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Improving reliability of GHG intensity estimates for crude oil: S&P Global
23 March 2022S&P Global Commodity Insights Editor
S&P Global has developed a new, comprehensive methodology to
improve assessments of the life-cycle GHG intensity of crude
oil.
When applied to the US crude slate in 2019, S&P Global found
the GHG intensity of crude oil processed was 84 gCO2-equivalent/MJ
(457 kgCO2e/bbl) of refined product, from production through end
use.
The study, The Right Measure, builds
on existing literature, standards, and practices to address some of
the challenges that currently limit the utility of life-cycle GHG
emissions estimates of crude oil, S&P Global said in announcing
the new methodology on 22 March.
"Not all GHG emissions estimates of are created equal," said
Cathy Crawford, director, GHG estimation and coordination, S&P
Global and co-author of the study. "Understanding GHG emissions can
require data that may not have historically been gathered or
reported across companies and regions, which affects the quality of
estimates."
Greater consistency
"What the market has been looking for is a credible and
equitable yardstick when it comes to assessing oil and gas GHG
emissions," said Daniel Yergin, vice chairman, S&P Global.
"This study advances several of the critical building blocks needed
in the market while also being very transparent where some of the
challenges remain."
S&P Global identified four main sources of differences
between life-cycle crude oil emissions estimates: system
boundaries, coproducts, units of measurement, and data quality.
"Each source of inconsistency was systematically reviewed, and
specific guidance was developed that addresses the core areas where
differences continue to exist between estimates," explained Kevin
Birn, vice president, GHG estimation and coordination, S&P
Global, and the study co-author.
While Birn emphasized that the creator of a methodology might
have "perfectly reasonable reasons" for selecting what to measure
and how to measure it, the collective result is that the
differentiated methods make it hard to compare emissions estimates
across studies. For some key areas in which methods differ
significantly on their estimates of emissions (or lack them at
all)—such as upstream land-use changes, or fabrication and
construction of oil and gas infrastructure—new guidance has
been issued.
New metric
The study also yields a new framework to improve the
transparency around the reliability of estimates, known as the Data
Quality Metric (DQM). It was developed in collaboration with the US
Department of Energy's National Energy Technology Laboratory.
DQM advances the state-of-the-art in how the quality of the data
can be understood by users, such as third-party verification
services. Through a simple letter-scoring system, users can
identify the reliability, representativeness, and utility (ease of
obtaining and interpreting) of the data itself.
"Data quality really does matter, and it is a source of
differentiation between estimates which has been unappreciated,"
Birn said. "The creation of the Data Quality Metric has the
potential to be a meaningful tool for GHG estimators, from
companies to third parties, to allow users to assess the
uncertainties and limitations of different GHG estimates."
Application
To show how the new methodology can be applied, S&P looked
at the crude slate processed by US refineries in 2019.
In all, 48 distinct crude oil streams were analyzed,
representing approximately 90% of the volume that was processed, or
more than 14 million barrels per day. Combined on a
weighted-average, their 84 gCO2e/MJ life-cycle estimate
is significantly lower than many other studies, S&P noted.
The US crude slate has changed over time, and operators are
focused on lowering emissions. "The understanding of reservoir
characteristics of US unconventionals has improved while production
techniques were refined. In Canada's oil sands, utilization rates
increased, while new less GHG-intensive operations came online," it
said.
The estimation of the US average leveraged a new upstream
analytical tool developed by S&P Global. From this tool wide
variation within oil plays was found, highlighting that
overreliance on averages can be misleading, Birn said.
"There were also 'known-unknowns' identified—specifically,
methane," Birn said.
According to a high-end estimate of methane emissions, the total
US average reaches 88 gCO2e/MJ. An agreed understanding of methane
emissions could affect the assessment of individual crudes against
the average, as the analysis found that crudes from Venezuela,
Nigeria, and Algeria are considered especially methane-intensive by
the International Energy Agency.
This type of information is valuable at a time when the
industry's GHG emissions could face greater scrutiny than ever
before. "Companies and asset owners would presumably have access to
more comprehensive data sets and be advantaged in being able to
produce the most reliable and representative GHG intensities for
their own assets," S&P Global said.
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.