ENVIRONMENTAL CONTROL OF ATMOSPHERIC EMISSIONS FROM OFFSHORE OIL AND GAS INSTALLATIONS

1. ENVIRONMENTAL CONTROL OF ATMOSPHERIC EMISSIONS FROM OFFSHORE OIL AND GAS INSTALLATIONS Derek Saward Head, Environmental Management Team Tel: (01224) 254037 E-mail: Derek.Saward@dti.gsi.gov.uk

2. INTEGRATED POLLUTION PREVENTION AND CONTROL (IPPC)

3. Legislative Basis • EU Directive 1996/61/EC establishing a scheme to prevent, or minimise emissions to air, water and soil, as well as waste, from agricultural and industrial installations in the Community, with a view to achieving a high level of environmental protection • Came into force on 30 October 1996 • Transposed into UK legislation for the offshore oil and gas sector by The Offshore Combustion Installations (Prevention and Control of Pollution) Regulations 2001 (Statutory Instrument 2001 No 1091) • Came into force on 18 March 2001 http://europa.eu.int/scadplus/leg/en/lvb/l28045.htm

4. What Does It Cover? • Industrial activities covered by the scheme are detailed in the Directive • For the offshore oil and gas sector, application restricted to combustion installations, and any directly associated activities • Qualification criterion Installations with aggregated thermal input exceeding 50MW • Aggregated thermal input poorly understood Relates to fuel consumption at 100% load, and not power output, e.g. if maximum power out put is 16MW, and combustion unit efficiency is 33.3%, then the rated thermal input is 48MW(th)

5. What Qualifies As A Combustion Unit? • Equipment covered by (I)PPC includes: Turbines Engines Boilers Heaters Burners Furnaces Incinerators Plus any other machinery that uses fuel, excluding combustion engines used for transportation • Does not include Flaring

6. Are Other Emissions Included? Directive includes: • Emissions from directly associated activities • Must be a technical connection • Processing emissions Included for refineries, as technically connected to refining activity Not included for offshore oil and gas sector, as no technical connection with power generation activity • Flaring Included for refineries, for reason indicated above Not included for offshore oil and gas sector, for reason indicated above • Flaring and venting controlled under consents designed to preserve resources, and not currently subject to environmental controls

7. Current Status • Permits required for new installations or combustion units exceeding 50MW(th) threshold • “Substantial change” assessments required for all changes in operation resulting in increases in the emissions of toxic substances, e.g. topside modifications or new tie-back • Changes in operation include additional qualifying combustion units and running existing units harder • If determined that there has been “substantial change”, permit required for installation or additional qualifying combustion units • All existing installations must be permitted by 31 October 2007

8. Permitting Process • New draft Guidance Notes recently completed, and will shortly be placed on DTI website for consultation and comment • Data requirements for permit applications and “substantial change” assessments have already been agreed with industry, and copies can be obtained from the DTI • Data requirements include technical information for qualifying combustion units; demonstration of energy efficiency and waste avoidance; demonstration of BAT (technique, not technology); quantification of fuel use and emissions of toxic substances; and assessment of environmental impact at local, regional and global levels • In principle agreement with industry that the permitting of existing installations will involve a “rolling start”, commencing in October 2005 http://www.og.dti.gov.uk/environment/ppcoci.htm

9. Permit Conditions • Limits on total annual emissions of toxic substances: Nitrogen oxides (Nox) Sulphur dioxide (SO2) Methane (CH4) Non-methane hydrocarbons (nmVOCs) • Stack sampling programme to verify emission calculations, including baseline verification within prescribed period following permit issue and annual sampling programme to be agreed with DTI • Monitoring and reporting of annual emissions (via EEMS), based on monitoring plan agreed with DTI • Formal review of permit at regular intervals (every 5 years?)

10. LARGE COMBUSTION PLANT

11. Legislative Basis • EU Directive 1988/609/EEC establishing a scheme to reduce acidification, ground level ozone and particulates throughout Europe, by controlling emissions of sulphur dioxide, nitrogen oxides and dust from large combustion plants • Came into force in November 1988 • Revised Directive 2001/80/EC takes into account advances in combustion and abatement technologies (many of which are still considered as “un-proven” for offshore use) • Revised Directive implemented onshore by Directions made under the Environment Act 1995 • Came into force on 18 October 2002 http://www.europa.eu.int/eur-lex/pri/en/oj/dat/2001/1.htm

12. What Does It Cover? • Combustion units with a thermal output exceeding 50MW • Emissions of NOx, SO2 and particulates controlled at individual unit level, based on: For new units Emission Limit Values (ELVs) For existing units (pre-1987) Emission Limit Values (ELVs); or Operation in compliance with a National Emissions Reduction Plan, which involve s calculating annual emission allocations based on the ELV approach applied to average actual operating hours, fuel use and thermal input • UK National Plan published in November 2003

13. Current Status • Offshore oil and gas sector currently excluded • Retrospective application to the offshore oil and gas sector would cause significant problems, as very few offshore units could meet stringent emission levels • EU currently reviewing application and implementation of the Directive, and could propose including the offshore oil and gas sector • Review is being undertaken by UK consultants, and they have solicited representations from DTI and UKOOA • Other Member States, and Norway, are also opposed to extending application to the offshore oil and gas sector • UK consultants have also solicited representations from offshore regulators and trade associations in those countries • Review will be issued for consultation and comment later this year (the first draft is about to be submitted to the Commission)

14. THE EU EMISSIONS TRADING SCHEME (ETS)

15. Legislative Basis • EU Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community • Came into force on 25 October 2003 • Transposed into UK legislation by The Greenhouse Gas Emissions Trading Scheme Regulations 2003 (Statutory Instrument 2003 No 3311) • Came into force on 31 December 2003 • Phase 1 of Scheme commences 1 January 2005 (until 31 December 2007) • Phase 2 commences 1 January 2008 (until 31 December 2012) http://www.europa.eu.int/comm/environment/climat/emission.htm

16. What Does It Cover? • Industrial activities covered by the scheme are detailed in the Directive • For the energy sector, application restricted to: Combustion installations with aggregated thermal input exceeding 20MW(th), and any directly associated activities Mineral oil refineries Coke ovens • For the offshore oil and gas sector, application restricted to: Combustion installations with aggregated thermal input exceeding 20MW(th), and any directly associated activities • Emissions of Greenhouse Gases – only CO2 in Phase 1 of Scheme

17. What Qualifies As A Combustion Unit? • Essentially same equipment as covered by (I)PPC • Sources of CO2 include turbines, engines, boilers and heaters, plus any other machinery that uses fuel, excluding combustion engines used for transportation • Also includes burners, furnaces and incinerators, if heat generated is used on the installation. Thus, if an incinerator is used solely for waste disposal, it is not included, but if the heat generated is utilised for an offshore process then it is included • Does not include Flaring

18. Are Other Emissions Included? Again Directive includes: • Emissions from directly associated activities • Must be a technical connection • Processing emissions Included for refineries, as technically connected Not included for offshore oil and gas sector, as no technical connection • Flaring Included for refineries, as technically connected Not included for offshore oil and gas sector, as no technical connection, but may be included as separate activity in Phase 2 of Scheme

19. Where Have We Got To?The First Step • Data collection coordinated by Defra • First stage Details of facilities to be covered by scheme Details of operators of facilities • Second stage Details of processes to be covered at each facility, e.g. details of combustion unit Compilation of historic emissions data set 1998-2002 http://www.defra.gov.uk/environment/climatechange/trading/eu/documents.htm

20. The Second Step • Issue of Greenhouse Gas Emissions Permits • Competent Authorities Onshore sectors: EA (England and Wales) SEPA (Scotland) DoE (Northern Ireland) Offshore oil and gas sector: DTI • Offshore oil and gas sector permits ready for issue, awaiting confirmation of NAP ID Numbers • Permits will not include CO2 allocations http://www.og.dti.gov.uk/environment/euetsr.htm

21. The Third Step - CO2 Allocations • National level Current UK emissions Projections for 2005 and 2010 Reductions to take account of Kyoto and UK Climate Change Programme • Sector level Proportional allocation of UK total based on current contribution to emissions Reductions in line with economic projections Contribution to New Entrant Reserve (NER) • Facility or installation level Lowest figure removed from historic emissions dataset Remaining figures averaged, and averages totalled Proportional allocation of sector total based on contribution to historic averages total

22. The National Allocation Plan (NAP) • Prepared by consultants on behalf of Defra • Published 19 January 2004 • Consultation ended 12 March 2004 • Detailed national, sector and individual facility allocations • Significant problems for offshore oil and gas sector, and for onshore terminals and gas transmission stations • Second draft currently being prepared for submission to EU – will be restricted to national and sector level allocations • Facility or installation level allocations to be detailed in a third draft – to be completed by the end of June 2004 http://www.defra.gov.uk/corporate/consult/eu-etsnap/index.htm

23. The Problems • Historic emissions data set incomplete and contained errors • Onshore terminals and transmission stations and offshore oil and gas facilities included in same sector – difficult to understand projections and allocations • Offshore oil and gas projections assumed linear declining relationship between emissions and oil and gas production • Proportion of the offshore oil and gas sector allocation set aside for the NER was greater than for most other sectors • Offshore oil and gas facility level allocations were not proportional to contributions to historic averages total • Data littered with basic mathematical errors

24. The Net Impact • Allocations were supposed to approximate to Business As Usual (although a slight reduction is probably inevitable) • Original offshore oil and gas sector allocation or cap represented a >30% cut in emissions from historic baseline • Industry estimated that a modest increase in emissions was more likely • Offshore oil and gas facility allocations measured in terms of percentage difference from contribution to historic averages total varied from +190% to –60% • Some offshore oil and gas facilities were not given an allocation

25. The Fourth Step • UKOOA and DTI LCU met with Defra and the DTI Energy Strategy Unit (ESU) to outline concerns • UKOOA, DTI LCU and DTI ESU prepared independent projections of future CO2 emissions, based on: Individual operator’s forecasts Modelling based on benchmarking studies A more detailed analysis of the historic emissions data set • DTI ESU proposed new sector cap, which has to be submitted to Defra for consideration and approval

26. The Next Steps • Agreement to be reached on offshore oil and gas sector allocations Sector level allocation Method of allocation at facility level Facility level allocations EU to approve final NAP by end of September 2004 • Agreement to be reached on New Entrant Reserve Size of reserve Sector contributions Access rules – seeking special case status for offshore oil and gas sector, to cover new tie-backs, significant top-side modifications etc

27. The Next Steps (continued) • Agreement to be reached on Closure Allocations will be withdrawn at end of year of closure Still to agree what constitutes closure for offshore oil and gas sector – COP proposed, but could be significant emissions during decommissioning and would be more appropriate to base criterion on installation falling below 20MW(th) threshold • Agreement to be reached on Auctioning Surplus set-aside (NER) may be auctioned each year Offshore oil and gas sector would prefer retention of some, or all, of the surplus, to allow for project delays or fast track developments

28. The Next Steps (continued) • Agreement to be reached on Monitoring Proposals Poor level of accuracy for offshore oil and gas sector EU tier approach has to be adopted DTI and UKOOA to agree common approach that satisfies EU requirements • Agreement to be reached on Reporting Complex multi-stage process proposed, with scope for errors at each stage DTI prefer electronic system, linked to EEMS

29. The Next Steps (continued) • Agreement to be reached on Verification Baseline historic data must be independently verified Annual emission reports must be independently verified DTI and UKOOA to agree common approach that satisfies EU requirements • Registry development to be completed Defra developing registry for UK and other Member States Based on UK Emissions Trading Registry Used by regulator to record facility data and allocations Used by competent authorities to record emissions Used by operators or agents to trade allocations

30. Finally • Scheme to commence 1 January 2005 • As soon as it starts, we have to begin planning for Phase 2 • Additional activities to be included? – Flaring? • Additional greenhouse gases to be included? – Methane, NOx? • New NAP to be developed, likely to move away from Business as Usual and impose significant cuts