assessing investment & financial flows for mitigation in the oil & gas sector undp i&ff...
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Assessing Investment & Financial flows for Mitigation in the OIL & GAS Sector
UNDP I&FF Methodology Guidebook: Mitigation
Relevance of Oil & Gas sector
Energy sector is primary source of global greenhouse gas (GHG) emissions ~ 70% of carbon dioxide (CO2), methane
(CH4), & nitrous oxide (N2O) emissions Energy-related emissions - 87% of total GHG
emissions in Turkmenistan in 2004 Oil & Gas upstream emissions represent 50%+
of total GHG emissions (mostly fugitive) Energy sector emissions have grown more
rapidly than those from any other sector since 1970, & will continue to be the largest source of global GHG emissions.
Define scope & boundaries for the assessment
Define the institutional framework Specify the time horizon for the
analysis: 2005-2030 recommended, base year 2005 recommended
Build on existing model or projection for the sector where possible
1. Establish key parameters of the assessment
Turkmenistan: Scope of Assessment: Exploration & Production Y
Drilling Flaring
Transportation Y Processing & Refining ? Demand side efficiency
? Industry, Transport,
Residential/Commercial?
1. Establish key parameters of assessment
Define boundaries for the assessment
Define boundaries for the assessment1. Establish key parameters of assessment
Subsectors Data availability
Investment (baseline & prior 10 years)
Priority in mitigation scenario
High Medium
Low Rank
Gas extractionGas transportGas distributionOil extraction/FlaringOil/Petroleum refining(Oil or Gas) Storage
Examples of subsectors for screening & prioritization
Subsector: Oil & gas production1. Establish key parameters of assessment
Identify preliminary set of mitigation options, i.e.: Efficiency measures at refineries Substitution of gas-pumping units Collection instead of flaring, etc.
Select analytical approach: Development of simple speadsheets Use of existing energy models Sector projectsions/trends
To arrive at an estimate of projected demand & supply in the sector
1. Establish key parameters of assessment
Identify preliminary mitigation options and select analytical approach
Data collection, rely on national accounts data The System of National Accounts (SNA) constitutes the
primary source of information about the economy. Systems of integrated environmental & economic accounts
(SEEA) were developed to address statistical gaps. Other sources: GHG Inventories, National Communications
etc.
REGIONAL CENTRE: PLEASE PROVIDE EXAMPLES OF INVESTMENT TYPES & FINANCIAL TYPES (PUBLIC PROGRAMMES)
2. Compile historical I&FF data and other input data for scenarios
Compile annual IF&FF data at the appropriate level of disagregation (according to the national circumstances): By investment type i.e.:
Reconstruction of oil refineries, disagregation possible:
At the national level By region By refinery? (e.g. reconstruction of the
Turkmenbashinsky complex) By investment entity
Government Public corporations Private corporations (domestic) Private corporation (foreign) ODA
2. Compile historical I&FF data and other
input data for scenarios
Data collection, rely on national accounts data
Oil & gas production volumes by site Oil & gas consumption by sector & fuel Inventory of large oil & gas infrastructure,
including commissioning & expected retirement/upgrade timescales
Capital infrastructure investment data 1996-2005
O&M data for key infrastructure Oil & gas price & subsidy data GHG emissions data for oil & gas sector Power generation efficiencies 1996-2005 Transmission & distribution losses 1996-2005 National resource assessments for oil & gas Overview of oil & gas concessions & field
ownership structure
Socio-Economic growth forecasts (population/GDP)
National energy forecast models Forecasts for oil & gas production Forecast oil & gas demand & export National resource assessments by fuel Forecast sector investment data Forecast upgrades for end of life
equipment Forecasts for price support & subsidies Emissions projections for sector 2005-
2030 Cost forecasts for new & emerging
technologies
Historical Data (1996-2005) Forecast Data (2005-2030)
2. Compile historical I&FF data and other
input data for scenarios
Data collection
2. Compile historical I&FF data and other
input data for scenarios
Data collection, rely on national accounts data
Examples of I&FF data disaggregation in each sub-sector
Define the physical basis for the Baseline Scenario
A baseline scenario: description of what is likely to occur in the absence of ADDITIONAL policies to address climate change; expected socioeconomic trends (e.g., population growth & migration, economic growth), technological change (if relevant), & expected business-as-usual investments in the sector
3. Define Baseline Scenario
3. Define baseline scenario
Characterizing each relevant energy supply & energy end-use subsector over the assessment period Assuming no new climate change policies
are implemented Baseline scenario reflects
Current sectoral & national plans Expected socioeconomic trends Expected investments in the subsectors
Define baseline scenario
3. Define baseline scenario
Define physical basis for the Baseline Scenario
Information should be disaggregated by: Year (starting 10 years before the Base
Year) Source (by corporations & government) Type (national funds, foreign direct
investment, official development assistance)
Compile annual estimates, disaggregated by investment entity, source, investment flow type, & financial flow type
Calculate the total investment cost in real, unannualized terms over the planning period
Estimate annual investment costs associated with the new plan
Develop a breakdown of total investments into major categories (e.g., ODA, FDI, domestic funds)
4. Derive I&FF for baseline scenario
4. Derive I&FF for baseline
scenarioEstimate annual I&FF
Cumulative investment(2005-2030)
Funding entity category Source of funds
(billion2005 $) (%)
Households Domestic funds
Governments
Domestic funds (budgetary) Foreign borrowing (loans) Foreign aid (ODA)
Corporations
Domestic equity Foreign investment Domestic debt Foreign borrowing Government support Foreign aid (ODA) Total
Adding costs to baseline scenario
Mitigation scenario: incorporates measures to reduce GHG emissions
The mitigation scenario should describe expected socioeconomic trends, technological change (if relevant), measures to mitigate GHG emissions, & the expected investments in the sector given implementation of the mitigation measures
5. Define Mitigation scenario
5. Define mitigation scenario
Category of Mitigation Measure
Energy Supply Measures Energy End-Use Measures
Reduce Combustion Emissions
Reduce Fugitive Emissions
Reduce Combustion Emissions
Reduce Energy Demand
Improve efficiency of oil extraction
Efficiency improvements in oil refinery processes
Switch from flaring to capture/utilization
Improve efficiency of own energy consumption (lower carbon fuels or alternative energy sources)
Energy conservation measures
Reduce emissions in gas transport process
Leaks detection & measuring,
leak repair plan,
Oil and Gas Sector Mitigation Measures
5. Define mitigation scenario
Two approaches to define Mitigation Scenario
Approach #1: assume an end point for oil & gas supply emissions E.g. setting a target in 2030 for accumulated
emissions from the oil & gas sector Approach #2: assume a set of
technologies for oil & gas exploration & production: E.g. Review national potential for oil & gas policy
that articulate a set of technological options, such as renewable energy, & other carbon-reducing options to meet future energy demand
Compile annual estimates, disaggregated by investment entity, source, investment flow type, & financial flow type
Estimate annual investment costs associated with the alternative mitigation options
Calculate the total investment cost in real, unannualized terms over the planning period
Develop a breakdown of total investments into major categories (e.g., ODA, FDI, domestic funds)
6. Derive I&FF for Mitigation Scenario
6. Derive I&FF for mitigation
scenario
Project I&FF associated with the Mitigation Scenario
Adding costs to mitigation scenario
Cumulative infrastructure (2005-2030)
Unit cost
Facility/TechnologyImproved efficiency of oil extraction by switching from flaring to capture/utilization
(# units) (2005 $/unit)
Reducing emissions in gas transport process by detecting and reparing leaks
(# pieces)(2005 $/piece)
... (# ….) (2005 $/…)Total
Projecting investments6. Derive I&FF for mitigation scenario
Adding costs to mitigation scenarioCumulative
investment(2005-2030)
Funding entity category
Source of funds (billion 2005 $)
(%)
Households Equity & debt
Governments
Domestic funds (budgetary) Foreign borrowing (loans) Foreign aid (ODA)
Corporations
Domestic equity Foreign investment Domestic debt Foreign borrowing Government support Foreign aid (ODA) Total
Subtract the baseline annual I&FF, by entity & source, from the mitigation annual I&FF, by entity & source
Subtraction of the Baseline Scenario from the Mitigation Scenario
Sum incremental amounts over all years, by entity & source
7. Estimate changes in annual I&FF needed to implement adaptation
[
Subtract the baseline annual I&FF from the mitigation annual I&FF
7. Estimate changes in
annual I&FF needed to implement mitigation
For each chosen oil & gas mitigation option, the analysis should identify the incremental investment (total dollars) by source (domestic funds, ODA, FDI etc.) up through 2030 to support the respective oil & gas management option
[
Summarizing incremental investments
7. Estimate changes in annual I&FF
needed to implement mitigation
REGIONAL CENTRE: PLEASE INSERT COUNTRY FIGURES FOR THE TEST RUN
Investment (billion 2005 $)Cumulative (2005-2030)
Incremental
Funding entity category
Source of funds Baseline scenario
Mitigation Scenario
HouseholdsEquity & debt Baseline
valueMitigation value
Mitigation minus Baseline value
Governments
Domestic funds (budgetary)Foreign borrowing (loans) … … …Foreign aid (ODA) … … …
Corporations
Domestic equity … .. …Foreign investment … … …Domestic debt … … …Foreign borrowing … … …Government support … … …Foreign aid (ODA) … … …Total
Sum(Baseline)
Sum (Mitigation)
Sum (Mitigation minus Baseline)
Determine policy instruments & measures to encourage changes in I&FF
Identify the entities that are responsible for the significant incremental changes in I&FF
Determine the predominant sources of their funds, particularly important to distinguish between public & private sources of finance
8. Evaluate policy implications
Assess policy options and summarize the projected I&FF for the key sector
8. Evaluate policy
implications
For more information on synthesizing results, documentation & the completion of the report, please refer to the Reporting Guidelines
9. Synthesize results and complete report
Q&A CLARIFICATIONS
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Additional Information Possible models and methods
NameDevelop
erPlatfor
m
Metho-
dology
Cost (US$)/
Licensing
Web Site/Contact
Description
CO2DB IIASA, WindowsDatabase
Database of CO2 emitting energy technologies
ENERGY COSTING TOOL
UNDP ExcelAccounting
Free
Estimates the amounts & types of energy investments required to meet the Millennium Development Goals
ENPEP Argonne National
Windows Various
Depends on modules used & type of institution.
WWW.DIS.ANL.GOV [email protected]
Suite of Models for Integrated Energy/Environment Analysis
HOMER National Renewable Energy
WindowsOptimization
Freewww.nrel.gov/homer
Design of off- & on-grid electrification options
LEAP Stockholm Environment Institute
Windows
Physical Accounting, Simulation
Free to qualified users from developing countries.
Integrated Energy/Environment Analysis
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