Allocation of greenhouse gas emissions to products and joint-venture partners

Abstract

The oil and gas industry in Australia consists of a range of complicated joint venture (JV) and processing arrangements. With a future price on carbon in the Clean Energy Future Legislation Package, parties are keen to understand their carbon liabilities where they have interests (both operated and non-operated), and the extent to which a price on carbon can be passed on to customers.

Many oil and gas companies have been reporting greenhouse gas emissions from their facilities to the Department of Climate Change and Energy Efficiency since 2009 using the National Greenhouse and Energy Reporting System framework. Subsequently, numerous companies from the sector have developed greenhouse gas reporting systems linking into existing oil and gas production allocation systems. These companies are now turning their attention to using this information to allocate greenhouse gas emissions from their facilities to specific oil and gas sales products, as well as to JV partners.

This extended abstract, which includes a case study, explores these developments and discusses the key considerations when allocating greenhouse gas emissions to specific products and JV partners. Also explored are the following questions:

1. What assumptions need to be made at the facility level for emissions associated with extracting, processing, and refining specific products ready for sale? How robust and defensible are these assumptions?

2. How do you build these assumptions into a system or model that allocates emissions to different products?

3. What processes do you then put in place to allocate emissions to specific JV partners, and what information will be reported to them and what quality and assurance processes need to be in place to provide comfort to your JV partners of the robustness of the numbers?

4. How will the costs associated with carbon be allocated?