By Florence Tan
SINGAPORE (Reuters) - Carbon emissions released during the process of producing crude oil from Canada's Cold Lake, Iraq's Kirkuk and the U.S. Bakken shale fields will cost producers the most to offset, said global commodities agency S&P Global Platts, ahead of the launch of new carbon pricing instruments from Oct. 1.
Platts will launch carbon offset premiums on Oct. 1 alongside monthly carbon intensity calculations for 14 major crude fields in Saudi Arabia, Iraq, Norway and the Americas, the agency said in a statement ahead of the Platts APPEC 2021 conference.
These instruments are aimed at meeting growing demand for low-carbon crude supplies amid increasing scrutiny on greenhouse gas emissions in oil production processes, it said.
Platts' move comes after producers like Occidental and Lundin Energy sold so-called 100%-carbon neutral crude using carbon credit offsets earlier this year.
Last week, Asia's largest refiner, Sinopec Corp, also used carbon credits for the first time to fully offset emissions from a 30,000-tonne Angolan crude cargo shipped to its refinery for processing.
"Oil and gas will remain part of the energy mix for decades to come," said Deb Ryan, Platts' head of low carbon market analytics.
"In order for the world to meet ambitious emissions reduction targets, a premium value needs to be associated with the lowest carbon-intensity oil and gas assets."
Platts' monthly carbon intensity calculates greenhouse gas emissions from well production to the storage terminal and takes into account the API gravity and sulphur content for a specific crude grade coming from an oil field.
The calculation, in kilogrammes of carbon dioxide equivalent per barrel of oil equivalent, currently excludes emissions during the exploration and drilling process.
Platts will also publish monthly assessments of transportation carbon intensity along one relevant route per source of crude.
The daily carbon intensity premium assessment is the premium that a buyer would pay to offset the greenhouse gas emissions generated through the production of each type of crude. This is calculated using the daily Platts Carbon Removal Credit assessment, the agency said.
For example, crude oil produced from Canada's Cold Lake and Iraq's Kirkuk are ranked No. 1 and No. 2, respectively, for having the highest carbon intensity among the 14 fields. Norway's Johan Svendrup and Ekofisk have the lowest, Platts' assessment in July showed.
It will cost producers of Cold Lake crude $1.637 per barrel of oil equivalent (boe) to offset greenhouse gas emissions in a $20 carbon price environment, and about $4 a barrel per boe for a $50 carbon price.
"Calculating carbon intensity (CI) for oil fields allows a greater understanding of the respective carbon footprint, which enables market participants to focus on utilising the lowest carbon assets," Paula VanLaningham, global head of carbon at Platts said.
Crude Grade July Sulphu API CI CI
marginal r % Premium Premium
upstream CI $20 $50
(kgCO2eq/bo carbon in carbon in
e) $/boe $/boe
Middle East Fields
Kirkuk (Iraq) 58.84 2.24 36 1.177 2.942
Ghawar (Saudi 18.16 1.96 34 0.363 0.908
Girassol 14.86 0.34 32 0.297 0.743
Tengiz 19.26 0.51 46.4 0.385 0.963
Johan Sverdrup 3.73 0.81 28 0.075 0.187
Ekofisk 11.18 0.21 38.4 0.224 0.559
North American Fields
Cold Lake 81.87 3.5 20.73 1.637 4.094
Bakken (US) 30.86 0.07 42.24 0.617 1.543
Eagle Ford (US) 17.55 0.1 45.74 0.351 0.878
Mars-Ursa (US) 14.78 1.92 28.8 0.296 0.739
Permian 17.36 0.05 44.67 0.347 0.868
Permian Midland 19.97 0.04 39.37 0.399 0.999
Latin America Fields
Tupi (Brazil) 24.69 0.36 28 0.494 1.235
Cantarell 18.37 3.27 22 0.367 0.919
Source: S&P Global Platts
(Reporting by Florence Tan; Editing by Kenneth Maxwell)