report · 2020-04-23 · - 2 - prior to the reform, pemex and cfe had been classified as...

FY2015 Study Report

Global Warming Mitigation Technology Promotion Project

Feasibility Study on CCS-EOR projects in Southern Mexico

Report

March 2016

The Japan Research Institute, Limited

Mitsubishi Heavy Industries, Ltd.

INPEX CORPORATION

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Report on the Global Warming Mitigation Technology Promotion Project

- Contents -

1 Background and Purpose of the Study .......................................................................... 1

1.1 Background of this study ............................................................................................. 1

1.1.1 Progress in Energy Reform .......................................................................................... 1

1.1.2 Response and Policy by the Mexican Government Regarding Climate Change ................ 8

1.1.3 Policies Related to CCS by the Mexican Government.................................................. 15

1.2 Purpose of This Study ............................................................................................... 20

2 Policies for Encouraging CCS Projects Aligned with the Joint Crediting Mechanism ..... 23

2.1 Alignment with the Mexican Emissions Trading System ............................................. 23

2.2 Cooperation in the Operation of the CCUS Research Center ........................................ 24

3 Project Planning for Promoting CCS .......................................................................... 25

3.1 Designing CCS-EOR Project ..................................................................................... 25

3.1.1 Structure and Stakeholder Analysis for CCS-EOR Project ........................................... 25

3.1.2 Designing Commercial CCS-EOR Project .................................................................. 28

3.1.3 CO2 Capture System ................................................................................................ 30

3.1.4 Discussion of Finance in Anticipation of CCS Project ................................................. 37

3.1.5 CCS-EOR Project in Demonstration Phase ................................................................. 40

4 Applicable Methodologies for Reducing Emissions in This Project and Their Estimated

Emission Reduction ................................................................................................. 43

4.1 Analysis of MRV Methodologies ............................................................................... 43

4.1.1 Analysis of CCS-EOR methodology adopted by the American Carbon Registry ............ 43

4.1.2 Analysis of Methodologies in Clean Development Mechanism (CDM) ......................... 44

4.1.3 Discussion on Methodologies for JCM ....................................................................... 45

4.1.4 Discussion on ISO/TC265 ......................................................................................... 45

4.2 Discussion of Methodologies for Emission reduction .................................................. 46

4.3 Estimation of Reduced Emissions .............................................................................. 62

5 Analysis of Economic Effects and Impact on Partner Country in the Event the Project is

Implemented ........................................................................................................... 65

5.1 Analysis of Impact of CO2 (Emission Credits) Price on Feasibility of Project ............... 65

5.2 Analysis of Impact of CCS-EOR Project on Oil Production in Mexico ......................... 65

5.3 Analysis of Impact of CCS-EOR Project on GHG Emissions in Mexico ....................... 67

6 Program for Promoting Understanding on the Part of Mexican Counterparts Regarding

JCM and Building a Stronger Relationship with Them ............................................... 68

6.1 Overview ................................................................................................................. 68

6.2 Details of exchange sessions and study tours .............................................................. 69

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6.3 Summary of Technical Exchange ............................................................................... 72

6.3.1 Exchange Regarding CO2 Capture System ................................................................. 72

6.3.2 Exchange Regarding CO2 Sequestration Site .............................................................. 73

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Terms

Abbreviation Standard nomenclature

CCA California Carbon Allowance

CCS Carbon Capture and Storage

CCUS Carbon Capture, Utilization, and Storage

CELs Certificados de Energías

CENACE Centro Nacional de Control de Energía

CER Certified Emission Reductions

CFE Comisión Federal de Electricidad

CNH Comisión Nacional de Hidrocarburos

CRE Comisión Reguladora de Energía

EOR Enhanced Oil Recovery

INDC Intended Nationally Determined Contribution

MMSCFD Million Standard Cubic Feet per Day

PEMEX Petróleos Mexicanos

SEMARNAT Secretaría de Medio Ambiente y Recursos Naturales

SENER Secretaría de Energía

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1 Background and Purpose of the Study

1.1 Background of this study

1.1.1 Progress in Energy Reform

Since taking office in December 2012, President Peña Nieto has been tirelessly pushing

forward with his promised energy reform. The petroleum, gas, and electric power sectors

hitherto protected by the constitution are now experiencing a major shakeup.

In a matter of a year under Peña Nieto's presidency, the reform-related legislation passed by

the Congress and states, as well as the constitutional reform in December 2013, paved the way

for market liberalization in the energy sector. As of today, the reforms are progressing

according to plan despite concern over the impact from the recent oil price slump and

resistance from CFE, PEMEX, and other vested interests that have been enjoying a monopoly

on the domestic electric power and petroleum markets.

Figure 1 Institutional Framework Involving PEMEX and CFE Before the Energy Reform

Source: CRE

Figure 2 Institutional Framework Involving PEMEX and CFE After the Energy Reform

Source: CRE

Executive Branch

Secretaries(Ministries)

SHCP(Treasury)

SENER(Energy Ministry)

CRE

CNH

Descentralized Entities

PEMEX

CFE

Symbology:Policy MakerRegulatorOperator--- Autonomous agency

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Prior to the reform, PEMEX and CFE had been classified as decentralized public entities.

Today, they are state-owned production companies with more freedom from governmental

restrictions than before.

In January 2016, SENER, Mexico's ministry of energy, announced a clear-cut proposal for

the restructuring of the CFE which had been monopolizing the country's power industry.

Although these will remain a state-owned enterprise, it will create subsidiaries without any

capital or personal ties. Some four to six of these subsidiaries in the generation segment will

lead the restructuring process to allow subsidiaries to also start providing transmission,

distribution, and other basic services1. CENACE will replace CFE to operate the grid to

prepare the way for fair competition between CFE and the new entrants in the electrical power

trading market in terms of e.g., market access and transmission cost.

Figure 3 Power Sector and Roles of CFE Before the Energy Reform

Source: CRE

Figure 4 Power Sector and Roles of CFE After the Energy Reform

Source: CRE

1 Press Release, SENER, "La Secretaría de Energía emite los Términos para la estricta separación legal de la Comisión Federal de Electricidad (CFE)"

<http://www.gob.mx/sener/prensa/la-secretaria-de-energia-emite-los-terminos-para-la-estricta-separacion-legal-de-la-comision-federal

-de-electricidad-cfe>, January 5, 2016

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At present, PEMEX has PEMEX Exploration and Production, PEMEX Gas and Basic

Petrochemicals, and other subsidiaries for different processes for production and utilization of

petroleum and gas. The new corporate structure will consist of seven subsidiaries including

PEMEX Upstream and PEMEX Industrial Transformation to boost the yield as a part of the

reform agenda. However, given the tight business conditions associated with falling oil prices,

the company has yet to fully streamline existing business or restructure business operations

aside from some efforts made in job cuts.

Figure 5 Restructuring of PEMEX Group

Source: PEMEX

Figure 6 Outline of How the Energy Reform Opens Up Petroleum and Gas Industries

Source: PEMEX

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Public bidding on oil fields has attracted particularly great attention among the other energy

reform agendas, in which Round One blocks were offered for bidding to foreign and domestic

companies whereas Round Zero blocks remained reserved for development and production by

PEMEX. In December 2014, the bid for Phase One (shallow waters) was announced by

National Hydrocarbons Commission (CNH). Thereafter, the bids and successful bidders for

Phase Two (shallow waters) and Phase Three (onshore) have already been announced.

Currently, bidding blocks (deep waters) for Phase Four have been announced.

Bidding for these oil field blocks is proceeding without any major delays. But only 2 out of

14 blocks were awarded in Phase One. The situation slightly improved in Phase Two, when 3

out of 5 blocks were awarded. Based on the production-sharing agreements signed in these

two phases, due payments from winning bidders comprised a certain share of the operating

profits, royalties, and exploratory phase contract fee. In Phase Three, a licensing agreement

model was adopted differing from the earlier model based on product-sharing agreements.

Onshore blocks offered in Phase Three, unlike those in shallow waters in Phases One and Two,

made it possible for a wide range of companies to participate in the tender. Thanks to more

relaxed conditions for bidders, all of the 25 blocks on offer were awarded in this successful

bidding. Phase Four is attracting the attention of foreign companies for the 10 blocks of

deep-water oil fields in the Gulf of Mexico in the midst of a protracted decline in the oil price.

The transparency of the bidding process for Round One blocks is ensured as relevant updates

are available on the CNH website (application and fee payments are necessary for accessing

detailed data related to these blocks).

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Figure 7 Progress in Round One

Source: Compiled by the Japan Research Institute based on "Programa Quinquenal de

Licitaciones Para la Exploración y Extracción de Hidrocarburos 2015-2019" by SENER and

CNH website

SENER plans four successive rounds between 2015 and 2019 as appropriate according to

the five-year plan for carbon exploration and extraction it announced in December 2015

(Programa Quinquenal de Licitaciones Para la Exploración y Extracción de Hidrocarburos

2015–2019). The total bidding area of 235,070 km2 (including exploration and extraction

blocks) covered the total reserve of carbon hydrate resources amounting to 104,788 million

barrels of equivalent oil equivalent (of which 65,945 million barrels were proven and 38,844

million barrels were probable).

Fist Phase(Exploration)

2nd Phase(Production)

3rd Phase(Production)

4th Phase(Exploration)

Prospective Resource（MMboe）

687 - - 10,889

Certified Reserve(MMboe)

-1P(Proved): 143

2P(Probable): 3553P(Possible): 671

1,882 -

Total Area (km2) 4,222 281 777 24,000Size of Block (km2) 116-500 42-68 7-135 1,678-3,287Number of Block 14 5Block （9Area） 25 10Location Shallow Water Shallow Water Onshore Deep Water

Type of ContractProduction-Sharing

ContractProduction-Sharing

ContractLicense Contract License Contract

Award Date 15 June 2015 30 Sep. 2015 15 Dec. 2015 -

Awarded Block Bock2, Block7 Block1、Block2、Block4 All Blocks -

Number of SuccessfulBidders

1（1 Consortium）

3（1 Company）

(2 Consortiums）

17(11 Companies)(6 Consortiums)

-

Successful Bidders

・Consortium of 3companies（Sierra Oil &Gas, Talos Energy,Premier Oil)

・Eni International・Consortium of 2companies（Pan AmericanEnergy, E&PHidrocarburos yServicios）・Consortium of 2companies（FieldwoodEnergy, Petrobal）

・Diavaz Offshore・Santa Campos Maduros・Renaissance Oil・Consortium of 2companies（Geo Estratos,Geo Estratos MxoilExploracion yProduccion）　　　　　　　　　　　Others

-

Number of Bidders7

（3 Companies)（4 Consortiums）

9（5 Companies)

(4 Consortiums）

40(26 Companies)

(14 Consortiums）-

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Figure 8 Reserve and Area of Bidding Areas for Exploration and Extraction 2015–2019

Source: Compiled by the Japan Research Institute based on "Programa Quinquenal de

Licitaciones Para la Exploración y Extracción de Hidrocarburos 2015–2019" by SENER

Figure 9 Bidding Areas in Round One

Source: SENER, "Programa Quinquenal de Licitaciones Para la Exploración y

Extracción de Hidrocarburos 2015–2019"

RoundResource（P1 & P2）

（MMboe）

Area（km

2）

1 70,095.3 34,074.12 14,796.2 75,342.83 12,276.5 61,557.14 7,620.6 64,095.9

Total 104,788.6 235,070.0

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SENER estimates an increased daily production of 0.5 million barrels in 2018 and 1 million

barrels in 2025, which can be expected from the energy reform compared to the scenario of

continued monopoly of oil production by PEMEX. The estimate assumes an oil price of

around 100 dollars per barrel and daily production of roughly 2.5 million barrels by PEMEX.

Figure 10 Actual and Projected Crude Oil Production

Source: SENER, "Programa Quinquenal de Licitaciones Para la Exploración y

Extracción de Hidrocarburos 2015–2019"

Monopoly by PEMEX

Energy reform

Actual crude oil production

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1.1.2 Response and Policy by the Mexican Government Regarding Climate Change

(1) Greenhouse Gas Emission

Greenhouse gas (GHG) emissions in Mexico increased by 33% from 1990 to reach 748

MtCO2e (equivalent metric ton carbon dioxide) in 2010. The average annual growth of 2.6%

from 2001 to 2010 was associated with GDP growth per capita and urbanization involving

emissions increase in particular from transportation, waste, fugitive emissions, flaring, and

venting of gas. The energy segment accounts for the greatest GHG emissions among other

segments of sources, which experienced an emission increase of 58% from 1990 to 2010, with

an average annual growth of 2.3%2.

Figure 11 Change in GHG Emission

Source: National Climate Change Strategy 10-20-40 Vision

(2) Intended Nationally Determined Contribution (INDC)

In 2012, Mexico developed and promulgated the first legal framework, Ley General de

Cambio Climático (LGCC), for tackling climate change among developing countries. The law

set forth a long-term target to cut GHG emission over the period until 2050 by 50% compared

to the 2000 level. The commitment is carried over to the intended nationally determined

2 National Climate Change Strategy 10-20-40 Vision

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contribution (INDC) that the country submitted to the Secretariat of the United Nations

Framework Convention on Climate Change (UNFCCC) in preparation for COP21 held in

France in 2015. Notably, Mexico was the first developing country to submit an INDC thus

demonstrating its active commitment to address climate change. GHG Emission Reduction

Targets stated in INDC are as follows.

Figure 12 INDC by Mexico (GHG Emission Reduction Targets)

Unconditional

Reduction

25% reduction in emissions of greenhouse gases and short-lived climate

pollutants below BAU by 2030 (i.e., 22% reduction in GHGs and 51%

reduction in black carbon)

Conditional

Reduction

The 25% reduction commitment expressed above could increase by up to 40%,

provided a global agreement addressing important topics including

international carbon price, technical cooperation, access to low-cost financial

resources, and technology transfer (i.e., 36% reduction in GHGs and 70%

reduction in black carbon).

Source: Compiled by the Japan Research Institute based on materials by UNFCCC

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Figure 13 GHG Reduction Targets by 2020 and 2050

Source: SEMARNAT, "National Climate Change Strategy: 10-20-40 Vision," 2014

(3) National Climate Change Strategy (ENCC) and Climate Change Special Plan (PECC)

In 2013, President Peña Nieto announced the National Climate Change Strategy

(ENCC 10-20-40 Vision) for SEMARNAT in order to achieve the reduction targets in line

with the Climate Change Basic Act (LGCC). The long-term goals and strategies presented in

the national strategy are based on a two-pronged measure for (1) adaptation to climate change

and (2) mitigation of GHG emissions. Activities are specified for three policies for adapting to

climate change, and five policies for mitigation of GHG emissions. No numeric targets and

schedule are specified for these activities since they are mainly aimed at defining a clear

long-term direction, which in turn is reflected into respective policies.

In 2014, SEMARNAT announced its Special Program on Climate Change 2014–2018

(PECC), which sets forth 5 goals and 10 numeric targets in the near-to-mid term to be

achieved by 2018. The program was developed in accordance with the National Development

Plan (PND) and aforementioned National Climate Change Strategy. Currently, measures to

tackle climate change are being carried out to achieve the numeric targets of the program.

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Figure 14 Goals and Strategies of National Climate Change Strategy in 2013

Goal Strategy

Adaptation

to climate

change

A1: Enhance resilience and reduce vulnerability of the affected society

A2: Enhance resilience and reduce vulnerability of the affected production systems

and strategic economic infrastructure

A3: Sustainable use, protection, and conservation of ecosystem

Mitigation

of GHG

emissions

M1: Accelerate transition to clean energy

M2: Reduce energy intensity with efficient and responsible consumption schemes

M3: Shift towards models of sustainable cities with mobility systems, integrated waste

management, and low-carbon footprint buildings

M4: Promote best practices in agriculture and forestry to increase and preserve natural

carbon sinks

M5: Reduce emissions of short-lived climate pollutants (SLCPs), and promote health

and well-being

Source: Compiled by the Japan Research Institute based on the National Climate Change

Strategy: 10-20-40 Vision

Figure 15 Goals of the Special Program on Climate Change 2014

Goals

Goal 1: Reduce vulnerability of citizens and production sectors, and enhance their resilience and that

of the strategic economic infrastructure

Goal 2: Protect, restructure, and manage sustainable environment and ecosystems for adaptation to

climate change and reduced GHG emissions

Goal 3: Curb GHG emissions to achieve a competitive economy and low-emission development

Goal 4: Reduce emissions of short-lived climate pollutants (SLCPs), and promote health and

well-being

Goal 5: Establish effective measures and national policies on climate change by concerted efforts by

the states, municipalities, federal congress, and the society

Source: Compiled by the Japan Research Institute based on the National Climate Change


Notably, SENER has identified carbon capture and sequestration (CCS) as a technology to

achieve GHG reduction by 2050 as defined in the National Sustainable Energy Use Program

2014–2018. More specifically, in the target scenario until 2050, a 42% reduction in the GHG

emissions can be achieved by renewable energy, followed by increased energy efficiency

(36%), alternative fuel (19%), CCS (3%), and nuclear energy (1%).

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(4) Carbon tax

The Mexican government has levied a carbon tax since 2014 as a measure to curb climate

change. The tax was approved by the congress in 2013 as part of the fiscal reform after Peña

Nieto assumed the presidency. Mexico was the first Latin American country to introduce this

tax, one designed to encourage use of clean energy and reduce CO2 emissions from fossil fuel.

Chile is expected to follow Mexico's lead. Mexico's carbon tax covers fossil fuel sales and

imports by manufacturers, producers, and importers. The taxed amount depends on the types

of fossil fuel, although the tax rate is capped at 3% of the sales price of the fuel. The tax rate

of 5.70 USD/tCO2e initially proposed by the Mexican government was brought down later to

3.21 USD/tCO2e. At the moment, natural gas in not subject to the tax. Payment may be made

with credits (CERs: certified emission reductions) from CDM projects (only credits from

CDM projects are recognized)3.

Figure 16 Carbon Tax by Type of Fossil Fuel

Source: OECD, "Mexican fiscal reform environmental taxes," June 2014

SEMARNAT envisages a revenue of 8 billion pesos (ca. 49.6 billion yen) from the carbon

tax in fiscal year 2015 against 9 billion pesos (ca. 55.8 billion yen) from the initial year which

is about half of the revenue of 1 billion US dollars (ca. 115 billion yen) expected by the

Mexican government. Industry has not voiced disapproval of the associated cost increase of

around 0.8% against the total sales of 64.2 billion US dollars (7.383 trillion yen) by PEMEX

in 2014, which fact suggests that the tax will have only a marginal impact on industrial

competitiveness. Already two years since the introduction of the tax, the tax rate is expected to

be adjusted to the economic climate.

3 OECD, "Mexican fiscal reform environmental taxes," June 2014

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(5) Emissions Trading System

The cross-ministerial committee on climate change set up based on the LGCC has a

mandate to establish a legally binding emissions trading system. In addition, such a system is

thought to be a part of the market mechanism that the INDC requires in order to achieve

conditional reduction targets. The Mexican government has yet to announce any

implementation of a cap-and-trade scheme, which has been popularly adopted in EU-ETS and

other systems. Still, preparation is under way on various fronts to implement the scheme.

After carbon was priced for the carbon tax in 2014, the National Registry of Emission

(RENE) was introduced in 2015 for each emitter of 25,000 tCO2e per year or more to report

GHG emissions to the government. The system requires about 3,000 emitters to report

emissions of CO2, CH4, N2O, SF6, PFCs, HCFCs, NF3, and black carbon to the government as

well as to undergo verification by third parties every three years. The system can track GHG

emissions by major emitters, and these emissions can serve as reference for setting the cap for

each emitter in order to introduce a cap-and-trade scheme.

In July 2015, while mentioning the emissions trading system, Deputy Secretary Rodolfo

Lacy of SEMARNAT announced the creation of an emissions trading market in Mexico in

2017 and that the emission credits will be linked with the trading systems in the states of

California, Quebec, and Ontario. Moreover, President Peña Nieto visited Quebec in October

2015 to sign an agreement for conducting research on an emissions trading system between

the government of Mexico and Quebec.

The reason for this move by Mexico includes the paralysis of EU-ETS by an imbalance of

supply and demand and the somewhat functioning emissions trading systems being

implemented in the geographically closer states in North America. Therefore, the country is

expected to design the emissions trading system by envisaging or referring to systems in states

in North America in order to define the intended use of emission credits generated in the

country and to regulate them.

(6) Energy Transition Law

In December 2015, the Energy Transition Law (LET) was promulgated as a part of the

energy reform spearheaded by President Peña Nieto. The law is mainly intended to promote

progress towards sustainable energy use, procurement of cleaner energy, and reduction of

pollutants in order to comprehensively address climate change. Notably, the law explicitly

requires that 25% of power be generated with renewable energy by 2018, and that the share be

raised in steps to 30% in 2021, and to 35% in 2024.

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The target is ambitious considering the 18.2% share of renewable energy in the total power

generation of 301,462 GWh in 2014 throughout the country4. Steel and some other industries

are strongly opposed to this law arguing that such an ambitious target will increase electrical

power costs and undermine Mexico's industrial competitiveness. In February 2016, AHMSA

(steel) and Deacero (steel) resorted to litigation against the law. Reportedly, the national labor

union of machinery, metal, and steel industries is also preparing to file a lawsuit5.

In addition to the numeric target, the law also specifies how clean energy certificates

(CELs) should be handled in order to encourage the use of renewable energy. This marked the

beginning of the trading in high-profile CELs. The certificates have already been defined in

Articles 121 through 129 in Chapter 3 of the Power Industry Act promulgated in the official

gazette on August 11, 2014. CELs are issued by the Energy Regulatory Commission (CRE) to

power producers using clean energy according to the power output. They will be freely traded

in the wholesale power market due to open or planned to be opened at the end of January 2016.

Heavy power consumers (consumption of 5 MW or greater and annual consumption of 20

GWh) who are eligible to participate in the wholesale power market must acquire and use6

CELs corresponding to the amount exceeding a certain share of the total annual power

consumption. The mandatory acquisition and use of CELs will be in place from 2018. The

required share will be announced in the first quarter of each year for the following three years.

In March 31, 2015, SENER announced the required share of CELs from 2018 having an

overall standing of 5% in the total power supply in 2018.

The first market trading of CELs is planned in March 2016. In January 2016, CFE

announced its intention to sign a long-term contract for 15 or 20 years to purchase a set of

CELs worth 6.3 MWh for consumption of around 500 MW, and a power output of 6.3 MWh

from clean energy7. The maximum purchase price is set around 70 USD/MWh as a total of 47

USD/MWh for power generated from clean energy and 24 USD/MWh for CELs. The price

will be gradually reduced from year to year. A press report pointed out that the current

purchase price offering is about 20% lower than the international price (90 USD/MWh) and

puts some modes of photovoltaic power generation at a disadvantage due to their generation

costs exceeding 100 USD/MWh8. Contrary to the fear of no bids, 103 companies and

organizations applied for preliminary bidding qualification that started in January 2016. In

total, the applications amounted to consumption around 830 MW and CELs worth 109 MWh

and power output of 102 MWh from clean energy. These total bids exceeded the amount of

4 SENER, "Prospectiva de Energías Renovables 2015-2029," 2015, p. 54 5 Vanguardia, "Industriales del acero se amparan contra la Ley de Transición Energética"

<http://www.vanguardia.com.mx/articulo/industriales-del-acero-se-amparan-contra-la-ley-de-transicion-energetica>, February 15, 2016 6 CELs can be resold to other consumers after acquiring them in the wholesale power market. The use of CELs by a heavy consumer to fulfill its own obligation is defined as

"settlement." After the settlement, CELs can no longer be traded in the market. Unsettled CELs can be resold as many times as possible. 7 Press Release, SENER, "Nutrida participación en la fase inicial de la primera subasta de largo plazo del Mercado eléctrico"

<https://www.gob.mx/sener/prensa/nutrida-participacion-en-la-fase-inicial-de-la-primera-subasta-de-largo-plazo-del-mercado-electrico>, February 14, 2016 8 Reforma, "CFE publishes prices for long-term electricity tender," January 28, 2016

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CELs being offered and power output. Clean energy included photovoltaic and wind power

generation. CENACE reviewed the technical competence and experience of the applicants.

Qualified bidders will move on to the bidding on March 28, whose result will be announced

on March 31. The second round of tender for CELs and clean energy is planned in the second

quarter of the current fiscal year9.

As mentioned above, heavy consumers will be required to procure 5% of the total power

consumption from clean sources of energy from 2018. In steel and other power-intensive

industries, some companies are trying to reduce the cost of acquiring CELs by investing in

their own clean energy projects to procure their own clean energy. For instance, Deacero

(steel) announced power contracts signed with eight wind power companies, three biogas

power companies, and four photovoltaic power companies. These projects will be put in effect

between 2016 and 2017. AHMSA (steel) plans to invest 136 million US dollars to introduce

three cogeneration power plants and sell any surplus power in the wholesale power market10

.

As these examples demonstrate, Mexican companies are increasingly eager to invest in clean

energy. It is still unclear to what extent the trading of CELs will lead to an increase in the

electrical power price, whether the trade will take place according to the plan, and whether a

sufficient amount of CELs will be supplied to meet the need of industries. Despite all that,

CELs are expected to increase the share of clean energy in power generation in Mexico.

1.1.3 Policies Related to CCS by the Mexican Government

In the aforementioned National Climate Change Strategy 2013 and Special Program on

Climate Change 2014, the following goals and activities have been established as the Mexican

government's CCS-related policies. CCS is acknowledged as indispensable energy for efficient

energy use. The special program indicates that carbon capture, utilization, and storage (CCUS)

will be adopted as a technology for increasing oil production in response to declining

production by PEMEX.

9 Press Release, SENER, "Nutrida participación en la fase inicial de la primera subasta de largo plazo del Mercado eléctrico"

<https://www.gob.mx/sener/prensa/nutrida-participacion-en-la-fase-inicial-de-la-primera-subasta-de-largo-plazo-del-mercado-electrico>, February 14, 2016 10 Reforma, "Steel and mining companies turn to renewable energy," December 29, 2015

- 16 -

Figure 17 CCS-related Components of National Climate Change Strategy 2013

Goal M2 Reduce energy intensity with an efficient and responsible consumption plan

Activity M2.9 <Technologies for enhancing efficiency>

Continue to consider the application of carbon capture and sequestration technologies

including enhanced recovery of carbon hydrate while keeping possible implementation

of projects in mind.

M2.10 <Transition process>

Promote energy efficient technologies, alternative fuel, industrial process designs, and

carbon dioxide recovery technologies in energy-intensive industries, such as the

cement, steel, petroleum, chemical, and petrochemical industries.

Source: Compiled by the Japan Research Industry based on National Climate Change


Figure 18 CCS-related Components of Special Program on Climate Change 2014

Strategy

3.1

Carry out activities and projects for enhancing energy efficiency

Activity 3.1.4

Proceed toward introduction of CCUS and run pilot projects for enhanced oil recovery

by PEMEX.

(Organizations in charge: SENER, PEMEX, and CFE)

Source: Compiled by the Japan Research Institute based on Programa Especial de Cambio

Climático 2014–2018

In March 2014, SENER announced the CCUS Technology Roadmap as a policy to promote

application of carbon capture and sequestration for enhanced oil recovery (CCS-EOR) in the

following 10 years. The plan is divided into six phases of incubation, public policy, planning,

EOR, power plants, and commercial application. The road map is mainly intended for running

pilot projects and conducting demonstrations in order to achieve commercial application of

CCUS-EOR by 2020. Toward this goal, the overall plan is to complete incubation (mainly

market analysis and preliminary review of the framework) and planning (analysis of candidate

sites) by 2015, public policy (including financing system) for CCUS-EOR by 2020 before

launching commercial-scale projects. A specific schedule for public policy and CCS-EOR

projects is presented below.

The specified schedule for public policy includes the establishment of a CCUS Research

Center in 2016, establishment of financing mechanisms, and discussion of incentives for the

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private sector to introduce CCS-EOR. In addition, development of a national policy called

"CCUS Ready" is scheduled to run from 2016 to 2017 to reduce related costs for companies

that have not yet considered introduction of CCS. The necessary policies are expected to be in

place by 2020. Activities for developing human resources will be continued thereafter as well.

Figure 19 Plan for Public Policy in CCUS Technology Roadmap 2014

Source: CCUS Technology Roadmap

According to the precise schedule for EOR pilot projects, the first pilot project will be

implemented from 2015 to 2016 along with the monitoring after field selection, lab analysis,

and designing in 2015. The first pilot project will be evaluated in 2017 by analyzing the

increase in oil production after actual injection of CO2. Pilot tests of CCS-EOR will be carried

out continuously from 2015 until 2024. Aside from pilot projects, a demonstration will be

conducted from 2018 with an eye toward commercial applications. CCS-EOR plants will be

constructed from 2018 until 2020 after CCS-EOR scaling plan, CCS-EOR research, and

field-scale design are complete. Enhanced oil recovery will begin from 2021 by injecting CO2.

According to the specific schedule for pilot projects with power plants (CO2 source), the

most suitable plants were selected among coal-fired and gas-fired power plants in 2014, when

technology for carbon dioxide capture was also selected. The demonstration was designed

from 2014 until 2015. The bidding is to be completed in 2015. Construction of the plants is to

be initiated in 2016. Around 2017, the plants will start operation and data analysis will

continue until these pilot projects are completed in 2019. These plans are being pursued with

- 18 -

assistance from the World Bank's CCS Trust Fund in order to prepare for plant construction

beginning in 2016.

In parallel with pilot projects, demonstration at 20-MW power plants will be prepared from

2018 to discuss oil fields for CO2 injection tests in detail. Pipes and related facilities will be

constructed from 2020 until 2021 following the designing, environmental assessment, and

tender in 2019. In a parallel manner, monitoring with actual injection of CO2 will begin in

2022 after CO2 injection tests carried out at least at two oil fields.

Commercial-scale CCS-EOR projects are expected around 2020 after the abovementioned

pilot projects and demonstration with power plants as CO2 sources regarding EOR.

Figure 20 Plan for EOR in CCUS Technology Roadmap 2014


- 19 -

Figure 21 Plan for Power Plants in CCUS Technology Roadmap 2014


- 20 -

1.2 Purpose of This Study

As already presented in the background of this study, an environment conducive to these

plans is developing in Mexico in line with the government's CCUS Technology Roadmap as a

part of the energy reform since 2013. Since commercial-scale CCS-EOR requires a huge

source of CO2 (hence a great contribution to CO2 reduction), it is essential to capture CO2

from flue gases from reformers, gas turbines, and so forth in addition to relying on existing

sources of CO2. This study examines the possible application of CO2 capture technologies

from Mitsubishi Heavy Industries which has ample experience in delivering commercially

viable products in order to pave the way for large-scale CCS-EOR projects in Mexico. The

study is also the subject of attention in terms of the next possible stages for demonstrating the

joint crediting mechanism (JCM) and introduction of commercial plants. The activities in this

study are geared toward reliable implementation of these CCS-EOR projects and introduction

of related technologies. Furthermore, assistance provided by the INPEX CORPORATION

with its expertise in CCS-EOR applied from the beginning of this study is aimed at

strengthening ties between PEMEX and Japanese companies.

In 2014, Mexico was the world's eleventh largest oil producer. However, production has

been dropping sharply since 2004. This decline of roughly 29.5% over the past 10 years is the

result of the ageing of major oil fields and stagnant development of new oil fields (See Figure

22). Oil production is expected to halve from its peak by the late 2020s and fall short of

domestic consumption demand if the decline continues (See Figure 23). The country faces the

impending task of making a unified pull in order to restore oil production which accounts for

over 30% of national revenue and around 15% of exports. Beside the development of

ultra-deep oil fields and shale layers in the Gulf of Mexico, CCS-EOR has been given high

priority for increasing oil production. In March 2014, the government of Mexico developed

the CCUS Technology Roadmap in a drive to promote progress in CCS-EOR in a planned

manner, and for which commercial applications of CCS-EOR are planned around 2020.

Cooperation between the consortium formed for this study and PEMEX toward

commercialization of CCS-EOR provides a solution to the challenges faced by the Mexican

government and strengthens bilateral ties with Japan. Demonstration and full-fledged

implementation of CCS-EOR projects under the framework of JCM will help attain the

understanding of the Mexican government and project participants regarding the joint

crediting mechanism. This bilateral cooperation aimed at commercially viable CCS-EOR is

expected to significantly reduce GHG emissions and thereby accomplish the newly set

reduction target in Paris Agreement from COP21 at the end of 2015.

- 21 -

Figure 22 Historical Oil Production in Mexico

Source: SENER

Figure 23 Projected Oil Production in Mexico

Source: SENER

This study examined new favorable JCM-related policies in Mexico and considered the

coordinated scheme for implementing CCS-EOR projects with effective application of

Japanese CCS technologies and products, while bearing in mind the aforementioned

background and findings from the "Feasibility Study on CCS Technologies in Mexico"

(hereinafter called FS 2013) conducted as one of the Global Warming Mitigation Technology

Promotion Projects in fiscal year 2013.

- 22 -

The project scheme was considered in cooperation with PEMEX, the Mexican Government,

and relevant organizations in Mexico with regards to Cinco Presidentes oil fields and major

CO2 sources such as CPQ Cosoleacaque, a petrochemical plant where PEMEX is considering

for a CCS-EOR demonstration project. The study and analysis were conducted assuming the

implementation of JCM demonstration projects in fiscal year 2016 and thereafter, as well as

subsequent involvement in commercial CCS-EOR projects. Specific plans leading to

commercially viable CCS-EOR projects were developed by examining the CO2 capture

equipment and costs as well as conditions for commercial viability with revenue from

enhanced oil recovery (e.g., project costs and oil price), and so forth.

To help achieve JCM, the study also discussed the necessary methodology for measuring,

reporting, and validating GHG emissions reduction achieved by CCS-EOR projects. The

methodology was applied in the estimation of GHG emissions reduction and other related

analyses.

- 23 -

2 Policies for Encouraging CCS Projects Aligned with the Joint Crediting

Mechanism

2.1 Alignment with the Mexican Emissions Trading System

The government of Mexico has not expressed their intention to put a cap-and-trade

emissions trading system into place. But it is steadily making preparations for example, by

trying to integrate the Mexican emissions market with the emissions trading systems of

California, Quebec, and Ontario, and signing an agreement with Quebec regarding their

emissions trading systems in 2017.

Mexico can attract more funds and technologies through market mechanisms if their

emissions trading system, carbon taxes, CELs, and other relevant systems and policies can be

harmonized with counterparts in respective states and provinces in North America. Hence, the

government’s move is probably aimed at reducing costs for curbing GHG emissions in Mexico

and promoting advanced technologies from abroad.

Bearing the intentions and actions of the Mexican government in mind, due harmonization

efforts must be made to enable the Mexican government and project counterparts to make the

most of both the emissions trading systems and JCM so that they are encouraged to implement

projects under JCM.

More specifically, in the development process of JCM projects in Mexico, an

institutionalized procedure will be introduced to refer to MRV methodologies, guidelines, and

other rules adopted by the emissions trading systems of California, Quebec, and Ontario with

the possibility of combined applications in mind. The MRV methodologies in these North

American systems might not be fully consistent with the basic idea or application of JCM.

Mexican counterparts involved in projects can easily choose a system for generating emission

credits and the Mexican government will have wider options for making use of emissions

credits when the similarities and differences among these systems are clearly identified. This

practice also offers an advantage for Japanese counterparts to be given priorities in pursuing

project implementation in cooperation with Mexican partners since competition between JCM

and other systems can be avoided.

A unique MRV methodology could also be created and applied in projects under JCM so

that such methodology can be “exported” to the emissions trading systems of California,

Quebec, and Ontario. Considering that some Japanese companies (including investing

companies) are regulated under the emissions trading system of the state of California,

harmonization of JCM with North American systems through the Mexican emissions trading

system can potentially broaden options for Japanese companies in complying with regulations.

- 24 -

2.2 Cooperation in the Operation of the CCUS Research Center

According to the CCUS Technology Roadmap, the government of Mexico plans to establish a

CCUS Research Center in 2016. The CCUS Research Center is presumably modelled on the

National Carbon Capture Center (NCCC) of the United States.

The NCCC has been operating since 2009 under the budget of the US Department of Energy

(DOE) with the aim of promoting advanced commercially-viable CCS technologies and to bring

CO2 emissions from coal-fired power plants to virtually zero. Toward this end, the DOE

provides not only funding, but also demonstration fields and leading specialists for the center to

develop and promote CCS technologies. Today, projects organized by the NCCC attract CCS

system manufacturers from all over the world including Mitsubishi Heavy Industries, Hitachi,

and Chiyoda Corporation from Japan, in addition to American power companies such as

Southern Company, DUKE Energy, and American Electric Power. They contribute to other

projects organized by DOE and serve as a driving force for the commercialization of CCS

technologies in United States.

The government of Mexico is expected to follow the American efforts to establish power

plants and storage sites for conducting research and demonstration of CCUS, as well as a center

for boosting technical exchange among Mexican companies and CCS system manufacturers

from other countries. At the moment, with the assistance from the World Bank CCS Trust Fund,

the public offering was initiated for the concept of the CCUS Research Center and

demonstration to be conducted there. The details are gradually being worked out in detail.

Despite the assistance from the World Bank, there are still few Mexican specialists in CCS

and CCUS. The limited number of existing specialists is concentrated in PEMEX, the National

Petroleum Institute, and several other organizations, which fact suggests that the country has an

overall need for human resources for operation, research, and demonstration. In concert with

JCM, existing Japanese frameworks such as the “Infrastructure Development and Research for

Acquiring Joint Credits (Training on MRV)” can be applied to help Mexican counterparts of

JCM projects and CCUS Research Center to develop necessary human resources. For example,

CCS training can be organized in Japan at research centers operated by companies,

manufacturing plants with CO2 capture systems, and the CO2 storage demonstration site in

Tomakomai. In cooperation with the United States, Mexican trainees could be invited for the

long term to participate in training and demonstrations organized mainly through DOE

programs involving Japanese companies. The necessary funding can be pooled by collecting

some portion of the vast amount of emission credits from CCS both from the governments of

Japan and Mexico (a similar approach as with the registration fee in CDM). The joint

management of the fund can ensure sustainable activities of the center.

- 25 -

3 Project Planning for Promoting CCS

3.1 Designing CCS-EOR Project

3.1.1 Structure and Stakeholder Analysis for CCS-EOR Project

(1) Owner of CO2 Source

CPQ Cosoleacaque operated by PEMEX Petroquímica (to be restructured into PEMEX

Fertilizers) was identified as the top candidate of CO2 sources for CCS.

This petrochemical plant has an ammonia plant where highly pure CO2 (98%) can be

obtained in the shift conversion in the ammonia production process. PEMEX is planning and

discussing enhanced oil recovery (EOR) by transporting CO2 from its plant to nearby oil

fields. Given this plan, this study considered CO2 capture from flue gases of reformers of the

ammonia plant for EOR.

The states Veracruz and Tabasco near the petrochemical plant are home to numerous oil

fields that have long underpinned PEMEX’s oil production. Off the coast, there are also the

flagship oil fields of Cantarell and Ku-Maloob-Zaap. Cinco Presidentes to the east of the

plant have many candidate oil fields for EOR projects. The plan in this study was aligned

with that of PEMEX to make use of the CO2 pipeline to be constructed by PEMEX to

transport captured CO2 for EOR.

Figure 24 List of Candidate Sources of CO2

Source: PEMEX

- 26 -

(2) Entity in Charge of EOR

EOR will be performed by PEMEX Exploración y Producción (to be restructured into

PEMEX Upstream or Drilling), which explores and extracts oil. Its local office, Activo de

Producción Cinco Presidentes (APCP), is in charge of the actual development and

management of Cinco Presidentes oil fields east to CPQ Cosoleacaque. APCP is expected to

be directly in charge of EOR. The project will probably be carried out in collaboration with

staff in charge of the ammonia plant of CPQ Cosoleacaque representing CO2 sources, as well

as an asset manager, a person in charge of practical operation of the oil fields, and operators

from APCP.

Figure 25 Combination of CO2 Sources and Oil Fields Considered by PEMEX

Source: PEMEX

(3) Manufacturers of CO2 Capture Systems

PEMEX has been capturing CO2 as a part of its production process for instance by

separating out CO2 in the shift conversion in the ammonia production process. But the

company employs mostly obsolete systems and has no experience in CO2 capture from flue

gases such as those from reformers. Such limited experience and existing systems, therefore,

will have little impact on the selection of new systems. All manufacturers are expected to

compete under the same conditions to introduce new technologies and systems starting from

scratch.

In this regard, Mitsubishi Heavy Industries, a member of the consortium for this study, has

sufficient appeal. As a matter of fact, the company started to develop CO2 capture technologies

in 1990 jointly with Kansai Electric Power Company. Later it succeeded in developing the

KM-CDR process which is a world-class CO2 capture process for a wide range of flue gases

that achieves low energy consumption and absorbent combined with low susceptibility to

corrosion. Since the delivery of the first unit of a CO2 capture plant in Malaysia to capture

CO2 from flue gas for natural gas combustion for urea synthetic in 1999, the company has

- 27 -

steadily gained an impressive track record with 11 delivered units of commercial plants in

operation around the world as of 2015. In terms of project scale, Mitsubishi Heavy Industries

has constructed many world-scale plants. Examples include the CO2 capture demonstration

unit delivered to Plant Barry Power Plant (Alabama, U.S.A.) of Southern Company operating

since 2011 with a capacity of 500 tons/day and the world’s largest capture system to be

completed in 2016 for CCS-EOR operation with Unit 8 of W.A. Parish Power Plant (Texas,

U.S.A.) of Petra Nova CCS I with a capacity of 4,776 tons/day. As such, Mitsubishi Heavy

Industries was selected as the manufacturer for this project with the expectation of effective

application of JCM to further boost the company’s competitiveness.

Figure 26 Examples of CO2 Capture Systems by Mitsubishi Heavy Industries

Source: Mitsubishi Heavy Industries

1999

200 ton/ day

Malaysia

2005

330 ton/ day

Japan

2006

450 ton/ day

India

2006

450 ton/ day

India

2009

450 ton/ day

India

2009

450 ton/ day

Bahrain

2010

400 ton/ day

UAE

2010

240 ton/ day

Viet nam

2011

340 ton/ day

Pakistan

2012

450 ton/ day

India

2014

500 ton/ day

Qatar

- 28 -

Figure 27 Concept Image of One of World’s Largest CO2 Capture Systems for CCS-EOR

cooling tower


3.1.2 Designing Commercial CCS-EOR Project

(1) CO2 Source

PEMEX plans enhanced oil recovery at Cinco Presidentes oil fields by using a portion of

the CO2 that can be captured from four units of ammonia plants of CPQ Cosoleacaque for

CCS-EOR (4,000 out of 7,120 tons/day or 88 out of 140 MMSCFD).

In an ammonia production process, a heating furnace or the like is employed to heat a metal

catalyst to 700 to 1,000°C for steam reforming of natural gas in a primary reformer. The

reformer can serve as a CO2 source since the CO2 in the flue gas can be captured.

Figure 28 CO2 Emission from Ammonia Plants of CPQ Cosoleacaque

Source: PEMEX

Site:

- NRG WA Prish Plant

Gas source:

-Waste gas from coal

boiler

CO2 Recovery volume:

- 4,776 ton/day

CO2 Recovery rate:

- 90%

Start of operation plan:

-The fourth quarter of 2016 Cooling tower

CO2 compressor

Waste gas duct

Waste gas

Cooling tower

Recovery tower

Adsorption tower

- 29 -

Since primary reformers from one ammonia plant emit around 1,000 tons/day of CO2, the

estimated amount of recoverable CO2 from the four units was 4,000 tons/day (ca. 80

MMSCFD). According to PEMEX, the ammonia plants will continue to operate for the time

being as long as there is a stable supply of natural gas. The envisaged amount of captured CO2

was 4,000 tons/day assuming uninterrupted plant operation.

(2) CO2 Storage Site

PEMEX is choosing target oil fields for CCS-EOR operation in the short-term (less than

three years) and long-term (more than three years) depending on their conditions and distance

from CO2 sources. Short-term projects are planned with oil fields of Brillante, Rabasa, and

Los Soldados which are close to CPQ Cosoleacaque as the CO2 source. Laboratory testing is

already complete at the Brillante oil field and the preparation for the pilot test is underway.

Based on the results of this pilot test, CCS-EOR will be carried out at the Brillante oil field on

a commercial scale by supplying CO2 from CPQ Cosoleacaque with the existing pipeline, a

newly constructed pipeline, and compressors for injecting CO2. According to the plan,

CCS-EOR operation will be expanded to oil fields of Rabasa and Los Soldados by extending

the pipeline based on results from the pilot test at the Brillante oil field.

Candidates for the long-term project all belong to Cinco Presidentes oil fields or namely,

Cinco Presidentes, Roadador, and San Ramón.

- 30 -

Figure 29 Locations of CPQ Cosoleacaque and Target Oil Fields for Short-term Projects

Source: PEMEX

In the commercial phase, CCS-EOR operation is envisaged for the Cinco Presidentes oil

fields with their vast potential for enhanced oil recovery, except for the Brillante oil field

intended only for the pilot test. In the project under consideration, CO2 captured from flue

gases from reformers of CPQ Cosoleacaque will be injected into oil fields of Rabasa, Los

Soldados, Cinco Presidentes, Roadador, and San Ramón.

3.1.3 CO2 Capture System

3.1.3.1 Overview of CO2 Source and Project for Introduced System

The system will capture CO2 at a concentration of 10% from flue gases from primary

reformers in the ammonia plant of CPQ Cosoleacaque as the main source of CO2 for the

PEMEX CCS-EOR project. The captured CO2 will be transported with the CO2 pipeline

- 31 -

planned by PEMEX to reach oil fields of Cinco Presidentes for injection and EOR. The CO2

source and the CCS-EOR project are summarized as follows.

Figure 30 Overview of Project Sites

CO2 source

Operator CPQ Cosoleacaque

Owner PEMEX Petroquímica

CO2 source Flue gases from each primary reformer of the ammonia plant

CO2 concentration 10%

Annual CO2

emissions

ca. 416,100 tCO2

(1,200 tCO2 x 1 unit x 365 days x capacity utilization of 95%)

Reference: 1,387,000 tCO2 from 4 units

CCS-EOR project

EOR sites Cinco Presidentes oil fields

Distance from the

CO2 source to EOR

sites

ca. 50 to 200 km (depending on target oil fields)

Injected amount of

CO2 per year

ca. 416,100 tCO2

Expected annual oil

recovery

ca. 0.83 million barrels

GHG emissions reduction

Annual GHG

emissions reduction

ca. 254,750 tCO2

Source: Established by PEMEX and the study consortium

(2) Discussion of CO2 Capture System

Outline of CO2 Capture System

The CO2 capture system employed in the project captures CO2 from the flue gas of a

reformer. A flue gas blower introduces the flue gas from an exhaust stack through the quencher

into the CO2 capture system. The flue gas is directly released into the atmosphere from an

existing stack when the flue gas glower is shut down. The main components of the system are

presented in the list of components.

Structure of CO2 Capture System

- 32 -

This CO2 capture system comprises three process segments of 1) pre-treatment of flue gas,

2) CO2 absorption, and 3) CO2 release and absorbent regeneration (see the schematic

illustration of the process).

Figure 31 Schematic Illustration of Process in CO2 Capture System


1) Pre-treatment of flue gas

The flue gas quencher comprises a cylindrical stack. Hot flue gas from a primary reformer

needs to be cooled down by the flue gas quencher before it is fed into the CO2 absorption

tower in order to ensure efficient absorption and minimized loss of absorbent. The hot flue gas

is fed in from the bottom of the quencher to be cooled down in contact with circulating water

supplied from the top of the quencher. The circulating water is cooled down by the flue gas

cooler and supplied to the flue gas quencher.

2) CO2 absorption

The absorber comprises a cylindrical stack divided into the CO2 absorber at the bottom and

a washer on the top.

2)-1 Absorption unit

CO2 absorption

CO2 release and

absorbent regeneration

Pre-treatment of flue gas

- 33 -

The flue gas cooled down by the quencher is fed to the bottom part of the absorber. The CO2

gas in the flue gas is absorbed into CO2-lean absorbent supplied from the top of the absorption

unit into the packed bed when these are brought into countercurrent contact. The CO2-rich

absorbent after absorbing CO2 in the flue gas is pushed by the rich-absorbent pump toward the

regenerator through the solution heat exchanger.

2)-2 Washer

After removal of CO2 in the packed bed in the absorption, the flue gas is fed into the washer

at the top of the absorber. Countercurrent contact with circulating washing water in the washer

prompts condensation of moisture in the flue gas to maintain the balance of water throughout

the entire CO2 capture system. The washer comprises a packed bed and several demisters to

capture vapor and mist and thereby reduces the loss of amine. One of the demisters was

developed and patented by Mitsubishi Heavy Industries. This type of special demister has

been applied in numerous systems for commercial operation. The flue gas is finally released

into the atmosphere after removal of vapor and mist from the absorbent.

3) CO2 release and absorbent regeneration

The regenerator comprises a cylindrical stack. The CO2-rich absorbent at the bottom of the

absorber is sent to the solution heat exchanger before being heated by heat exchange with the

CO2-lean absorbent and then sent to the top of the regenerator. The CO2-rich absorbent fed

into the regenerator releases CO2 gas to be regenerated into CO2-lean absorbent after being

subject to the stripping effect from steam heated by low-pressure steam in the reboiler. The

CO2 gas and steam rise upwards inside and pass through the top of the regenerator to be

cooled down by the regenerator condenser.

Regenerated CO2-lean absorbent is then cooled down by the lean absorbent cooler to the

optimal temperature for CO2 absorption after the initial cooling by heat exchange with

CO2-rich absorbent in the solution heat exchanger before finally being sent back to the

absorber.

Figure 32 Main Components of CO2 Capture System

Component Number Type Note

FLUE GAS QUENCHER 1

CO2 ABSORBER 1

REGENERATOR 1

REGENERATOR REFLUX DRUM 1 Vertical

STEAM CONDENSATE DRUM 1 Vertical

- 34 -

SOLUTION STORAGE TANK 1

SOLUTION SUMP TANK 1 Pit

CAUSTIC SODA STORAGE TANK 1

RECLAIMED WASTE TANK 1

UP STREAM GUARD FILTER 1 Vertical

CARBON FILTER 1 Vertical

DOWN STREAM GUARD FILTER 1 Vertical

SOLUTION SUMP FILTER 1 Vertical

FLUE GAS COOLING WATER COOLER 2 Plate

WASH WATER COOLER 2 Plate

SOLUTION HEAT EXCHANGER 4 Plate

REGENERATOR CONDENSER 1 Shell and tube

REGENERATOR REBOILER 2 Shell and tube

LEAN SOLUTION COOLER 1 Plate

RECLAIMER 1 Shell and tube Intermittent

operation

FLUE GAS COOLING WATER PUMP 1 Centrifuge, motor

WASH WATER CIRCULATION PUMP 1 Centrifuge, motor

RICH SOLUTION PUMP 1 Centrifuge, motor

REGENERATOR REFLUX PUMP 1 Centrifuge, motor

LEAN SOLUTION PUMP 1 Centrifuge, motor

SOLUTION SUMP PUMP 1 Centrifuge, motor Intermittent

operation

STEAM CONDENSATE RETURN PUMP 1 Centrifuge, motor

RECLAIMER CAUSTIC SODA FEED

PUMP

1 Centrifuge, motor Intermittent

operation

RECLAIMED WASTE TRANSFER PUMP 1 Cavity, motor Intermittent

operation

RECLAIMED WASTE FEED PUMP 1 Cavity, motor Intermittent

operation

CO2 COMPRESSION UNIT 1 Geared

COOLING WATER TOWER 1

COOLING WATER TOWER FAN 6

CHEMICAL INJECTION UNIT FOR CW 1

COOLING WATER CIRCULATION PUMP 1 Centrifuge, motor

- 35 -

DEHYDRATION UNIT 1

PACKAGE BOILER UNIT 1

ADDITIONAL PUMP AND HEAT

EXCHANGER


(3) CO2 Capture System and Operational Characteristics

CO2 absorbent

In a joint effort with Kansai Electric Power Company since 1990, Mitsubishi Heavy

Industries has been conducting research and development of technologies for recovering CO2

from flue gases from power plants. Conventional technologies has disadvantages such as the

great amount of energy required for recovery, fast deterioration and great loss of absorbent,

and a high susceptibility to corrosion. As a first step, these two partners have started basic

research of absorbent and ultimately developed an energy-saving absorbent KS-1TM

having

great deterioration resistance.

Reclaiming system (intermittent operation)

During operation of the absorber, the absorbent KS-1TM

reacts with SOx, NOx, and O2 in

the flue gas and produces heat stable salts (HSSs) and degradation products. These

components need to be removed by a reclaimer since their condensation causes corrosion or

foaming of the absorbent. The reclaimer starts up when the HSS concentration in the system

reaches a certain level to condense these components by batch simple distillation.

Incinerator (optional)

An incinerator can be optionally provided for treating reclaimed waste.

(4) Cost-benefit analysis

The total cost for providing the CO2 capture system amounted to USD 135 million, which

includes equipment in the component list, designing, and other production and construction

costs. The CCS-EOR project earns revenue from the sales of crude oil from enhanced oil

production with CO2 obtained by installing the CO2 capture system. The feasibility

(cost-benefit performance) greatly depends on the amount of crude oil produced from roughly

416,100 tons of CO2 based on the source and the oil price.

The IEA anticipates an equilibrium oil price of 80 dollars per barrel around 2020 in its

middle scenario for its World Energy Outlook 2015 published in November 2015. The

possibility of a protracted price hovering around 50 dollars per barrel is suggested in the

low-price scenario. In this study, the standard scenario adopted an oil price of 80 dollars per

- 36 -

barrel along with two other scenarios of 40 and 60 dollars/barrels to evaluate the risks of a

lingering price slump.

The enhanced amount of oil produced (average) by injection of CO2 was set to 2

barrel/tCO2 with reference to the PEMEX estimate based on the laboratory tests conducted at

the Brillante oil field and the production efficiency of EOR operations in the United States.

The amount of oil production can increase or decrease depending on various factors, including

the underground structure of each oil field and the track record of production before the EOR.

Accordingly, there are two more scenarios of 1.0 and 3.0 barrel/tCO2 for evaluating the change

in increment in oil production.

The IRR from the project in the standard scenario (80 dollars/barrel and 2.0 barrel/tCO2)

was 16.2%. Generally speaking, the IRR from any oil field is expected to exceed 10%. The

revenue from the standard scenario is therefore sufficient. In contrast, the increment in oil

production by 1.0 barrel/tCO2 significantly undercuts the profitability resulting in an IRR of

4.7%. In terms of oil price, a drop from 80 dollars/barrel in the standard scenario to 60

dollars/barrel results in the IRR of 10.8%. At the moment, oil price is hovering around 40

dollar/barrel. The estimate suggests that the price needs to rise to around 60 dollars/barrel in

order for the CCS-EOR project to become feasible.

The estimate excludes costs associated with pipeline transportation of CO2 from the CO2

capture system and the costs involved in injecting CO2 to avoid a misleading estimate based

on insufficient analysis and information for precise cost estimation. The IRR will inevitably

drop if these costs are included. For this reason, an IRR of more than 15% was deemed

desirable for the CO2 capture system by allowing for a certain decline. The IRR exceeds 15%

in three scenarios including the standard scenario. The CCS-EOR project is deemed possible

in a highly productive oil field (2-3 barrel/tCO2 ) when the oil price rises.

Figure 33 Cost-Benefit Performance of CO2 Capture System (Project IRR and Sensitivity

Analysis)

Project IRR Oil price

40 USD/barrel 60 USD/barrel 80 USD/barrel

Incremental

oil

production

1.0 barrel/tCO2 -3.9% 1.0% 4.7%

2.0 barrel/tCO2 4.7% 10.8% 16.2%

3.0 barrel/tCO2 10.8% 18.7% 26.4%

Source: The study consortium

- 37 -

3.1.4 Discussion of Finance in Anticipation of CCS Project

(1) Overview of Preceding Project

In one of the preceding projects involving CCS-EOR, JX Nippon Oil & Gas Exploration

Corporation is trying to enhance oil production at an obsolete oil field in the United States by

injecting CO2 from an existing coal-fired power plant. This first large-scale CCS-EOR operation in

the world is expected to start in the fourth quarter of fiscal year 2016.

The project is an equal joint venture between JX Nippon Oil Exploration (EOR) Limited, an

indirectly owned subsidiary of JX Nippon Oil & Gas Exploration Corporation, and NRG Energy

Inc., an American independent power producer. Petra Nova Parish Holdings as the joint venture

constructs the world’s largest CCS plant for recovering CO2 from the combustion flue gas from W.

A. Parish in Texas (America’s largest coal-fired power plant owned by NRG Energy Inc.). The

recovered CO2 will be injected underground of the West Ranch oil field in Texas (approximately

130 km in the southwest of the power plant) for enhancing oil production.

Figure 34 Structure of CCS-EOR Project in the United States Lead by JX and NRG

Source: Sumitomo Mitsui Banking Corporation

CCS CAPEX: approx. 1,000M USDCCS OPEX: (not disclosed)Equity: 60%, Debt: approx. 40%

Revenue source: Oil sale from West Ranch Oil field

JX Nippon Oil & Gas Exploration（EOR)

Limited

NRG Energy Inc

(Project Company)Petra Nova Parish Holdings LLC

CCS plant

JBIC

Japanese Bank

NEXI

US Department

of Energy

W. A. Parish Power Plant

EPC contract

Equity（50%）

Subsidy167M US$CO2 Capture

4,776 t/d

（CCS site）（EOR site）（Oil Production）

500 BPD/d=>

12,000BPD/d

Debt175M US$

Debt75M US$

100% Political Risk covered

Term: 12 years

Debt

CO2 Injection4,776 t/d

Equity

JX Nippon Oil & Gas Exploration Corporation

JX Nippon Oil & Gas Exploration（U.S.A)

Limited

Equity（50%）

MHI America

Insurance

West Rancｈ Oil Field interest 25%

(constriction company)

TIC

West Ranch Oil Field

West Rancｈ Oil Field interest 25%

- 38 -

The project reduces the amount of CO2 released so far into the atmosphere by 1.60 million tons

in a year and enhances oil recovery from the current level of 500 barrel/day to 12,000 barrel/day.

Roughly 60% of the total cost is covered by JX Nippon Oil Exploration (EOR) Limited and NRG

Energy Inc. as the stakeholders. The remaining 40% is externally funded of which about 40% is

subsidized by the US Department of Energy. The rest is to be funded through project financing with

loans from JBIC and other Japanese financial institutions. Mitsubishi Heavy Industries was

awarded an order for EPC of the CO2 capture plant from two consortium partners, The Industrial

Company (TIC) and Petro Nova, through its American operating company Mitsubishi Heavy

industries America, Inc. (MHIA).

(2) Envisaged Implementation System and Finance Scheme for CCS Project

Various kinds of implementation systems and finance schemes can be anticipated for the CCS

project. At the moment, there are two envisaged models or namely: [1] a demonstration project

supported by the Japanese government; and [2] PEMEX owns the commercial CCS plant.

[1] Demonstration project supported by the Japanese government

In this model, a demonstration is conducted with the support of the Japanese, wherein PEMEX

commissions an EPC contractor to procure and install a CCS plant to use captured CO2 there for

EOR. A part of the project cost is funded by NEDO. The remaining part is funded by JBIC, loans

from megabanks and other private financial institutions guaranteed by NEXI, in addition to a

contribution from PEMEX.

One of the important issues concerning this finance scheme is allowance for major risks

anticipated for this project considering that repayment relies on PEMEX resources, which depend

on the financial standing of the company. Allowance for each type of risk needs to be discussed

with financial institutions.

- 39 -

Figure 35 Proposed Project Structure for Demonstration with Support from Japanese Government


[2] PEMEX owns the commercial CCS plant

In this model, PEMEX installs the CCS plant for EOR operation at the company’s own sites. For

instance, Mitsubishi Heavy Industries may supply and install a CCS plant both as the supplier and

the EPC contractor whereas PEMEX can enhance oil recovery with CO2 captured at the CCS plant.

The project is expected to be financed by PEMEX’s own funds or by borrowing from financial

institutions. In a similar manner as in the demonstration project, the repayment to financial

institutions relies on PEMEX’s cash flow from the entire projects. The repayment conditions

therefore greatly depend on the company’s financial standing. The way in which this project is to be

funded will impact the financial performance of PEMEX, and thus must also be considered.

Figure 36 Proposed Project Structure When PEMEX Owns the commercial CCS Plant


Japanese Government

(NEDO)

Fund for demonstration

MHI

PEMEX

PaymentCCS plant

PEMEXFertilizers

PEMEX Exploration &

Production

EOR site CO2 (CO2 Injection)(CO2 Capture)

JBIC

SMBC(Commercial

banks)

NEXI

Debt

Debt

<Buyers Credits>

Debt

EPC (CCS）

MHI

PEMEX

PaymentCCS plant

PEMEXFertilizers

PEMEX Exploration and

Production

EOR site CO2 (CO2 Injection)(CO2 Capture)

JBIC

SMBC(Commercial

banks)

NEXI

Debt

Debt

Debt

EPC(CCS）

- 40 -

(3) Points to Consider Regarding the Financial Scheme for CCS Project

Japanese companies have an advantage in CCS projects. But such projects involve vast initial

costs for the installation of facilities. Key challenges are whether public grants, JCM, and other

financial assistance can be effectively leveraged and whether necessary financial schemes can be

provided for the stakeholders. Because the CCS project in Mexico implemented with PEMEX is

designed in combination with EOR, the economic performance and feasibility of the project as a

whole is expected to be examined in detail while taking the increase in sales of oil from the EOR

operation into account.

3.1.5 CCS-EOR Project in Demonstration Phase

3.1.5.1 Possibility of demonstration

NEDO conducts Global Warming Mitigation Technology Promotion Projects (JCM

Demonstration) in member countries that have signed up for the joint crediting mechanism

(JCM). These projects effectively apply JCM to projects for reducing GHG sources along with

advanced Japanese low-carbon technologies and systems to mitigate global warming to validate

them in terms of the GHG emissions reduction, energy-saving performance, and potential as an

alternative energy to oil. The CO2 capture system considered for this project meets the

requirements for such JCM demonstration projects. Accordingly, the demonstration is

considered with application of JCM in mind.

3.1.5.2 Description of demonstration

Currently, PEMEX is planning EOR in three oil fields (for short-term projects) by using CO2

(off-gas) generated from the ammonia plant of CPQ Cosoleacaque. Because the planned amount

of injection is small in every target oil field (10 to 20 MMSCF, ca. 500 to 1,000 TPD),

additional CO2 capture with a CO2 capture system or the like is not considered necessary

according to the plan.

PEMEX on the contrary believes that CO2 generated as off-gas will be insufficient and that

additional CO2 capture is necessary for long-term EOR operation in the Cinco Presidentes oil

fields.

Accordingly, a JCM demonstration project was proposed by integrating a part of the

CCS-EOR operation planned by PEMEX in combination with smaller CCS operations in order

for PEMEX to deepen its understanding of technologies and gain necessary experience in CO2

capture systems toward commercially-viable EOR operation in the future, as well as to help

Japanese companies to build a track record with projects employing a CO2 capture system in

Mexico. The proposed demonstration project is outlined in the table below.

- 41 -

Figure 37 Overview of Demonstration Project

CO2 capture system

Operator CPQ Cosoleacaque

Owner PEMEX Petroquímica

CO2 source Flue gas from primary reformers of Unit 6 of the ammonia plant

CO2 concentration 10%

Annual CO2

emissions

ca. 86,700 tCO2

(250 tCO2 × 1 unit × 365 days × capacity utilization of 95%)

Major equipment to

be delivered

CO2 capture system, CO2 compressor, booster pump, etc.

CCS-EOR project

EOR site Rabasa oil field or Los Soldados oil field

Distance between CO2

source and EOR site

ca. 50 km

Injected amount of

CO2 per year

ca. 86,700 tCO2

Expected annual oil

recovery

ca. 173,000 barrels

GHG emissions reduction

Annual GHG

emissions reduction

ca. 63,697 tCO2

Source: Established by PEMEX and the study consortium

- 42 -

Figure 38 Position of CCS Plant (Enclosed in Red Dotted Line) in Relation to Target Ammonia

Plant (Unit 6) in Proposed Demonstration Project

Source: Prepared by the Japan Research Institute based on a Google Earth image (image data

provided by Google)

AP No.6 AP No.7

- 43 -

4 Applicable Methodologies for Reducing Emissions in This Project and Their

Estimated Emission Reduction

4.1 Analysis of MRV Methodologies

4.1.1 Analysis of CCS-EOR methodology adopted by the American Carbon Registry

In April 2015, the American Carbon Registry11

announced the “Methodology for GHG

Emission Reductions from Carbon Capture and Storage Projects, v1.0” for estimating CO2

emission reduction in CCS-EOR projects. The methodology is expected to be applied to the

emissions trading system in California.

The methodology considers CO2 leakage and CO2 emissions associated with consumption of

fossil fuel and purchased power in processes for capture, transport, and injection and storage. It

envisages emissions of CO2 from power plants, industrial processes (production of natural gas,

fertilizers, and ethanol), and poligeneration facilities, while no restriction is imposed on CO2

sources for carbon capture. All means of transportation are covered by the methodology,

including pipeline, barges, railways, and trucks. Eligible geological storage of CO2 for an EOR

project must at minimum, utilize Class II (i.e., Class II or Class VI) wells in the US and similar

well requirements in Canada. Credits can be issued for 10 years although a CCS project normally

lasts over 30 years.

CO2 leakage during injection and storage is calculated with each facility and ground surface.

Monitoring must be continued for five years with CO2 leakage from the ground surface after the

injection into geologic storage reservoirs. Monitoring must be planned in line with each project.

Any leakage needs to be counted as emissions from the project.

11

http://americancarbonregistry.org/carbon-accounting/standards-methodologies

- 44 -

Figure 39 Flow and Sources of Emissions of CO2 in CCS Project

Source: The American Carbon Registry, Methodology for GHG Emission Reductions from Carbon

Capture and Storage Project, v1.0

4.1.2 Analysis of Methodologies in Clean Development Mechanism (CDM)

The following CDM methodologies are believed applicable to CCS-EOR and CCS projects.

NM0167 (Recovery of anthropogenic CO2 from large industrial GHG emission

sources and its storage in an oil reservoir (The White Tiger Oil Field Carbon Capture

and Storage (CCS) project in Vietnam))

NM0168 (The capture of CO2 from natural gas processing plants and liquefied

natural gas (LNG) plants and its storage in underground aquifers or abandoned

oil/gas reservoirs (The capture of CO2 from the Liquefied Natural Gas (LNG)

complex and its geological storage in the aquifer located in Malaysia))

NM without assigned number (Capture of CO2 from the front-end of integrated

Gas-to-Liquid (GTL) plants, transport via pipeline and long-term containment in

appropriately selected and well-managed geological Storage Complexes.)

Methodologies NM0167 and NM0168 are similar to the one applicable to this project. These

are CDM methodologies for CCS proposed in September 2005 and January 2006. The panel

however, raised concern over insufficient consideration made for these methodologies regarding

precise tracking of leakage of stored CO2 and subsequent responsibilities over the long term.

- 45 -

More specifically, these methodologies simply assume a leakage rate of 0.7% for the crediting

period of 7 years and 1% for the crediting period of 10 years based on the IPCC CCS Special

Report, which states that “leakage is less than 1% for a probability of over 90% over the period

of both 100 years and 1,000 years.” Moreover, there are no detailed descriptions of the measured

items, frequency, and monitoring plan. These are believed to be shortcomings as pointed out by

the panel.

4.1.3 Discussion on Methodologies for JCM

In fiscal years 2012 and 2014, a total of three studies were conducted in NECO’s Global

Warming Mitigation Technology Promotion Projects regarding carbon capture and storage

involving enhanced oil recovery.

General Environmental Technos considered a CCS project in Gundih gas field in Indonesia in

its study conducted in fiscal year 2014. But as of January 2016, no report has been published.

In fiscal year 2012, a study conducted by Arabian Oil Company, Marubeni, and Mitsubishi

Research Institute data from the geologic storage reservoir of target oil field in Indonesia were

carefully examined and the amount of CO2 storage and reduction was calculated by developing a

three-dimensional model. Based on these fact-based examinations and simulations, the study

compiled useful findings regarding the method and procedure for evaluating the adequacy of

target storage sites as well as the monitoring method and frequency.

Likewise, another study conducted by Mitsubishi Heavy Industries and Mitsubishi UFJ

Morgan Stanley Securities in fiscal year 2012 developed a methodology based on the

abovementioned unapproved methodology for CDM in the specific sites in Indonesia. The

concern about leakage from the ground surface is addressed not only by applying the default

value given by IPCC, but also by providing another option to identify the amount of leakage

from the ground surface by actual measurements. While the IPCC’s default value of 1% is

adopted, it is pointed out that the adequacy of the value and the use of default value remain to be

discussed.

4.1.4 Discussion on ISO/TC265

Since 2011, discussion has been underway regarding ISO/TC265 Carbon dioxide capture,

transportation, and geological storage in order to standardize designing, construction, operation,

environmental planning and management, risk management, quantification, monitoring,

verification, and other activities involved in carbon capture and sequestration (CCS)

Six working groups have been set up for ISO/TC265, whose activities are presented below.

WG6 on EOR was set up in 2014. At the current working phase, no drafts have been published.

In this study, the discussion cannot be reflected in our methodology. In case of filing an

- 46 -

application for a methodology, the work done by WG6 will be checked and incorporated as

necessary.

WG1 (Capture)

Standardization of technologies and processes in CO2 capture systems for recovering

CO2 from sources, such as thermal power plants, steel plants, and chemical plants for

cement production, oil refinery, and so on

WG2 (Transportation)

Standardization of transportation of captured CO2 from the sources to the storage

facilities

WG3 (Storage)

Standardization of geological storage of captured CO2

WG4 (Quantification & Verification)

Standardization of quantification and verification of CO2 emission reduction achieved

by CCS

WG5 (Crosscutting issues)

Standardization of crosscutting issues across capture, transportation, and storage

involved in CCS

WG6 (CCS-EOR)

Standardization of CCS employed for enhanced oil recovery (EOR)

4.2 Discussion of Methodologies for Emission reduction

The proposed methodology for reducing emissions in this project was considered by taking the

expected conditions into account while referring to the Methodology for GHG Emission

Reductions from Carbon Capture and Storage Project, v1.0 developed by the American Carbon

Registry for determining the amount of CO2 emission reduction in CCS (including EOR) projects.

Figure 40 Process of CCS-EOR

- 47 -



A. Title of the methodology

The capture of CO2 from industrial plants and its storage in an oil reservoir with

enhanced oil recovery in Mexico.

B. Terms and definitions

Terms Definitions

Industrial plants Industrial plants are to emit CO2. Industrial plants

include the following plants;

Fossil fuel-fired power plant

Gas processing plant

Refinery plant

Chemical plant

Enhanced oil recovery Enhanced oil recovery is the implementation of various

techniques (e.g.: CO2, water) for increasing the amount

of crude oil that can be extracted from an oil field.

C. Summary of the methodology

Items Summary

GHG emission reduction

measures

This methodology applies to the project that aims for

enhancing oil recovery by capturing CO2 from industrial

plants and injecting CO2 into the oil reservoir in Mexico, which

leads to GHG emission reductions, through the capturing CO2

by not releasing CO2 to the atmosphere.

Calculation of reference

emissions

Reference emissions are calculated with volume of CO2

inject into oil reservoir and density of CO2 at standard

condition.

Calculation of project

emissions

Project emissions are calculated with the following process.

CO2 capture

- 48 -

Leakage of CO2

Fossil fuel consumption

Electricity consumption

CO2 transport

Leakage of CO2



CO2 injection and storage

Vented CO2

Leakage of CO2

Flaring of associated gas

Entrained CO2 in produced oil and gas



Monitoring parameters Volume of CO2 input into CO2 capture facilities during the

period p [m3/p]

Volume of CO2 input into CO2 transport facilities during

the period p [m3/p]

Volume of CO2 input into injection-well from transport

during the period p [m3/p]

Volume of CO2 inject into oil reservoir during the period p

[m3/p]

Volume of CO2 input into injection-well from CO2

reinjection system during the period p [m3/p]

Volume of gas flared during the period p [m3/p]

Volume of produced gas during the period p [m3/p]

Weight of produced oil during the period p [kl/p]

Fossil fuel consumption by related facilities during the

period p [t,kg,m3/p]

Electricity consumption by related facilities during the

period p [MWh/p]

- 49 -

Figure 41 Project Flow and Monitoring Points (Envisaged)

Source: Japan Research Institute

D. Eligibility criteria

This methodology is applicable to projects that satisfy all of the following criteria.

Criterion 1 The project is to capture CO2 from industrial plants and inject CO2 into

the oil reservoir in Mexico.

Criterion 2 There is no law or regulation of capturing CO2 from industrial plants,

and where CO2 is released into the atmosphere in Mexico.

Criterion 3 To apply the well specification for avoiding CO2 leakage from oil

reservoir.

(e.g. complying with ClassII under US EPA or another appropriate

standard)

Criterion 4 A plan for associated storage assurance for CO2 sequestration site is

prepared.

(e.g. monitoring the variation of temperature and pressure within oil

reservoir)

Execution of the assurance plan is checked at the time of verification,

in order to confirm that CO2 from oil reservoir is not released to the

atmosphere.

Criteria for evaluating risks of CO2 leakage from geological storage reservoirs were established

with reference to Methodology for GHG Emission Reductions from Carbon Capture and Storage

Project, Version 1.0 by the American Carbon Registry, proposed methodologies for CDM, and

Source

plant

CO2

capture

system

Injection

well

Production

well

CO2

transportation

system

Gas

Separation

system

Associated

gas

remover

CO2

Reinjection

System

Crude oil

tankoil

gas

Oil reservoir

oil/gas

oil/gas

oil

gas

CO2 CO2 CO2

CO2

CO2

CO2

CO2

CO2

CO2

M

E

Measuring instrument for

gas/CO2 volume

Measuring instrument for fossil

fuels and electricity consumption

M1 M2 M3

M4

E1 E2 E3 E4

E5

E6

E7

E8

VMeasuring instrument for vented

gas volume

V1 V2

V3

V4

V5

M6

M7

- 50 -

methodologies that had been discussed for JCM in the past. Eligibility criteria 3 and 4 will be

precisely adjusted when implementation of the project is confirmed.

E. Emission Sources and GHG types

Reference emissions

Emission sources GHG types

CO2 emission from industrial plants CO2

Project emissions

Emission sources GHG types

CO2 Capture

Leakage of CO2 from CO2 capture system CO2

Fossil fuel consumption by CO2 capture facilities CO2

Electricity consumption by CO2 capture facilities CO2

CO2 Transport

Leakage of CO2 from CO2 transportation system CO2

Fossil fuel consumption by CO2 transportation facilities CO2

Electricity consumption by CO2 transportation facilities CO2

CO2 Injection and Storage

Vented CO2 at the injection well, production well and other related

facilities

CO2,CH4

Flaring of associated gas CO2,CH4,N2O

Entrained CO2 in produced oil and gas CO2

Fossil fuel consumption by CO2 Injection and Storage facilities CO2

Electricity consumption by CO2 Injection and Storage facilities CO2

Leakage of CO2 from oil reservoir CO2

GHG sources were identified for the anticipated project with reference to the GHG sources

identified in Methodology for GHG Emission Reductions from Carbon Capture and Storage Project,

Version 1.0 by the American Carbon Registry. Leakage of CO2 does not take place under normal

specifications of the oil field and geological storage reservoir. Nevertheless, the leakage ratio of 1%

was anticipated for the project period of 10 years based on the IPCC CCS Special Report which

states “leakage is less than 1% for a probability of over 90% over the periods of both 100 years and

1,000 years.”

- 51 -

Figure 42 Referenced GHG Sources



- 52 -

F. Establishment and calculation of reference emissions

F.1. Establishment of reference emissions

Reference emissions are GHG emissions from releasing CO2 to the atmosphere from

industrial plants and calculated with volume of CO2 inject into oil reservoir and density

of CO2 at standard condition.

Net emission reductions in this methodology are achieved by including leakage of CO2 from

CO2 capture and transport process, and also setting default values of leakage of CO2 from the

oil reservoir in a conservative manner when calculating emission reductions.

The American Carbon Registry presented a projection-based baseline and a standards-based

baseline as two kinds of reference scenarios in its Methodology for GHG Emission Reductions from

Carbon Capture and Storage Project, Version 1.0. The projection-based baseline regards the

amount of CO2 captured from an industrial plant as the amount of atmospherically-released CO2.

According to the description, estimations can be made with projection-based baseline in many

projects. A standards-based baseline meanwhile is set beforehand by assigning the amount of CO2

per unit of output in the technical specifications. Such a baseline is sector-specific and thus

intended for coal-fired and gas-fired power plants.

The methodology in this study adopted the approach of a projection-based baseline in

Methodology for GHG Emission Reductions from Carbon Capture and Storage Project, Version 1.0

and a conservative reference scenario that excludes the amount of CO2 emissions from existing

facilities.

F.2. Calculation of reference emissions

RE𝑝 = ∑(𝑉𝑒𝑜𝑟_𝑐𝑜2𝑖𝑛,𝑝 − 𝑉𝑖𝑛𝑗𝑒𝑐𝑡𝑖𝑜𝑛−𝑤𝑒𝑙𝑙_𝑟𝑒𝑐𝑜2𝑖𝑛,𝑝) × 𝜌𝑐𝑜2

Where;

𝑅𝐸𝑝 : Reference emissions during the period p [tCO2/p]

𝑉𝑒𝑜𝑟_𝑐𝑜2_𝑖𝑛,𝑝 : Volume of CO2 inject into oil reservoir during the period p

[m3/p]

𝑉𝑖𝑛𝑗𝑒𝑐𝑡𝑖𝑜𝑛−𝑤𝑒𝑙𝑙_𝑟𝑒𝑐𝑜2𝑖𝑛,𝑝 : Volume of CO2 input into injection-well from CO2

reinjection system during the period p [m3/p]

𝜌𝑐𝑜2 : Density of CO2 at standard condition [tCO2/m3]

The methodology determines the amount of CO2 emissions by multiplying the density of CO2

with the measured amount of CO2 that is transported by pipeline and injected into an oil field

- 53 -

through the injection well. The American Carbon Registry in Methodology for GHG Emission

Reductions from Carbon Capture and Storage Project, Version 1.0 defines active mass as the

amount of CO2 transported from a power plants or industrial facility to a capture plant rather than

the amount of CO2 injected through an injection well. The methodology in this study follows the

approach of JCM to define the active mass as the amount of CO2 injected into an oil reservoir,

which includes the amount of leakage from the capture and transportation processes as well as

leakage from injection facilities.

G. Calculation of project emissions

The amount of emissions involved in the project is determined by adding up the amount of CO2

emissions from respective processes of capture, transport, injection, and storage according to the

method defined by the American Carbon Registry in Methodology for GHG Emission Reductions

from Carbon Capture and Storage Project, Version 1.0.

𝑃𝐸𝑝 = 𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒,𝑝 + 𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡,𝑝 + 𝑃𝐸𝑒𝑜𝑟,𝑝

Where;

𝑃𝐸𝑝 : Project emissions during the period p [tCO2/p]

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒,𝑝 : Project emissions for CO2 capture during the period p

[tCO2/p]

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡,𝑝 : Project emissions for CO2 transport during the period p

[tCO2/p]

𝑃𝐸𝑒𝑜𝑟,𝑝 : Project emissions for CO2 injection and storage during the

period p [tCO2/p]

- 54 -

Figure 43 Reference Flow and Sources of CO2 for CCS Project

Source: American Carbon Registry, Methodology for GHG Emission Reductions from Carbon


Amount of CO2 emission from CO2 capture process

In the CO2 capture process, the model calculates both the amount of CO2 leakage during the

capture and transport from an industrial facility and the amount of CO2 emission associated

with the use of fossil fuel or purchased power for operating the capture system.

The amount of CO2 leakage is determined from the difference between the flow rate of CO2

accepted by a capture system and the flow rate of CO2 delivered to a transport system. Each

flow rate is multiplied by the CO2 density to convert it into the CO2 amount. These flow rates

are actual measurements with flowmeters calibrated according to international or Mexican

standards.

CO2 emissions associated with consumption of fossil fuel and purchased power are tracked by

actual measurements with instruments calibrated according to the international or Mexican

standards for fossil fuel and purchased power, which will be multiplied by the emissions

coefficients published by the Mexican government or IPCC to determine the amount.

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒,𝑝 = 𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑙𝑒𝑎𝑘,𝑝 + 𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑓𝑢𝑒𝑙,𝑝 + 𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑒𝑙𝑒𝑐,𝑝

Where;

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒,𝑝 : Project emissions for CO2 capture during the period p

[tCO2/p]

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑙𝑒𝑎𝑘,𝑝 : Project emission of leakage CO2 from CO2 capture

- 55 -

[tCO2/p]

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑓𝑢𝑒𝑙,𝑝 : Project emissions of fossil fuel consumption by CO2

capture facilities during the period p [tCO2/p]

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑒𝑙𝑒𝑐,𝑝 : Project emissions of electricity consumption by CO2


𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑙𝑒𝑎𝑘𝑒,𝑝 = ∑(𝑉𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝐶𝑂2𝑖𝑛,𝑝 − 𝑉𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝐶𝑂2𝑖𝑛,𝑝) × 𝜌𝑐𝑜2

Where;

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑙𝑒𝑎𝑘,𝑝 : Project emission of leakage CO2 from CO2 capture

[tCO2/p]

𝑉𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝐶𝑂2𝑖𝑛,𝑝 : Volume of CO2 input into CO2 capture facilities during

the period p [m3/p]

𝑉𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝐶𝑂2𝑖𝑛,𝑝 : Volume of CO2 input into CO2 transport facilities during

the period p [m3/p]

𝜌𝑐𝑜2 : Density of CO2 at standard conditions [tCO2/m3]

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑓𝑢𝑒𝑙,𝑝 = 𝐹𝐶𝑐𝑎𝑝𝑡𝑢𝑟𝑒,𝑝 × 𝐸𝐹𝑓𝑢𝑒𝑙

Where;

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑓𝑢𝑒𝑙,𝑝 : Project emissions of fossil fuel consumption by CO2


𝐹𝐶𝑐𝑎𝑝𝑡𝑢𝑟𝑒,𝑝 : Fossil fuel consumption of CO2 capture facilities during

the period p [t,kg,m3/p]

𝐸𝐹𝑓𝑢𝑒𝑙 : CO2 emission factor for consumed fossil fuel

[tCO2/t,kg,m3]

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑒𝑙𝑒𝑐,𝑝 = 𝐸𝐶𝑐𝑎𝑝𝑡𝑢𝑟𝑒,𝑝 × 𝐸𝐹𝑔𝑟𝑖𝑑

Where;

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑒𝑙𝑒𝑐,𝑝 : Project emissions of electricity consumption for CO2


𝐸𝐶𝑐𝑎𝑝𝑡𝑢𝑟𝑒,𝑝 : Electricity consumption of CO2 capture facilities during

the period p [MWh/p]

𝐸𝐹𝑔𝑟𝑖𝑑 : CO2 emission factor for consumed grid electricity

[tCO2/MWh]

- 56 -

Amount of CO2 emissions from CO2 transport process

In the CO2 transport process, the model calculates both the amount of CO2 leakage during the

transport of CO2 from the industrial facility to a target oil field and the amount of CO2 emission

associated with the use of fossil fuel or purchased power for operating the transport system.

The amount of CO2 leakage is determined from the difference between the flow rate of CO2

accepted by a transport system and the flow rate of CO2 delivered to an injection well. Each

flow rate is multiplied by the CO2 density to convert it into the CO2 amount. These flow rates

are actual measurements with flowmeters calibrated according to international or Mexican

standards.


actual measurements with instruments calibrated according to international or Mexican standards,

which will be multiplied by emissions coefficients published by the Mexican government or

IPCC to determine the amount.

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡,𝑝 = 𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑙𝑒𝑎𝑘,𝑝 + 𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑓𝑢𝑒𝑙,𝑝 + 𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑒𝑙𝑒𝑐,𝑝

Where;

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡,𝑝 : Project emissions for CO2 transport during the period p

[tCO2/p]

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑙𝑒𝑎𝑘,𝑝 : Project emission of leakage CO2 from CO2 transport

during the period p [tCO2/p]

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑓𝑢𝑒𝑙,𝑝 : Project emissions of fossil fuel consumption by CO2

transport facilities during the period p [tCO2/p]

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑒𝑙𝑒𝑐,𝑝 : Project emissions of electricity consumption by CO2

transport e facilities during the period p [tCO2/p]

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑙𝑒𝑎𝑘𝑒,𝑝 = ∑(𝑉𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝐶𝑂2𝑖𝑛,𝑝 − 𝑉𝑖𝑛𝑗𝑒𝑐𝑡𝑖𝑜𝑛−𝑤𝑒𝑙𝑙_𝐶𝑂2𝑖𝑛,𝑝) × 𝜌𝑐𝑜2

Where;

𝑃𝐸𝑐𝑎𝑝𝑡𝑢𝑟𝑒_𝑙𝑒𝑎𝑘,𝑝 : Project emission of leakage CO2 from CO2 transport

during the period p [tCO2/p]

𝑉𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝐶𝑂2𝑖𝑛,𝑝 : Volume of CO2 input into CO2 transport facilities during

the period p [m3/p]

𝑉𝑖𝑛𝑗𝑒𝑐𝑡𝑖𝑜𝑛−𝑤𝑒𝑙𝑙_𝐶𝑂2𝑖𝑛,𝑝 : Volume of CO2 input into injection-well from CO2

transport facilities during the period p [m3/p]

𝜌𝑐𝑜2 : Density of CO2 at standard conditions [tCO2/m3]

- 57 -

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑓𝑢𝑒𝑙,𝑝 = 𝐹𝐶𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡,𝑝 × 𝐸𝐹𝑓𝑢𝑒𝑙

Where;

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑓𝑢𝑒𝑙,𝑝 : Project emissions of fossil fuel consumption for CO2


𝐹𝐶𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡,𝑝 : Fossil fuel consumption of CO2 transport facilities during

the period p [t,kg,m3/p]


[tCO2/t,kg,m3]

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑒𝑙𝑒𝑐,𝑝 = 𝐸𝐶𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡,𝑝 × 𝐸𝐹𝑔𝑟𝑖𝑑

Where;

𝑃𝐸𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡_𝑒𝑙𝑒𝑐,𝑝 : Project emissions of electricity consumption for CO2


𝐸𝐶𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡,𝑝 : Electricity consumption of CO2 transport facilities during

the period p [MWh/p]


[tCO2/MWh]

Amount of CO2 emissions from CO2 injection and storage process

In the CO2 injection and storage process, this model calculates the following 5 kinds of CO2

emissions.

・ CO2 released from injection wells, production wells, and ground facilities

・ GHG (CO2, CH4, and N2O) from faring of associated gases

・ CO2 emission from entrained CO2 in produced oil and gas

・ CO2 emissions associated with consumption of fossil fuel or purchased power by each

facility

・ CO2 leakage from the geological storage reservoir through ground surface

An amount of CO2 released from a facility is calculated by multiplying the flow rate of carried

gas by the proportion and density of CO2 and CH4. The flow rate and proportion of CO2 and CH4

are given by actual measurements with flowmeters calibrated according to international or

Mexican standards.


actual measurements with instruments calibrated according to international or Mexican standards,

- 58 -

which will be multiplied by emissions coefficients published by the Mexican government or

IPCC to determine the amount.

𝑃𝐸𝑒𝑜𝑟,𝑝 = 𝑃𝐸𝑣𝑒𝑛𝑡,𝑝 + 𝑃𝐸𝑓𝑙𝑎𝑟𝑖𝑛𝑔,𝑝 + 𝑃𝐸𝑒𝑛𝑡𝑟𝑎𝑖𝑛𝑒𝑑,𝑝 + 𝑃𝐸𝑒𝑜𝑟_𝑓𝑢𝑒𝑙,𝑝 + 𝑃𝐸𝑒𝑜𝑟_𝑒𝑙𝑒𝑐,𝑝

+ 𝑃𝐸𝑒𝑜𝑟_𝑙𝑒𝑎𝑘𝑎𝑔𝑒,𝑝

Where;

𝑃𝐸𝑒𝑜𝑟,𝑝 : Project emissions for CO2 injection and storage during the

period p [tCO2/p]

𝑃𝐸𝑣𝑒𝑛𝑡,𝑝 : Project emissions from venting of CO2 at the CO2 injection

and storage facilities during the period p [tCO2/p]

𝑃𝐸𝑓𝑙𝑎𝑟𝑖𝑛𝑔,𝑝 : Project emissions from flaring of associated gas during the

period p [tCO2/p]

𝑃𝐸𝑒𝑛𝑡𝑟𝑎𝑖𝑛𝑒𝑑,𝑝 : Project emissions from entrained CO2 in produced oil and

gas during the period p [tCO2/p]

𝑃𝐸𝑒𝑜𝑟_𝑓𝑢𝑒𝑙,𝑝 : Project emissions of fossil fuel consumption for CO2

injection and storage facilities during the period p [tCO2/p]

𝑃𝐸𝑒𝑜𝑟_𝑒𝑙𝑒𝑐,𝑝 : Project emissions of electricity consumption for CO2

injection and storage facilities during the period p [tCO2/p]

𝑃𝐸𝑒𝑜𝑟_𝑙𝑒𝑎𝑘𝑎𝑔𝑒,𝑝 : Project emissions from leakage of injected CO2 from oil

reservoir during the period p [tCO2/p]

𝑃𝐸𝑣𝑒𝑛𝑡,𝑝 = ∑(𝑉𝑣𝑒𝑛𝑡_𝑖,𝑝 × 𝑅𝐶𝑂2_𝑖,𝑝 × 𝜌𝐶𝑂2) + ∑(𝑉𝑣𝑒𝑛𝑡_𝑖,𝑝 × 𝑅𝐶𝐻4_𝑖,𝑝 × 𝜌𝐶𝐻4 × 𝐺𝑊𝑃𝐶𝐻4)

Where;

𝑃𝐸𝑣𝑒𝑛𝑡,𝑝 : Project emissions from vented CO2 at the injection well,

production well and other related facilities during the

period p [tCO2/p]

𝑉𝑣𝑒𝑛𝑡_𝑖,𝑝 : Volume of vented gas for equipment ”i” during the period

p [m3/p]

𝑅𝐶𝑂2_𝑖,𝑝 : Concentrate of CO2 for equipment ”i” during the period p

𝑅𝐶𝐻4_𝑖,𝑝 : Concentrate of CH4 for equipment ”i” during the period p

𝜌𝐶𝑂2 : Density of CO2 at standard conditions [tCO2/m3]

𝜌𝐶𝐻4 : Density of CH4 at standard conditions [tCH4/m3]

𝐺𝑊𝑃𝐶𝐻4 : Global Warming Potential of CH4

- 59 -

𝑃𝐸𝑓𝑙𝑎𝑟𝑖𝑛𝑔,𝑝

= ∑ (𝑉𝑔𝑎𝑠𝑓𝑙𝑎𝑟𝑒𝑑_𝑗,𝑝 × ∑(𝐶𝑗 × 𝑦𝑗) × 44.0123.64⁄ )

+ ∑(𝑉𝑔𝑎𝑠𝑓𝑙𝑎𝑟𝑒𝑑_𝑗,𝑝 × (1 − 𝐷𝐸) × 𝑅𝐶𝐻4_𝑗,𝑝 × 𝜌𝐶𝐻4 × 𝐺𝑊𝑃𝐶𝐻4)

+ ∑(𝑉𝑔𝑎𝑠𝑓𝑙𝑎𝑟𝑒𝑑_𝑗,𝑝 × 𝐸𝐹𝑓𝑙𝑎𝑟𝑖𝑛𝑔_𝑁2𝑂 × 𝐺𝑊𝑃𝑁2𝑂)

Where;

𝑃𝐸𝑓𝑙𝑎𝑟𝑖𝑛𝑔,𝑝 : Project emissions from flaring CO2 during the period p

[tCO2/p]

𝑉𝑔𝑎𝑠𝑓𝑙𝑎𝑟𝑒𝑑_𝑗,𝑝 : Volume of gas flared during the period p [m3/p]

𝐶𝑗 : Number of carbon atoms would be assessed based on the

chemical formula of each gas “j” (e.g., 1 for CH4, 1 for CO2,

2 for C2H6)

𝑦𝑗 : Direct measurement of the mole fractions of each

carbon-containing gas “j” in the gas mixture

44.01 : Reference value for Molecular Weight of CO2 [g/mol]

23.64 : Volume occupied by 1 mole of an ideal gas at standard

conditions of 15 Celsius and 1 atmosphere.

𝐷𝐸 : Destruction efficiency of the flare

𝑅𝐶𝐻4_𝑗,𝑝 : Concentrate of CH4 of each gas “j” during the period p

𝜌𝐶𝐻4 : Density of CH4 at standard conditions [tCH4/m3]

𝐺𝑊𝑃𝐶𝐻4 : Global Warming Potential of CH4

𝐸𝐹𝑓𝑙𝑎𝑟𝑖𝑛𝑔_𝑁2𝑂 : N2O emission factor for flaring gas [tN2O/m3]

𝐺𝑊𝑃𝑁2𝑂 : Global Warming Potential of N2O

𝑃𝐸𝑒𝑛𝑡𝑟𝑎𝑖𝑛𝑒𝑑,𝑝 = ∑(𝑉𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑𝑔𝑎𝑠,𝑝 × 𝑅𝐶𝑂2_𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑𝑔𝑎𝑠,𝑝 × 𝜌𝐶𝑂2) + ∑(𝑊𝑜𝑖𝑙.𝑝 × 𝐹𝑐𝑜2,𝑝)

Where;

𝑃𝐸𝑒𝑛𝑡𝑟𝑎𝑖𝑛𝑒𝑑,𝑝 : Project emissions from entrained CO2 in produced oil

and gas during the period p [tCO2/p]

𝑉𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑𝑔𝑎𝑠,𝑝 : Volume of produced gas during the period p [m3/p]

𝑅𝐶𝑂2_𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑𝑔𝑎𝑠,𝑝 : Concentrate of CO2 for produced gas during the period p

𝜌𝐶𝑂2 : Density of CO2 at standard conditions [tCO2/m3]

𝑊𝑜𝑖𝑙.𝑝 : Weight of produced oil during the period p [kl/p]

𝐹𝑐𝑜2,𝑝 : Mass fraction of CO2 in produced oil during the period p

- 60 -

𝑃𝐸𝑒𝑜𝑟_𝑓𝑢𝑒𝑙,𝑝 = 𝐹𝐶𝑒𝑜𝑟,𝑝 × 𝐸𝐹𝑓𝑢𝑒𝑙

Where;

𝑃𝐸𝑒𝑜𝑟_𝑓𝑢𝑒𝑙,𝑝 : Project emissions of fossil fuel consumption for CO2

injection and storage facilities during the period p

[tCO2/p]

𝐹𝐶𝑒𝑜𝑟,𝑝 : Fossil fuel consumption by CO2 injection and storage

facilities during the period p [t,kg,m3/p]


[tCO2/t,kg,m3]

𝑃𝐸𝑒𝑜𝑟_𝑒𝑙𝑒𝑐,𝑝 = 𝐸𝐶𝑒𝑜𝑟,𝑝 × 𝐸𝐹𝑔𝑟𝑖𝑑

Where;

𝑃𝐸𝑒𝑜𝑟_𝑒𝑙𝑒𝑐,𝑝 : Project emissions of electricity consumption for CO2

injection and storage facilities during the period p

[tCO2/p]

𝐸𝐶𝑒𝑜𝑟_𝑒𝑙𝑒𝑐,𝑝 : Electricity consumption by CO2 injection and storage

facilities during the period p [MWh/p]


[tCO2/MWh]

𝑃𝐸𝑒𝑜𝑟_𝑙𝑒𝑎𝑘𝑎𝑔𝑒,𝑝 = 𝑉𝑒𝑜𝑟_𝑐𝑜2𝑖𝑛,𝑝 × 𝑅𝑙𝑒𝑎𝑘

Where;

𝑃𝐸𝑒𝑜𝑟_𝑙𝑒𝑎𝑘𝑎𝑔𝑒,𝑝 : Project emissions from leakage of injected CO2 from oil

reservoir during the period p [tCO2/p]

𝑉𝑒𝑜𝑟_𝑐𝑜2𝑖𝑛,𝑝 : Volume of CO2 inject into oil reservoir during the period

p [m3/p]

𝑅𝑙𝑒𝑎𝑘 : Rate of CO2 leakage from oil reservoir [%]

H. Calculation of emissions reductions

𝐸𝑅𝑝 = 𝑅𝐸𝑝 − 𝑃𝐸𝑝

Where;

𝐸𝑅𝑝 : Emission reductions during the period p [tCO2/p]

- 61 -

𝑅𝐸𝑝 : Reference emissions during the period p [tCO2/p]

𝑃𝐸𝑝 : Project emissions during the period p [tCO2/p]

I. Data and parameters fixed ex ante

The source of each data and parameter fixed ex ante is listed as below.

Parameter Description of data Source

𝐸𝐹𝑓𝑢𝑒𝑙 CO2 emission factor for consumed fossil

fuel

IPCC default values

provided in table 1.4 of

Ch.1 Vol.2 of 2006 IPCC

Guidelines for National

GHG Inventories.

𝐸𝐹𝑔𝑟𝑖𝑑 CO2 emission factor for consumed grid

electricity

Updates on Grid

Electricity Emission

Factors, National

Committee on Clean

Development Mechanism,

Mexico, unless otherwise

instructed by the Joint

Committee.

𝐸𝐹𝑓𝑙𝑎𝑟𝑖𝑛𝑔_𝑁2𝑂 N2O emission factor for flaring gas Updates on Emission

Factors, National

Committee on Clean

Development Mechanism,

Mexico, unless otherwise

instructed by the Joint

Committee.

𝐺𝑊𝑃𝐶𝐻4 CH4: 25

Global Warming Potential of CH4

2006 IPCC Guidelines for

National Greenhouse Gas

Inventories

𝐺𝑊𝑃𝑁2𝑂 N2O: 298

Global Warming Potential of N2O

2006 IPCC Guidelines for

National Greenhouse Gas

Inventories

𝑅𝑙𝑒𝑎𝑘 1%

Rate of CO2 leakage from oil reservoir

The IPCC Special Report

on Carbon Dioxide Capture

and Storage

- 62 -

4.3 Estimation of Reduced Emissions

This study estimated the reduction in emissions achieved by a commercial CCS-EOR project

implemented by capturing 1,000 tons of CO2 per day from flue gas from primary reformers of an

ammonia plant (CO2 concentration of 10%) for enhanced oil recovery. According to the assumption,

the designing and construction start in 2017 before EOR is carried out for the 10 years from 2020 to

2029. The necessary amount of energy for CCS-EOR operation was evened out over the entire

project period for making the estimation.

[1] Emission reduction

The amount of emission reduction was calculated by subtracting the project emissions from the

reference emissions. The annual reduction in GHG emissions was 254,750 tCO2. The amount of

emission reduction over the entire life of the project (10 years) emission was 2,547,500 tCO2.

Figure 44 Emission reduction

Year Emission reduction

(tCO2/y)

Reference emissions

(t-CO2/y)

Project emissions

(tCO2/y)

2020 254,750 346,750 92,000

2021 254,750 346,750 92,000

2022 254,750 346,750 92,000

2023 254,750 346,750 92,000

2024 254,750 346,750 92,000

2025 254,750 346,750 92,000

2026 254,750 346,750 92,000

2027 254,750 346,750 92,000

2028 254,750 346,750 92,000

2029 254,750 346,750 92,000

* Fractions are considered during the calculation, and are later rounded off in the statement.

Source: Prepared by the Japan Research Institute

- 63 -

[2] Reference emissions

In this project, CO2 is captured from flue gas of primary reformers at an ammonia plant at CPQ

Cosoleacaque and injected into oil fields of Cinco Presidentes for CCS-EOR. The source emits

1,000 tons of CO2 daily. EOR is carried out by capturing 95% of the emissions. The reference

emissions are presented below.

Figure 45 Reference Emissions

Year Reference emissions (tCO2/y)

2020 346,750

2021 346,750

2022 346,750

2023 346,750

2024 346,750

2025 346,750

2026 346,750

2027 346,750

2028 346,750

2029 346,750

Source: Estimate and established values by the study consortium

- 64 -

[3] Project emissions

Project emissions consist of CO2 leakage, CO2 from flaring, and CO2 emissions associated with

power and heat consumed for CO2 capture and injection.

The respective emissions were obtained by applying the emissions coefficient of 0.4999

tCO2/MWh for grid power in 2013 as calculated under a Mexican voluntary emissions trading

system GEI (Gases de Efecto Invernadero), as well as the emissions coefficient of 53.66

kg-CO2/MMbtu for natural gas as established by SENER.

Figure 46 Project Emissions

Year

Power Natural gas

CO2 leakage

(tCO2/y)

Total

(t-CO2/y) Consumption

(MWh)

CO2

emission

(tCO2/y)

Consumption

(MMbtu)

CO2 emission

(tCO2/y)

2020 25,964 12,979 1,408,000 75,553 3,468 92,000

2021 25,964 12,979 1,408,000 75,553 3,468 92,000

2022 25,964 12,979 1,408,000 75,553 3,468 92,000

2023 25,964 12,979 1,408,000 75,553 3,468 92,000

2024 25,964 12,979 1,408,000 75,553 3,468 92,000

2025 25,964 12,979 1,408,000 75,553 3,468 92,000

2026 25,964 12,979 1,408,000 75,553 3,468 92,000

2027 25,964 12,979 1,408,000 75,553 3,468 92,000

2028 25,964 12,979 1,408,000 75,553 3,468 92,000

2029 25,964 12,979 1,408,000 75,553 3,468 92,000

Source: Estimated and established by the study consortium

- 65 -

5 Analysis of Economic Effects and Impact on Partner Country in the Event the

Project is Implemented

5.1 Analysis of Impact of CO2 (Emission Credits) Price on Feasibility of Project

The standard case does not take into account the additional revenue from reduced CO2 emissions

(i.e., emission credit revenue). Given that neither the Mexican emissions trading system nor JCM

clearly defines emission price, a sensitivity analysis was conducted regarding carbon pricing with

reference to prices from systems involving Mexico.

The targets of the sensitivity analysis were the carbon tax price imposed by the Mexican

government (USD 3.21/tCO2); California carbon allowance (CCA), which is the emission credit

price under California’s emissions trading system (USD 13/tCO2); and the upper price limit for

clean energy certificates (CELs) (USD 48/tCO2). The estimate demonstrated that the IRR only

slightly increased by 0.3% with the carbon tax as the lowest carbon price. The rate increased by

1.3% for the CCA under the California emissions trading system, for which the Mexican

government expressed its intention to link with the domestic emissions credit market. The

feasibility is not significantly boosted since the impact is still minor compared to the impact from

oil prices or enhanced oil production. In contrast, the upper price limit of CELs increased the IRR

by 4.9%, which is comparable to an impact from a rise of oil price by 20 US dollars or enhanced oil

recovery of 0.5 barrels/t-CO2.

In the CCS-EOR project, emission credits bring only subsidiary revenue. The feasibility is

considered mainly in terms of oil revenue. Still, obtaining a credit revenue of at least the CCA price

level or higher is believed to enhance project feasibility while avoiding the risks noted from the

persistent oil price slump.

Figure 47 Impact of CO2 (Emission Credit) Price on Project Feasibility

Combination of standard case and emission credit price IRR of project Difference

Standard case 16.2% -

Standard case + Equivalent of carbon tax (USD 3.21/tCO2) 16.5% +0.3%

Standard case + Equivalent of CCA (USD 13/tCO2) 17.5% +1.3%

Standard case + Equivalent of CELs (USD 48/tCO2) 21.1% +4.9%

Source: Estimated by the Japan Research Institute based on various materials

5.2 Analysis of Impact of CCS-EOR Project on Oil Production in Mexico

Production systems of petrochemical plants operated by PEMEX in southern Mexico were

analyzed as CO2 sources to see how much CO2 can be captured and utilized for a CCS-EOR

project.

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Recoverable CO2 from the three plants of CPQ Cangrejera, CPQ Morelos, and CPQ

Cosoleacaque amounted respectively to 6,315 tCO2/day, 5,234 tCO2/day, and 8,800 tCO2/day. The

total amount of 20,349 tCO2/day translates into an annual total of 7,056,016 tCO2. In the standard

scenario for enhanced oil recovery, 2 barrels/tCO2 resulted in oil production of 40,698 barrels/day,

or 14,112,032 barrels/year. If all CO2 sources are utilized, the oil production will increase by 1.70%

since recent total oil production of Mexico is around 2.4 million barrels/day. Both the amount of

recoverable CO2 and oil production are expected to increase when a more detailed analysis is

conducted with many other CO2 sources among PEMEX’s facilities (oil refineries and gas plants)

in southern Mexico.

Figure 48 Amount of Recoverable CO2 from Petrochemical Plants in Southern Mexico and

Resulting Enhanced Oil Production

Plant Recoverable

amount of CO2

(tCO2/day)

Enhanced oil

production

(barrels/day)

Annual CO2

recovery with

capacity utilization

of 95%

(tCO2/year)

Enhanced oil

production

(barrels/year)

CPQ Cangrejera 6,315 12,630 2,189,726 4,379,453

CPQ Morelos 5,234 10,468 1,814,890 3,629,779

CPQ Cosoleacaque 8,800 17,600 3,051,400 6,102,800

Total 20,349 40,698 7,056,016 14,112,032

Source: Estimated by Mitsubishi Heavy Industries and the Japan Research Institute based on

various materials

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5.3 Analysis of Impact of CCS-EOR Project on GHG Emissions in Mexico

As presented in “5.2. Analysis of Impact of CCS-EOR Project on Oil Production in Mexico,”

the amount of recoverable CO2 from petrochemical plants in southern Mexico is 7,056,016

tCO2/year. The CO2 emission reduction amounted to 5,207,123 tCO2/year after subtracting the total

CO2 emission of 1,848,893 tCO2/year associated with energy involved for CO2 capture in the

project and leakage from the storage site of the project.

SENER predicts the GHG emissions of 748 million tons of CO2 (MtCO2e) in 2010 to increase by

212 MtCO2e to reach 960 MtCO2e in 2020. The CCS-EOR project is expected to reduce the CO2

emissions by 0.5% from the expected GHG emissions in 2020, which is 2.5% of the increase of

2.12 MtCO2e in the status quo scenario between 2010 and 2020. Similarly, to enhanced oil recovery,

an extra GHG reduction can be expected from the CCS-EOR project by including CO2 sources in

addition to the petrochemical plants in southern Mexico covered in this study.

Figure 49 Impact of CCS-EOR Project on GHG emissions in Mexico

Emission reduction by CCS-EOR project

(tCO2/year)

Reduction from

emission in 2020

Ratio to GHG increase from

2010 to 2020

Recoverable amount of CO2 7,056,016 - -

CO2 emission from project 1,848,893 - -

Reduction in CO2 emission 5,207,123 0.5% 2.5%

Source: Estimated by the Japan Research Institute based on various materials

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6 Program for Promoting Understanding on the Part of Mexican Counterparts

Regarding JCM and Building a Stronger Relationship with Them

6.1 Overview

The project intends to introduce and promote the CO2 capture system and other related

technologies by Mitsubishi Heavy Industries, which has abundant experience in their demonstration

and delivery in Japan and abroad. Today, eleven such CO2 capture systems are commercially

operated. In 2016, one of the largest systems for CCS-EOR operation in the world will be put into

service. Unfortunately, PEMEX is not very familiar with the technologies of Japanese companies in

general. Although the company has utilized products and technologies by Japanese companies in

the past, the proportion is quite marginal compared to all of the facilities and plants owned by

PEMEX. The company in particular has limited knowledge of advanced CO2 capture technologies

although it has introduced a CO2 capture system for ammonia production processes several decades

ago.

Given the circumstances, it is deemed necessary to promote an overall understanding regarding

the rich track record and reliable technologies employed for the CO2 capture system of Mitsubishi

Heavy Industries by organizing study tours at the sites employing the system and exchanging

sessions with user companies. Making the technological competence and track record of Mitsubishi

Heavy Industries known to persons in charge of PEMEX at the same timing is crucial for

promoting bilateral cooperation and developing a CCS project under JCM.

Accordingly, persons in charge from PEMEX were invited to observe a CCS site in the United

States from November 12 to November 13, 2015. The outcomes of the exchange and study tours

are summarized along with an overview of the program.

・ Purpose

Organize technical exchange (study tours and exchange sessions) for PEMEX and other

Mexican counterparts to gain an understanding regarding CCS-EOR projects, as well as

Japanese technologies and products while facilitating the study.

・ Participants from Mexico

PEMEX (state-owned petroleum company)

Ms. Paulina Serrano (Carbon Finance Manager)

Ms. Marcela Arteaga (Superintendent for Secondary and Enhance Oil Recovery)

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・ Program

Schedule and major activities

November 12-13, 2015

November 12 Departure from Mexico City International Airport - Transit at

Houston International Airport - Arrival at Mobile, Alabama,

United States

November 13 Study tour at the CCS site in Plant Barry

Departure from Mobile, Alabama, United States - Transit at

Houston International Airport – Arrival at Mexico City

International Airport

6.2 Details of exchange sessions and study tours

The program for the exchange session and study tour at each site is presented below (time, site,

hosts, and activities).

Time Site Hosts Activities

Friday, November 13, 2015

8:15-11:30 Southern Company,

Alabama Barry

Power Plant, CO2

Capture Plant

・ Mr. Joe, Southern

Company

Research Engineer

・ 5 more persons

・ Technical briefing of CCS

technologies and CO2

capture operation at Barry

Plant by Mitsubishi Heavy

Industries America

・ Observation of the CO2

capture system

12:00-13:30 Denbury, CO2

Storage Site

・ Mr. Hunter

・ 3 more persons

・ Technical briefing of the

CCS project by Denbury

・ Observation of the CO2

storage site

Study tour of Plant Barry CCS site

Study tours were organized at the CO2 capture plant of Alabama Barry Power Plant

operated by the Southern Company (American power company) and the CO2 storage site

operated by Denbury (American oil development company).

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CO2 capture plant

A demonstration plant for CO2 capture and storage was constructed next to the coal-fired

power plant owned by Southern Company with a 50% capital contribution from the

Southern Company and the remaining 50% from Mitsubishi Heavy Industries. A

demonstration test has been conducted since 2011. The plant has a capacity equivalent to

around 25 MW to capture 500 tons of CO2 per day. CO2 injection is carried out by the US

Department of Energy (DOE).

In 2001, Mitsubishi Heavy Industries began a demonstration test in Hiroshima with a

coal-fired boiler as the source of the flue gas (1 ton/day). Another one was started in 2006

in Nagasaki (10 tons/day). The plant visited here is an extension of these demonstration

projects. In 2016, operation of the world’s largest commercial CCS plant for a coal-fired

boiler with a capacity of 4,776 tons/day will begin in Texas, United States after the

construction is completed by Mitsubishi Heavy Industries (as a joint project between

NRG Energy and JX).

The plant captures 240,900 tons and injects 115,600 tons of CO2 in 13,000 hours. The

purity of the CO2 is 99.9%.

The discharge pressure of the CO2 compressor is 1,900 psi.

In the next four years, research on CO2 capture will be conducted with this demonstration

plant jointly with Mitsubishi Heavy Industries and Southern Company with funding from

DOE.

Figure 50 View of CO2 Capture Plant


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CO2 sequestration site

In 2012, injection of CO2 was begun, and was stopped in 2014 (total injection of 114,000

tons). Monitoring is still continued today.

CO2 is carried through the 4-inch carbon steel pipeline to the injection well 19 km away

from the plant.

The target reservoir for injection is the sandstone bed of the multi-layers located on top of

the depleted oil reservoir. The injection hole has permeability up to 4,000 mD, a porosity

of 4.4 to 26.1%, a net thickness of 60 feet, and a depth of 9,436 to 9,800 feet.

Two observation holes have been drilled about 300 m away from the CO2 injection well

for conducting monitoring with the bottom hole pressure and temperature, surface

pressure and temperature, seismic tomography between wells, PLT, pulsed neutron log,

soil flux, fluid sampling, and injection of tracer into injection gas. The results of

simulation and PLT with CMG GEM were deemed to indicate the importance of injection

of CO2 into the highly permeable layer on the top.

This CCS project is implemented as joint research with DOE (SECARB Partnership

Anthropogenic Test), which is funded by DOE. The study is conducted by Advanced

Resources using the field provided by Denbury.

Figure 51 View of CO2 sequestration site (Booster pump is seen on the right side)

Source: Photographed by the study consortium

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Figure 52 Wellhead of Injection Well

Source: Photographed by the study consortium

6.3 Summary of Technical Exchange

6.3.1 Exchange Regarding CO2 Capture System

Ms. Paulina Serrano (Carbon Finance Manager), who participated in this technical exchange, is

in charge of coordinating the GHG emission reduction projects of PEMEX. She has a deep

knowledge of CCS-EOR in which PEMEX is interested. She has participated in observation tours

in the United States in order to gain technical understanding. She has already been briefed on the

ample track record of CO2 capture systems by Mitsubishi Heavy Industries and their application on

a commercial scale. Still, her visit to the plant and exchange with employees in charge of CO2

capture at Barry Power Plant are considered quite significant for deepening her understanding of

the CO2 capture systems of Mitsubishi Heavy Industries.

Ms. Marcela Arteaga (Superintendent for Secondary and Enhance Oil Recovery) is one of the

persons in charge of discussion of CCS-EOR projects at the Cinco Presidentes oil fields. She is

another key person for project organization along with Ms. Paulina Serrano. For the time being,

PEMEX can obtain highly pure CO2 from the shift conversion of ammonia production process,

which in fact explains why some employees of oil fields have a low level of interest or a

misunderstanding of CO2 capture systems (e.g., they don’t know that systems from Mitsubishi

Heavy Industries can already be applied in CO2 capture on a commercial scale). In order to

improve the situation, the visit by Ms. Marcela Arteaga as a representative of oil field staff to

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understand the CO2 capture system of Barry Power Plant was a major step forward for promoting

an awareness of the need for demonstrating such systems to PEMEX at an early stage.

6.3.2 Exchange Regarding CO2 Sequestration Site

PEMEX has a sufficient knowledge of oil fields as CO2 storage sites. The petroleum company

has conducted pilot tests of EOR in several sites, and therefore is experienced in underground

injection of CO2. In this regard, a simple presentation about CO2 storage sites was considered

insufficient for gaining a deeper understanding by PEMEX. This study therefore introduced a site

for underground research conducted by Advanced Resources to study CO2 behavior in the field

operated by Denbury as a part of DOE program. In the past, PEMEX has experienced extremely

low productivity at the pilot test conducted in Chicontepec contrary to the envisaged underground

behavior of CO2. Hence, the company was believed to be extremely interested in research on the

underground behavior of CO2. The eagerness shown by PEMEX in exchanging ideas with hosts on

the site seems to indicate that PEMEX access to such research through Mitsubishi Heavy Industries

will facilitate implementation of any CCS-EOR projects in the future.

report · 2020-04-23 · - 2 - prior to the reform, pemex and cfe had been classified as...

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