angola liquefied natural gas carbon credit...

ECONOMIC CONSULTING ASSOCIATES LIMITED41 Lonsdale Road London NW6 6RA UKtel +44 (0)20 7604 4545 / fax +44 (0)20 7604 4547 www.eca-uk.com

1 (C) 2002. Economic Consulting Associates Ltd

Angola Liquefied Natural Gas Carbon Credit Study

funded by the World Bank/ Global Gas Flaring Reduction public-private partnership

with the support of the UK Foreign & Commonwealth Office

Stephen Wilson /ECA, LondonBraulio Pikman /ERM, Brazil

Capacity Building Workshop, Luanda, Angola, 25-26 October 2006


Agenda Welcome by MinUAWednesday AM

The World Bank/ intro to CDM ERM: how the CDM process worksMinPet & ECA: ALNG CDM Project Idea Note ECA & ERM: potential value of carbon credits

Wednesday PM ECA: how to unlock this potential value Groups: ideas for other CDM projects ERM: overview of emissions from other sectors

Thursday AM ECA: ALNG CDM Project Design Document Groups: host country and developer roles

Thursday PMERM: sustainable development Groups: sustainable development criteria Summary and next steps

Close by MinPet


How a CDM project is developed

CDM project first concept

Project Idea Note (PIN)

Is a New Methodology

Required?

Develop New Methodology (NM)

Project Design Document (PDD)

No Yes

Use Approved Methodology (AM)

CDM Process


Overview of the Angola LNG project

Angola Liquefied Natural Gas (ALNG) project being developed by:

Sonagas/Sonangol together with Chevron, ExxonMobil, BP and Total

Total project CapEx is very large ALNG will enable Angola to:

send to market gas produced in association with oil (AG) instead of flaring it monetise its currently ‘stranded’ gas reserves potentially catalyse the use of modern, commercial fuels such as bottled LPG and possibly natural gas, at least near the LNG plant


Petroleum concession blocks in Angola


Angola LNG general project concept

LNG exports


Export to buyers in Atlantic basin LNG markets

LNG exports

NORTH ATLANTIC

SOUTH ATLANTIC


How and why is ALNG a CDM project?

ALNG will: Help meet the Government’s objective of reducing gas flaring in Angola Facilitate the economic development of Angola by providing a revenue stream in addition to that from oil production Provide sustainable developmentbenefits by: reducing the resources lost to flaring in Angola and by making possible access to energyfrom modern commercial sources in Angola and neighbouring countries




Required?



No Yes


CDM Process


Step 1: Initial CDM project concept




Required?



No Yes


CDM Process

Baseline

4.3 bcm/y ~ 150 bcf/y

~ 10 Mt CO2-e

CDM ProjectAs much of the associated gas as can be put into LNG tankers instead of flared may earn credits


Step 2: Develop a PIN

A Project Idea Note (PIN) is not a formal CDM requirement, but is an excellent discipline It forces you to think systematically, identify the key issues, decide whether your initial project concept is a viable CDM projectIt provides a useful tool to persuade internal decision-makers and external supporters, financiers, etc The World Bank Carbon Finance team requires applicants to start with a PIN




Required?



No Yes


CDM Process


Step 2: the PIN for the ALNG project

Written by ECA and ERM in the standard template used by the World Bank Carbon Finance team

Describes the project investment

Estimates the magnitude of the emission reductions that the project would generate CDM project first

concept



Required?



No Yes


CDM Process

The PIN provided the starting point for discussions between the project partners and the GGFR, enabling the GGFR study team to develop a draft framework Project Design Document for the ALNG partners to take further


What magnitude of numbers are we talking about?

LNG is mostly* methane, CH4

Carbon Dioxide is the greenhouse gas we are most interested in hereHow much CO2 is produced from each unit of methane burned?

*Other hydrocarbons will be involved, eg: C2 and C3 used to produce LPG; other condensates to market.

CH4 + 2O2 CO2 + 2H2O

16 : 44

1t LNG ≈ 2.75 t of CO2 saved


What magnitude of numbers are we talking about?

Assume LNG plant of 5.2 Mt/yEach tonne of CH4 saves about 2.75 t of CO2

=> up to 14.3 Mt/y of CO2reductions MAXIMUM

IF! 100% of the LNG is from gas produced in association with oil that would otherwise have been flaredSignificantly less than half of the gas piped to the plant is likely to be from AG


Plant throughout supply and demand balance

0

5

10

2000

2005

2010

2015

2020

2025

2030

2035

2040

Qua

ntity

(Mt)

Excess AG

NAG make-up required

AG up to limit

Plant LNG output capacity

Plant AG input quantity


Is the ALNG plant ‘additional’?

How to convince the CDM Executive Board that you would not have built the plant anyway? This is essential in the detailed Project Design DocumentIt’s good to start thinking about it for the Project Idea NoteALNG has a distance disadvantage in the Atlantic basin market … cost barrier Major international oil and gas investments in Angola are all offshore … risk barrier


Distance disadvantage of ALNG relative to NLNG LNG exports

NORTH ATLANTIC

SOUTH ATLANTIC

Angola’s distance disadvantage is about the same to US or EU markets


Distance disadvantage of ALNG relative to NLNG

Distance disadvantage is about 740 nautical miles (nm)If the variable shipping cost is about $0.25/mmBtu/1000nm or US$13/t LNG/1000nm

13 x 740/1000 = $9.62 /t LNG

9.62/2.75 = $3.50 /t CO2

A price of $3.50 for Certified Emission Reductions would offset the shipping distance disadvantage of ALNG

ECONOMIC CONSULTING ASSOCIATES LIMITED41 Lonsdale Road London NW6 6RA UKtel +44 (0)20 7604 4545 / fax +44 (0)20 7604 4547 www.eca-uk.com


Angola Liquefied Natural Gas Carbon Credit Study

funded by the World Bank/ Global Gas Flaring Reduction public-private partnership

with the support of the UK Foreign & Commonwealth Office

Stephen Wilson /ECA, LondonBraulio Pikman /ERM, Brazil

Capacity Building Workshop, Luanda, Angola, 25-26 October 2006

angola liquefied natural gas carbon credit...

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