Assessment of greenhouse gas mitigation options and costs for California Petroleum Industry facilities: The shape of things to come

Abstract

The California Global Warming Solutions Act of 2006 sets a goal for the state to reduce its greenhouse gas emissions to 1990 levels by 2020. In preparation for implementation of a cap and trade program under this Act, Chevron has undertaken a detailed assessment of greenhouse gas mitigation options and costs. Such an assessment is key to making compliance decisions within the constraints of a given cap and trade regime. If the cap and trade market is minimally restricted (i.e., recognizes that climate change is a global issue and thus has no geographic restrictions and no set requirement for onsite emission reductions), facilities can make the best economic (and environmental) choices of where to ‘make’ emission reductions inside the facility fenceline and when to ‘buy’ the emission reduction allowances or credits on the market. The scope of the study included Chevron’s two refineries and a large heavy oil steamflood production operation in California. This paper will discuss how mitigation technologies are identified and assessed, describe some of the key greenhouse gas mitigation alternatives of interest to the Chevron California facilities and present a business-based approach to analyzing mitigation costs. Technologies studied included energy efficiency, advanced energy (solar, wind, geothermal, biomass, nuclear, low temperature heat recovery) and carbon dioxide capture and storage (CCS). For each mitigation option, a consistent methodology, based on the International Petroleum Industry Environmental Conservation Association/American Petroleum Institute (IPIECA/API) Guidelines for Evaluation of Greenhouse Gas Emission Reduction Projects was used to assess baseline or ‘business as usual’ emissions, net emission reductions due to the project, capital cost, operating cost and any project benefits (e.g., reduced fuel use for energy efficiency projects). These values were then entered into a business evaluation tool to calculate a Net Present Value for each option. Key conclusions: Broad involvement of various disciplines is needed to identify new alternatives for greenhouse gas mitigation technologies. Other than CCS, options for significant reductions of refinery and petroleum production emissions were extremely limited in the facilities studied. Since cost-effective, feasible options are limited for refineries and petroleum production facilities, availability of sufficient allowances and offsets is an important element if state goals are to be achieved. Although a number of energy efficiency projects were identified, the cumulative total emissions reductions available through energy efficiency projects is minimal. Renewable and advanced energy projects that generate electricity generally have very high mitigation costs, and may not greatly benefit facilities if emission caps apply only to direct emissions, since these projects reduce the quantity of purchased electricity rather than emissions from the facility itself (and are therefore not eligible for credit under most regulatory design schemes). Renewable and advanced energy technologies for steam generation may have significant mitigation potential for heavy oil steamflood production. Further development and demonstration is needed to determine whether these technologies will be viable. In order to support good business decisions, it is important that greenhouse gas mitigation technology evaluation be done in a manner consistent with other business evaluation processes.