Kent demystifying oil & gas decarbonization economics

Dubai-headquartered engineering and services company Kent is developing a comprehensive report aiming to offer guidance for determining the cost of decarbonization, including its societal aspect, in the upstream oil and gas industries on behalf of the London-based Energy Institute.

While the guideline document will focus on the UK North Sea, it will be written to serve as a basis for future research globally. This collaborative effort seeks to create comprehensive guidelines for decarbonization economics in greenhouse gas (GHG) emission reduction projects.

According to Kent, this will be the fifth guidelines document it has authored for the Energy Institute in the past five years. It will be prepared under the guidance of Graham Filsell, Kent’s Asset Decarbonisation Lead.

“We have seen the challenges of presenting decarbonisation projects against standard project economics with the only justification being the reduced OPEX related to Emission Trading Scheme credits and potential increased revenue from an increase in sales gas quantities from reducing fuel and flare gas,” said Filsell.

“With the changes proposed in the NSTA’s consultation on the draft OGA Plan to reduce UKCS GHG Emissions, there is a strong case for the societal cost of carbon and potentially an individual asset marginal abatement cost to form part of the project economics for decarbonisation projects.”

The document will cover five key objectives. The first one is demystifying decarbonization economics to provide clarity for energy professionals with limited exposure to project economics, such as environmental or sustainability managers.

The second objective is to offer insights into how carbon costs are calculated and influenced by market forces, including societal costs, while non-standard metrics beyond NPV will be recommended under the third one to ensure that decarbonization goals are met.

The choice of both standard and non-standard metrics used in the guidance will be explained as part of the fourth objective and the fifth one intends to focus on the upstream sector of the upstream oil and gas value chain affected by decarbonization and assess the potential to broaden the scope to the full value chain.

The interdisciplinary process to develop these guidelines will involve the collaboration of Kent’s environmental team, asset decarbonization team, and energy environment economic (E3) modeling and communications team.

James Lawson, the Chair of Upstream Environmental Group (USEG) underlined: “Decarbonisation and GHG reduction projects are inherently holistic, involving a wide spectrum of energy professionals, many of whom have not previously engaged in economic assessments and project prioritisation.

“Furthermore, these projects compete for capital and resources with other industry sectors. Therefore, a clear, concise, and targeted document that all energy professionals can refer to will be invaluable for ensuring that capital and resources are allocated appropriately and in line with net zero commitments.”

According to Kent, this collaboration marks a significant step toward achieving the environmental objectives of the North Sea Transition Deal and ensuring that the UK North Sea upstream oil and gas sector can operate while maintaining a low environmental impact.

Kent recently inked a global enterprise framework agreement (EFA) with Shell for commissioning and start-up services (CSU) across the UK giant’s global portfolio, including several onshore and offshore projects in a range of energy sectors.