
215 Million Sq. M.Solar PV Annually
32 New Nuclear Plants
Annually
17,759 Wind Turbines
Annually
70% Gain in Fuel Mileage and 95% Advanced Cars
CCS for 55 Coal Plants
Annually
Double World’s Energy
Efficiency
50% Reduction in CO2e Emissions by 2050
Sources: Chevron, International Energy Agency
Although Copenhagen failed to produce a global accord, several emerging economies pledged voluntary carbon cuts
To date, a total of 55 countries have pledged voluntary or mandated cuts in carbon emissions
Mo
Mo
New Zealand
Australia
ChinaJapan
Indonesia
South Korea
Morocco
Sierra Leone
Finland
Sweden
Norway
Great Britain
Ireland
SpainPortugal
France
Italy
GermanyPoland Kazakhstan
India
Russia
South Africa
Syria
Israel
Ethiopia
Madagascar
DemocraticRepublic of the Congo
Romania
Greece
Costa Rica
Brazil
Alaska
USA
Canada
MoldovaAustriaBelgium
Bulgaria
Cyprus
Czech
Denmark
Croatia
Maldives
Marshall Islands
Georgia
Jordan
Singapore
Macedonia
Estonia
Hungary
LatviaLithuania
Luxembourg
Malta
Netherlands
SlovakiaSlovenia
Transport Distribution Total
6%
RefiningE&P
Oil and gas companies will be forced to assess and cut greenhouse gas emissions across the value chain …
1%
12% 1%
80% 100%
Combustion / End-Use
CO2e Emissions Across Oil and Gas Value Chain (Based on Emissions in 2008)
Source Category
Combustion
Vents
Area
Non-Routineand Indirect
Representative Sources
Boilers, heaters, engines, turbines, incinerators, and flares Vehicles, barges, ships, and railcars
FCC catalyst regeneration, hydrogen plants, and coking units Storage tanks and loading racks
Fuel gas system and other equipment leaks Wastewater collection and treating equipment
Equipment blowdown and heater / boiler-tube decoking Pressure relief valves and emergency shutdown devices Offsite production of electricity, steam, and hydrogen
... But this will be difficult because of the fragmented source of greenhouse gas emissions across the value chain
Source of CO2e Emissions in Oil Refineries
Petroleum companies will have to respond using three levers – corporate strategy, innovation, and carbon markets
Key Carbon Monetization LeversIllustrative List
Corporate Strategy
Baseline carbon footprint Benchmark with competitors Plan strategy through war-games
Innovation
Improve and optimize operations Deploy new technologies Invest in emerging technologies
Carbon Markets
Understand carbon markets Evaluate and nurture offsets Develop CDM projects
1 2
3
Corporate strategy must drive carbon monetization initiatives
Key Carbon Monetization LeversIllustrative List
Corporate Strategy
Baseline carbon footprint Benchmark with competitors Plan strategy through war-games
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A four-step approach to develop a corporate carbon strategy
Description Understand the current state of an enterprise
Identify and invest in “no regret” or low-cost options
Engage and monetize through carbon markets
Pave path to “low-carbon” future
Estimate company’s carbon footprint
Develop competitive intelligence
Review and project regulatory scenarios
Inventory options to improve operations
Define near-term risks and responses
Deploy engagement and advocacy plan
Identify and engage carbon markets
Inventory near-term projects, e.g., CDM
Pilot 2-3 projects to gain experience
Integrate learnings from initial efforts
Establish long-term carbon strategy
Implement strategy with dedicated team
Tasks
InitiativeManageBaseline Monetize Amplify
1 32 4
Scenario planning can help explore strategic themes …
Break-through!
Signposts include many demos, early adoption, and integration with infrastructure
Winners are majors with equity in innovators from corporate venture groups
Signposts include more voluntary cuts, growth of shale gas, and higher gas penetration
Gas Galore!
Winners include players with assets producing or using gas
Winners include early movers in cleantech
Clean Clean
Energy!
Signposts include public incentives, leapfrogging by BRICs, and price inelasticity
Winners include conventional oil and gas majors
Signposts include more squabbling, new discoveries, and continued recession
Oil is King! Degree of Energy
Affordability
Degree of Global Cooperation on Carbon
Regulatory Scenarios
… War games can help companies test efficacy of multiple strategic options
Strategy and Operations
Stakeholder Impact
Oil Major
Oil Super Major
Ind. RefinerAuto Maker
Biofuels Start-Up Electric Utility
National
Regional
Players simulate regulators to draw up likely and unlikely scenarios
Financial and shareholder returns are computed using complex models
A wide range of stakeholders develop compliance strategies using a menu
Identify and evaluate critical assumptions Uncover and assess major risks Develop unconventional strategic paths Describe show stoppers and fatal flaws Build new insights and sensitivity
Innovation and technology are critical enablers
Key Carbon Monetization LeversIllustrative List
Innovation
Improve and optimize operations Deploy new technologies Invest in emerging technologies
2
In upstream, fugitive emissions can be reduced through incremental – but NPV positive – improvements in operations
The Problem
Nearly 600,000 pneumatic devices in U.S gas industry …
… Used as liquid level controllers, pumps, and pressure regulators …
…Each emit 100 avoidable tons CO2e/yr of methane
The Solution
Replace high-bleed inventory with low-bleed devices
Verify reductions in emissions
Audit and certify emission reductions
Monetize resulting CERs
The Opportunity
Developed the first U.S. carbon offset methodology for fugitive methane emission reductions in oil / gas
Established baseline without direct measurements
Piloted retrofit program in Washakie Basin, WY
Measured leaks before and after with a third-party
Completed several hundred retrofits within a month
Observed devices after installation to allay concerns about failures and “upsets”
Planning next phases in Oklahoma and Texas
Auditing emission reductions of 65,000 - 80,000 tons of CO2e per year
Similarly, refineries too offer “low-hanging fruit” although deep cuts in greenhouse gas emissions are expensive
Carbon Abatement Opportunities in Refineries
Life Cycle Cost, $/tCO2e
Potential Reduction in Refinery CO2e Emissions, Percent
Sequester CO2 from units Integrate gasification in refining
Export fuel oil Use cogeneration Reduce hydrogen use
Clean heaters Use more exchangers Recover APH heat Switch fuel gas
There are a number of “no regret” options
that can pay off in less than three years
Sulfur RecoveryFlue Gas
(H2S, CO2, HC, etc.)
Unit to Polish H2S Traces
Flue Gas
(20-30 ppm H2S)
Sulfur
BoilerScrubber + Quencher
GT-CO2 Unit
Sweet Flue Gas with light hydrocarbons
Dryer + Compressor
Water Steam
N2 + O2
CO2 + N2 + O2
CO2
DMC Unit
Pipeline-grade CO2
Ethylene Oxide + Methanol
Dimethyl Carbonate
Flue gas desulfurization and feed prep
Carbon dioxide capture
Carbon dioxide utilization
1
2
3
Process licenses from GTC Technology
Since industry prefers integrated solutions, GTC, Sarasijam, and ADI have proposed one for multiple applications
In Step 1, flue gas desulfurization improves CO2 capture performance to produce pipeline-ready CO2
Commercially proven desulfurization technology– Patented process for medium-scale sulfur removal
– Operating commercially at natural gas plant in Germany
Novel reaction chemistry– Modified liquid-phase, non-aqueous Claus reaction
– Converts H2S into elemental sulfur
– Uses mild SO2 oxidant
Advantages– Compatible with wide pressure range (0.1 to 10+
MPag)
– Avoids chronic problems of conventional processes, e.g., plugging, foaming, and high chemical costs
– Tolerant to contaminants (e.g., CO2, SO2, NH3, O2, heavy hydrocarbons) with no operating penalty
– Solvent selective to H2S and has excess capacity eliminating need to match H2S to SO2 ratio
– Low-corrosion carbon steel construction
10,000 100,000 1,000,0001000
Gas Flowrate, M3/hr
H2S
Co
nc
en
tra
tio
n
100 ppm
1000 ppm
5000 ppm
1%
5%
10%
0.1 TPD sulfur
100 TPD sulfur
25 TPD sulfur5 TPD sulfur
1 TPD sulfurScavenging
Amine/Claus/TGT
5000 50,000
500 ppm
CrystaSulfCrystaSulf(All Applications)(All Applications)
High CO
High CO22 & Unconventional Gas
& Unconventional Gas
Applications
Applications
0
20
40
60
80
100
120
140
160
180
200
0 2 4 6Hours
Inle
t C
on
ce
ntr
ati
on
(m
g/N
m3)
0
2
4
6
8
10
Ou
tle
t C
on
ce
ntr
ati
on
(m
g/N
m3
)
Inlet
Outlet
Relevance to CO2 StreamsRelevance to CO2 Streams
High Desulfurization PerformanceHigh Desulfurization Performance
Flue Gas Desulfurization
In Step 2, CO2 is captured using the cost-effective, high-performance, and commercially proven GT-CO2 process
GT-CO2 process advantages
– Higher CO2 removal (>90%) than regular amines
– Packed-bed absorption with blended solvent
– High oxygen tolerance suitable for flue gas
– Cost-effective due to higher CO2 capture levels and standard construction material
– Higher carrying capacity allows reduced circulation rates and lower energy costs
GTC’s commercial experience – GTC experts have designed, supported, and
operated commercial CO2 capture projects 1980s
– Designed the first world-scale CO2 recovery plant at Lubbock, TX
– GTC is a leader in mass transfer equipment, a critical component of the GT-CO2 technology
– GTC has designed commercial absorption and fractionation towers using high-efficiency packing, e.g., world’s largest refinery vacuum tower with a diameter of 17 m
Commercial ReferencesCommercial References
DMC SECTION: Transesterification
EC
MeOH
Vacuum
Lights
EG
MeOH/DMC Azeotrope
DMC
EG
Se
pa
rati
on
EG
Pu
rifi
cat
ion
MAKE-UPCATALYST
Rea
ctiv
e D
isti
lla
tio
n
Heavy Purge
DM
C S
epar
ati
on
In Step 3, a phosgene-free, environment-friendly process converts CO2 to dimethyl carbonate (DMC)
Reaction– CH2OCH2 + CO2 (CH2O)2C=O (Ethylene
Carbonate)
– (CH2O)2C=O + 2CH3OH (CH3O)2C=O (Dimethyl carbonate) + HOCH2CH2OH (Ethylene Glycol)
Process features– High ethylene carbonate (EC) conversion (95-99%)
– High EC selectivity (>98%) to dimethyl carbonate (DMC) and ethylene glycol (EG)
– Reactive distillation for equilibrium controlled reaction
– Based on novel catalysts with high carbon utilization
– Uses or produces no hazardous raw materials and intermediates
Commercial experience– Second step producing DMC commercialized
– First step producing EC tested at 5 KTA pilot scale
EO
CO2
CO2Vacuum
EC TANKTo DMCSection
Purge
MAKE-UPCATALYST
Heavy Purge
EC SECTION: Epoxide to Alkylene Carbonate1
2
Two-Step DMC ProcessTwo-Step DMC Process
DMC is an intermediate used in polycarbonates, lubricants, solvents, fuel additives, and other products
Uses Features
Octane additive Road octane 105; high oxygen content, good blending characteristics
Solvent High solvency, thermal stability, and biodegradability; low vapor pressure and toxicity
Polycarbonate resin precursor
Phosgene substitute
Dimethyl CarbonateDimethyl Carbonate
Dimethyl Carbonate Uses and FeaturesDimethyl Carbonate Uses and Features
OxygenOxygen
HydrogenHydrogen
CarbonCarbon
Our integrated solution enables multiple end uses of the recovered CO2 stream
Dryer + Compressor
DMC Unit
Pipeline-grade CO2, e.g., for EOR
Ethylene Oxide + Methanol
Dimethyl Carbonate
CO2 Other products, e.g., urea, fuels, etc.
Most CO2 conversion
technologies are at lab-scale; DMC has
commercial and pilot-tested
components.
Our integrated offering can produce contaminant-free CO2 …
– … Meeting specs for transportation by pipeline or …
– … Ready as raw material for conversion to dimethyl carbonate or other products
The optimal end-use of the recovered CO2 stream should be evaluated in a feasibility study:
– Total volume of recovered CO2 stream
– Supply, transportation logistics, and cost of raw materials
– Reformed products’ demand, supply, and market dynamics
– Ability to generate carbon credits
Effective carbon management will require competitive technologies for capture, transport, storage, and utilization
Segment
Status
TransportCarbon Capture
Three processes
– Post-combustion– Pre-combustion– Oxy-combustion
No clear winner yet
Storage Utilization
Three routes
– Pipeline– Ship– Rail
Pipelines are most cost effective
Three sinks
– Old oil fields– Coal seams– Saline aquifers
Saline aquifers have the most capacity
Nascent field with multiple paths
Limited R&D effort
71
Integrated Completed Canceled or Delayed
31
80
Active or Planned
Large-scale, integrated
Total Projects
87
Carbon capture is advancing through several R&D and pilot and a few commercial projects across the world …
59
210
Global Portfolio of CCS Projects
… While carbon storage has a number of options
Enhanced Oil Recovery
Uses CO2 already to increase oil production Offers financial incentive for injection and storage
Depleted Oil and Gas
Fields
Creates storage for CO2 as production declines and formation pressures drop
Enables utilization of existing infrastructure
Coal Seams Utilizes abandoned or unproductive coal seams Leverages affinity of coal for CO2
Saline Aquifers
Exploits permeable formations in oceans Creates use for undeployed formations
Low
Low
Medium
High
High
High
Low
Minimal
Potential Knowledge
In comparison to carbon capture, transport, and storage, CO2 utilization has received little attention
Segment
Status
TransportCarbon Capture
Three processes
– Post-combustion– Pre-combustion– Oxy-combustion
No clear winner yet
Storage Utilization
Three routes
– Pipeline– Ship– Rail
Pipelines are most cost effective
Three sinks
– Old oil fields– Coal seams– Saline aquifers
Saline aquifers have the most capacity
Nascent field with multiple paths
Limited R&D effort
In comparison, CO2 utilization has received little
attention
Direct Mineralization
Chemical Utilization
Chemical Utilization
Biological Utilization
Biological Utilization
Utilization of Supercritical CO2
Aqueous precipitation to carbonates (Calera)
Direct capture and conversion to carbonates (Skyonic)
Catalytic conversion to polycarbonates (Novomer)
Small organic compoundsElectrochemical utilizationMethane reforming
Enzymatic conversion to soluble carbonates (Alcoa)
Algal-based conversion to biofuels (Touchstone, Phycal)
Fixation using algal systemsUtilization in bioreactors
ExtractionCatalysisEnvironmental remediation
EXISTING
EMERGING
Several new technologies are emerging for CO2 utilization
Novomer has attracted funding, partners, and recognition around its catalytic route to convert CO2 to polymers
Investors
DSM Venturing Flagship Ventures Physic Ventures OVP Venture Partners KensaGroup
PartnersExternal Recognition
U.S. Department of Energy funding of $18.4 M over multiple phases
MIT Technology Review TR 50 New York State Energy R&D
Authority funding of $0.8 M
Eastman Kodak Albemarle Praxair Cornell University
Key Advantages Commercialization StatusKey Challenges
Uses CO2 as a reactant … … Allowing it to compete effectively
against plant-based routes Use of catalyst enables flexibility Equipped with funds and resources
Difficult to make high MW polymers Polymer processability and end-use Catalyst and process scale-up Catalyst lifetime and stability Overall process economics
Synthesized in 25 gallon batches Demonstrated in 500 gallon reactor Investigating flow process Using product for adhesives Testing polymer processing
Process RouteCompany
EPOXIDES
+ CO2 POLYCARBONATES
+ COACRYLIC ACID
1,3-PROPANEDIOL
Calera seeks to convert CO2 to cement and other usable materials
Investors
Khosla Ventures
PartnersExternal Recognition
U.S. Department of Energy funding of $19.9 M
Multiple awards in making ‘Green’ building materials
Dynegy Gruppo de Nora Bechtel Peabody Energy
Key Advantages Commercialization StatusKey Challenges
Utilizes CO2, … … Fly ash, and … Flue gas process heat … Producing cement and aggregates,
excellent for carbon storage
Requires use of extra power … … Hazardous fly ash and … … Additional energy inputs for key
unit operations of spray drying and aggregate formation
Demo plant in Mass Landing, CA to capture 30,000 tons per year of CO2
Plant to be expanded to handle 550,000 tons per year of CO2 from a 100 MWe plant
Process RouteCompany
CARBONATE PRECIPITATION
CEMENT
THICKING AND SPRAY DRYING
FILL MATERIAL
FLUE GAS
FLY ASH
BRINE
POWER+
+
+
Carbon markets are a powerful lever but require engagement to fully exploit their potential
Key Carbon Monetization LeversIllustrative List
Carbon Markets
Understand carbon markets Evaluate and nurture offsets Develop CDM projects
3
Carbon markets have enjoyed accelerated growth and are likely to continue growing exponentially …
Annual Transactions, Million Tons CO2e
Volumes of CO2e Reductions (Commitments up to 2012)
Sources: The World Bank
… Driven by demand from Europe, which is seeking to comply with its emission reduction goals
Buyers of CO2e Credits (Commitments up to 2012)
Sources: The World Bank
China – the emerging “Green Giant” – is the predominant supplier of credits
Suppliers of CO2e Credits (Commitments up to 2012)
Sources: The World Bank
Energy efficiency and fuel switching were the dominant goals; renewable energy is slowly gaining steam
Types of CDM Projects (Commitments up to 2012)
Sources: The World Bank
The CDM process is suffering from too much success and throughput has fallen due to increased scrutiny …
CDM Project Pipeline Activity (Commitments up to 2012)
Sources: The World Bank
… Increasing the time a project spends at each stage and decreasing actual credits delivered to the market
CDM Projects – Days in Each Step (Commitments up to 2012)
Projected Delivery of CERs (Commitments up to 2012)
Sources: The World Bank
Carbon markets responded to the recession with a sell-off of allowances, flight to security, and reduced projects demand
Carbon Credit Markets (European Union Emission Trading System)
Sources: The World Bank
Engaging carbon markets will require a strong understanding of both the CDM project development process and …
CDM Project Development and Credit Monetization ProcessCDM Project Development and Credit Monetization Process
Analyze project feasibility and environmental impacts Draft Project Design Document Seek Designated National Authority (DNA) approval
Identify baseline and monitoring methodologies Propose new methodology if required Designated Operational Entity (DOE) consults
stakeholders and issues validation report
Register project with Executive Board (EB) Pay project registration fees Evaluate external financing options, if required
Identify key data needs and reporting templates Develop plan to collect and store data Collect, store, and report data
Support annual, on-site DOE verification inspections Provide monitoring reports to DOE team Ensure DOE submits certification report to EB
Obtain Certified Emission Reduction (CER) credits Analyze economics of trading credits on global
emission markets vs. use for internal compliance Monetize CERs through most advantaged route
Key Steps
… Insight into factors that shape carbon credit pricing
CDM Certification Impacts on CER Price(Carbon Credit, $/ton)
CDM Certification Impacts on CER Price(Carbon Credit, $/ton)
Summary
Carbon reduction in the oil and gas industry is challenging …
… But can be achieved through strategy, innovation, and carbon markets
Scenario planning and war gaming are two tools to develop carbon management strategies
Innovation will occur at the incremental and disruptive levels
– Incremental innovations will drive operational improvements and integrated solutions
– Disruptive innovations are still in the pipeline
Finally, the industry must engage carbon markets and build experience to derive value