Are You in the Green? The Economic Impact of Carbon-Conscious Choices on Project Development Planning

Abstract

The greenhouse-gas (GHG) emissions target set by UNFCCC Paris Accord in 2016 will emerge as a new value driver to project development planning that has the potential to degrade the viability of future offshore oil and gas projects. Integration of GHG emissions and legislated carbon price as new decision drivers to project decision-making will require an in-depth understanding on the overall economic impact of carbon-conscious choices. In this light, the purpose of this paper is to present the impact of such choices on project development planning and implications for Decision Quality (DQ). The case study presents a comparative assessment of total GHG emissions and comparative project economics for a Greenfield project, considering four development concepts: a Reference Case with a "traditional" offshore facility and three hypothetical cases, each of which are defined, evaluated, and compared against the Reference Case. Development of each case is discussed and created to support decision-making during project development planning. The paper presents an economic comparison to demonstrate the importance of including a carbon assessment early in project development planning to assure a thorough concept evaluation. It also demonstrates how a clear outlook on the annual GHG intensity over project life can be vital, for project sanction and mitigation of high carbon cost penalties in the future regulatory landscape. Early understanding of risks associated with carbon price and regulatory enforcement can potentially change how industries analyze the viability of their projects/assets. The paper demonstrates the importance of assessing carbon-conscious options early in the project development planning stage, and how this helps developers to navigate the risks and opportunities in the drive to a lower-carbon society.