Part III: Flare Reduction Project Family - IPIECA

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Section 7. Flare Reduction Project Family Table 7-9. Case Study #3 Baseline Scenario Assessment Baseline Scenario Alternatives Candidate 1: Continuation of current activities: Associated gas continues to be flared Candidate 2: Associated gas is vented to the atmosphere Candidate 3: (Project activity): Associated gas is used for fuel to generate power on-site Candidate 4: Associated gas is transported off-site to be sold as fuel to an outside party Investment Ranking No additional costs No additional costs Replacement of existing IC engines with new units that can accommodate associated gas fuel Moderate to high costs for new compression equipment and a new pipeline to transport gas Technology No additional technology requirements Existing technologies Existing technologies Existing technologies Policy/ Regulatory May be prohibited by local regulations May be prohibited by local regulations Consistent with current applicable laws and regulations Consistent with current applicable laws and regulations Benchmarking Common practice in project region 19 Generally avoided due to safety risk Associated gas quantity nearly matches facility’s power generation requirements Gas infrastructure not developed in project region Based on comparing the baseline candidates presented above: • Candidates 1 and 2 are restricted by local policies and/or regulations. However, flaring of associated gas (Candidate 1) occurs routinely in the project region because assessed penalties for flaring are too low to effectively discourage the practice. Enforcement of the prohibition against routine venting is more substantive because of potential serious safety risks associated with gas venting. Accordingly, Candidate 2 is assumed not to be feasible for this example. • Candidate 3 (Project activity) would incur substantial costs to change out the engine drivers for power generation in a manner that will enable their use on associated gas fuel. Offsetting this cost over the long term will be the savings in crude oil that can be marketed, rather than used on-site for fuel, because of its replacement with the previously flared associated gas. This candidate scenario would utilize the emerging technology of engines that are being designed to better accommodate variable fuel quality and composition. Depending on the scale of the production and local pricing factors, this scenario could conceivably be considered a viable baseline scenario. • Costs for implementing Candidate 4 are also considerable in that new compression capacity and a new gas pipeline would need to be developed to support delivery of produced gas to 19 Depending on the circumstances of the project, the region or geographic area may be narrow (e.g., an area within a nation or state), or broad (e.g., an international region or global area). October 2009 44
Section 7. Flare Reduction Project Family markets. However, there is no natural gas infrastructure in the project region, with the result that the gas has little value, and these expenses are not justified. Thus, this Candidate cannot be assumed to be the baseline scenario. In the above analysis, Candidate 1, which represents the continuation of current activities, could be considered the most probable baseline scenario. 20 However, depending on local pricing factors and the scale and remaining lifetime of oil production at the field in question, it is possible that Candidate 3, which represents the project activity, could also be a viable baseline scenario and could even be more economically attractive in the long run than continued flaring. While this type of project would almost certainly result in an overall reduction in facility emissions of GHGs (replacement of a higher carbon intensity fuel with a lower intensity one for on-site consumption), it might well be undertaken based simply on improving operational economics, rather than to obtain emission reduction credits. Most of the following discussion pertains to a scenario in which continued flaring can be demonstrated to be the most likely baseline scenario, i.e., where the circumstances of the project’s implementation would cause it to be substantially more costly than a continuation of associated gas flaring and where acquisition of emission credits may be at least a partial motivation for the flare reduction project. Figure 7-7 provides a schematic illustration of this baseline scenario. Internal Combustion engine for Power Generation (burning crude oil) meter Flare Associated gas Crude oil to sales Crude oil Oil/Water Separator Produced oil/water Oil/Gas Separator Associated gas Gas dehydration/ compression Oil field with associated gas Figure 7-7. Baseline Illustration for Case Study #3 20 Baseline candidates and the analysis presented here are for illustrative purposes only. Actual project activities will require an assessment of the candidates and characteristics specific to the project application. Specific climate change regimes may require additional details and justification for baseline scenario determination. October 2009 45
Page 1 and 2: Prepared by URS Corporation Oil and
Page 3 and 4: Table of Contents PART I 1 ........
Page 5 and 6: Section 7. Flare Reduction Project
Page 21 and 22: ATTACHMENTS TO SECTION 7: FLARE RED
Page 47: Section 7. Flare Reduction Project
Page 67: American Petroleum Institute Intern

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