Kent to create guidelines for decarbonisation economics

Kent is collaborating with the UK’s Energy Institute to create guidelines for decarbonisation economics in Greenhouse Gas (GHG) emission reduction projects in the upstream oil and gas industries

This report will provide clear, actionable guidance to help the sector achieve its environmental goals, demystifying the economics of decarbonisation, including the societal cost of carbon. While it will focus on the UK North Sea upstream sector, it will take a global view so that it can serve as a basis for future research across the world. It will involve the collaboration of Kent’s Environmental team, Asset Decarbonisation team, and Energy Environment Economic (E3) Modelling and Communications team.

Key objectives

The guidelines will address the following key objectives:

Demystifying Decarbonisation Economics: Provide clarity for energy professionals with limited exposure to project economics, such as environmental or sustainability managers.
Understanding Carbon Costs: Offer insights into how carbon costs are calculated and influenced by market forces, including societal costs.
Alternative Metrics: Recommend non-standard metrics beyond NPV to ensure that decarbonisation goals are met, delivered as a technical note to the industry.
Justification of Metrics: Articulate and justify the choice of both standard and non-standard metrics used in the guidance.
Upstream O&G Value Chain: Focus on the upstream sector of the O&G value chain affected by decarbonisation and assess the potential to broaden the scope to the full value chain.

"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 Graham Filsell, Kent’s Decarbonisation lead. "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."

James Lawson, chair of USEG (Upstream Environmental Group) added, "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."