Occidental uses energy to produce oil and gas and manufacture chemicals to generate steam and electricity, and to conduct other business activities. Our longstanding policy is to seek continuous improvement in resource recovery and energy efficiency. Occidental reports overall energy use net of the amount of energy consumed to generate electricity exported to the grid and adjusted by Occidental's equity share in the facilities we operate. Occidental has been successful in controlling energy consumption, achieving a 10 percent reduction in energy intensity per pound of production over the 2012-2016 period.
In its oil and gas operations, Occidental's energy consumption per barrel of oil equivalent (BOE) has improved by over three percent since 2012. Occidental applies several strategies to increase energy efficiency and reduce air emissions, even while expanding our production from mature fields that require more energy per BOE. Generally, however, the energy demand per barrel increases over time, as more intensive production methods, such as water and steam flooding and carbon dioxide enhanced oil recovery (CO2-EOR), are used to recover oil and natural gas from mature fields.
OxyChem's energy consumption per pound of product improved over the 2012-2016 period. In 2016, guided by the principles of the American Chemistry Council (ACC) Responsible Care® Energy Efficiency program, seven OxyChem plants successfully implemented innovative energy efficiency initiatives through technical innovations, creative projects or novel processes. Combined, energy savings resulting from these projects in 2016 equated to 154,000 million British Thermal Units (MMBTU), which contributed to a reduction of 9,500 tons of greenhouse gas emissions.
In February 2017, OxyChem announced the start-up of a 1.2 billion pound-per-year capacity ethylene cracker at its plant in Ingleside, Texas, one of the largest new ethylene crackers along the Gulf Coast. In addition to the energy efficiency features such as the use of hydrogen-rich vent gas as fuel, recovery of waste heat on the process and flue gas outlet of the cracking furnaces, a unique aspect of this project is the use of two thermal oxidizers equipped with waste heat boilers to combust low pressure discharges of vent gases from process equipment and storage vessels. These thermal oxidizers are designed to provide high emissions control and generate steam from the waste heat. OxyChem estimates that the approximately 970,000 tons per year of total CO2 is avoided due to its highly efficient design.
OxyChem began constructing a plant at its Geismar, Louisiana facility to produce a new raw material to be used in making next-generation, climate-friendly refrigerants. Based on patented research and development by OxyChem, the new product would enable the efficient production of next-generation refrigerants, which have low global-warming potential and ozone depletion potential. The refrigerant is approved by the U.S. EPA and meets the European Union regulatory requirements for automobile air conditioning systems.
Occidental's cogeneration facilities are highly efficient natural gas fired cogeneration power plants that co-produce electricity and steam for adjacent plants, while also providing excess electricity into local markets. Cogeneration, or combined heat and power (CHP), significantly increases electrical power generation efficiency over traditional methods while reducing carbon dioxide (CO2) emissions by more than 50 percent. Cogeneration is more than just an energy-efficient method of generating electricity and thermal energy. It has the potential to deliver lower overall system costs, stronger critical infrastructure, and improved grid reliability.
The greenhouse gas (GHG) emission-reduction benefits from Occidental's natural gas-fired CHP facilities are substantial. Based on typical assumptions, Occidental's CHP facilities at full utilization are estimated to reduce GHG emissions by 5 million metric tons per year compared to the case where equivalent power is supplied from the electrical grid. The steam produced by the combined cycle facilities reduces the nearby manufacturing facilities' CO2 emission of about 500,000 tons annually, compared to steam supplied by typically configured boilers.
OxyChem has made improvements to its CHP systems, saving more than 306,000 MMBtu/year and approximately 18,500 tons of CO2 equivalents reductions per year since implementation.
OxyChem has partnered with Canada's Independent Electricity System Operator (IESO) to build an energy saving project at our Ontario-based PVC Plant. A new gas turbine and heat recovery steam generator will generate efficient power and steam for the plant's processes. This updated technology will increase the macro-efficiency of the plant by about 25 percent.
In the Texas market, Occidental is one of the leading providers of Responsive Reserve Service, which helps improve reliability of the electric grid. By offering to reduce power consumption at specific Occidental locations, when called upon by the grid operator, Occidental provides the Texas electrical grid with a demand response tool which helps maintain grid reliability for industrial, commercial and residential consumers.
Occidental routinely looks for alternatives to help secure low cost, reliable energy for its power needs. Occidental devotes capital to install energy-efficient electrical equipment and distribution systems to provide electric power for operations that formerly required natural gas or diesel engines. We are exploring the possibility of installing renewable energy systems, such as wind and solar generation, to provide electricity for our chemical and oil and natural gas operations.
Globally, there is an ongoing effort to assess and quantify the effects of climate change and the human influences on climate. Occidental recognizes the importance of economic and policy assessments taking place in many countries and among international organizations related to climate change, including the agreement reached in Paris in 2016 to set a goal of limiting global warming to less than 2 degrees Celsius (°C), compared to pre-industrial levels.
Occidental is committed to be part of the climate solution and continues to develop and implement practical innovations to preserve the environment and reduce our emissions. Our business decision-making process integrates climate change-related issues with other business priorities to help us effectively manage greenhouse gas (GHG) emissions, the social and economic impacts of Occidental's energy use and further the company's commitment to be an efficient, low-cost producer of oil and gas and commodity chemicals. Climate change risks and opportunities are considered in our business decisions through a team of managers and employees, with oversight from the Board of Directors' Environmental, Health and Safety Committee.
Scenario planning, which factors intrinsic carbon pricing and energy intensity assumptions, enables Occidental's management team to understand a range of risk around commodity prices, expected returns on capital, and the risk and opportunity associated with various GHG abatement and CO2 utilization options. This includes the consideration of international accords, treaties, legislation, regulation and government policy initiatives that may affect the raw materials, other inputs and costs to produce our products, and the demand for and the restrictions on the use of our products. The process of risk evaluation also includes potential physical and social impacts relating to severe weather events and disruption of operations due to proximity to flood-prone and water-stressed areas. Other aspects that influence risk factors and assumptions include potential commercial and reputational risks; the actions of governments, such as actual or proposed international, national, regional and state GHG control measures; scenarios developed for the International Energy Agency (IEA) Energy Outlooks and; the recommendations of quasi-government agencies such as the Financial Stability Board's Task Force on Climate-related Financial Disclosures (FSB TCFD).
Key elements of Occidental's climate-related risks and opportunities assessment include:
Considering a range of possible future carbon-constraint scenarios, including the IEA 450 Scenario, which articulates an energy pathway consistent with the goal of limiting the global warming to no more than 2`C
Developing strategic alternatives to maximize shareholder value in a future with uncertain carbon constraints and defined carbon budgets
Testing strategies under various scenarios
Developing options for delivering sustainable shareholder value under scenarios with stringent regulation of CO2 emissions and potentially changing demand for oil and gas
Outcomes of this process to integrate climate change considerations into our business strategy help inform our active engagement with institutional stockholders, state and national-level regulators, environmental groups and other public stakeholders addressing climate risks. We work with governments, companies, peer companies in our industry sector and civil society organizations to facilitate the development of viable global policies and regulatory frameworks. The engagement with these stakeholders has initiated a constructive dialogue. Occidental participates in domestic and international industry initiatives, such as IPIECA and the Global Carbon Capture and Storage Institute that focus on GHG mitigation solutions and global climate change-related risks and opportunities.
Occidental’s newly released report, Climate-Related Risks and Opportunities: Positioning for a Lower-Carbon Economy highlights our efforts to address climate-related risks and opportunities in our business. The report begins with a letter from our President and CEO, followed by a substantive executive summary. We then take a deeper look at carbon dioxide enhanced oil recovery (CO2 EOR) and carbon capture, utilization and sequestration (CCUS), a technological and operations-oriented approach that can be used to reduce greenhouse gas emissions while growing our business. For those interested in greater detail, we include an in-depth review that is organized in the four-element framework recommended by the Task Force on Climate-related Financial Disclosures (TCFD), which covers governance, risk, strategy and metrics and targets.
The U.S. federal government has adopted legislation, regulations and policies that seek to control or reduce the production, use or emissions of GHGs, to control or reduce the production or consumption of fossil fuels, and to increase the use of renewable or alternative energy sources. The U.S. Environmental Protection Agency (EPA) has a program that requires reporting of GHGs from certain facilities and has regulations covering certain GHG emissions.
Governmental efforts to mitigate or adapt to climate change - including the Paris Agreement - while maintaining reliable, cost-effective energy and fuel supplies for society present both challenges and opportunities. In accordance with the rules and regulations of the Securities and Exchange Commission (SEC), Occidental provides disclosure of the risks posed by climate change and climate change regulations on its business and operations in its Annual Report on Form 10-K. Occidental publishes information on our approach to reserves estimation and capital planning and allocation. This includes economic feasibility at the prevailing commodity prices; changes in proved reserves, including downward revisions of previous estimates due to changes in economic conditions; and provides an Industry Outlook section that identifies factors influencing the price of Occidental's products. The process includes consideration of the actions of governments, such as actual or proposed international, national and state GHG controls and fiscal measures.
Any approach to regulating GHG emissions should be holistic. Occidental does not support efforts that regulate some sectors while omitting others. Local programs that focus on a particular state or region have inherent limits in their ability to affect any human-induced climate change. Furthermore, such approaches may conflict with one another and are inherently cost-inefficient. Whether to impose mandatory GHG emission controls in the U.S. is a decision that should be legislated by U.S. Congress based on informed science, after due consideration of the social and economic costs and consequences of a particular course of action.
Occidental voluntarily reports estimated greenhouse gas (GHG) emissions using several protocols. For our worldwide operations, Occidental uses the Greenhouse Gas Protocol of the World Business Council for Sustainable Development and the World Resources Institute, supplemented by business-specific protocols (API-IPIECA). We have reported on GHG emissions to the CDP (formerly known as Carbon Disclosure Project), since its inception in 2003. Carbon dioxide (CO2) is the predominant component of Occidental's GHG emissions, while the remainder is primarily methane (CH4).
In 2016, Occidental's estimated global direct and indirect GHG emissions on an equity-share basis increased by approximately seven percent, net of the disposition of certain oil and gas assets and included the additional source emissions categories resultant from the updated U.S. EPA GHG reporting requirements. On an emissions intensity basis, for the period 2011-2016, Occidental's global emissions per barrel of oil equivalent declined from .074 to .072, a 7.5% decrease.
Occidental's ongoing efforts to capture methane emissions under the U.S. Environmental Protection Agency's (EPA) voluntary Natural Gas STAR Program have helped to reduce GHG emissions from our oil and gas operations. Occidental has implemented a broad spectrum of projects that reduced cumulative estimated methane emissions by more than 17.2 billion cubic feet from 1990 through year end 2016. This corresponds to almost 8 million metric tons of CO2 equivalents, which, according to EPA emission factors, is the same as the emissions from 2.5 coal-fired power plants operating for one year.
Occidental strives to achieve 100 percent reduction of all routine flaring of natural gas. Methane, the major component of natural gas, is a clean-burning fossil fuel and has 40-percent lower greenhouse gas emissions relative to coal. In upstream oil and gas operations, gas streams are flared for safety reasons when gas processing plants have planned shutdowns or during turnarounds, enabling inspections, repairs and maintenance activities that cannot occur during operation to be performed safely.
Occidental has developed business-specific plans to minimize gas flaring. Historically, Occidental's oil production operations in the Arabian Gulf offshore in Qatar were the largest source of gas flaring in the company's operations.
With the active support of our partner, Qatar Petroleum, Occidental Qatar has successfully reduced flaring emissions by more than 98 percent since 2005 and continues to reduce flaring in Qatar. These efforts include capturing a substantial portion of the produced gas for treatment and use by Qatar Petroleum as a feedstock or fuel, reinjecting it for enhanced oil recovery and using it to generate electricity for Occidental's Qatar's operations.
In Oman, Occidental has worked with the national oil company to implement projects that have reduced natural gas flaring and redirected 30 billion cubic feet of methane to productive end uses.
In its U.S. oil and gas operations, Occidental has achieved a 30 percent reduction in (CO2) emissions from natural gas flaring (primarily the result of non-routine operations, maintenance and weather related upsets) over the period of 2012-2016.
Occidental has an ongoing effort to maintain and improve the reliability of the equipment and facilities used in its oil and gas activities. Occidental's oil and natural gas, chemical and midstream operations generate air emissions including sulfur oxides (SOX), nitrogen oxides (NOX), volatile organic compounds (VOCs) and carbon monoxide (CO), among other substances. These air emissions are generated from boilers, heaters, engines, flares, compressors and other process sources.
Occidental devotes significant resources to capture emissions of methane and other organic compounds, both in design and construction of new facilities and in retrofitting existing facilities. Occidental employs advanced technologies and leak detection and repair (LDAR) processes to contribute to the decline in methane and to monitor and control fugitive emissions of VOCs and other air pollutants. This reduction is the result of investments in gas process plant capacity, enhanced control systems and upgraded gas handing infrastructure. Among such efforts are:
Adopting lower emission thresholds to eliminate leaks and to repair connections (e.g., valves, flanges, pump seals).
Adopting "green completion" practices to capture gas at the wellhead during well completion and prevent its release to the atmosphere.
Replacing diesel generators and engines with electric drives, where feasible.
Installing air supply systems to control instruments, rather than using natural gas controls and instruments.
Installing Vapor Recovery Units (VRUs) to capture and recover gas from certain equipment, rather than venting to atmosphere.
Adopting better control devices (e.g., low-bleed or no-bleed pneumatic valves) to reduce methane emissions.
Adopting advanced monitoring systems to help identify and eliminate sources of fugitive emissions.
Infrared (IR) cameras use the infrared spectrum to visually identify possible emissions leaks. Equipment exhibiting possible leaks identified by IR cameras are further inspected and components are repaired or replaced, as appropriate. The IR camera approach is being used in Occidental's oil and gas segment to monitor fugitive emissions on equipment and components such as pneumatic valves, plunger lift systems, storage tanks, compressors, glycol dehydrators and similar components, especially where the equipment or components are geographically dispersed or difficult to access. Occidental has a comprehensive LDAR program for field facilities that includes the use of FLIR cameras and over 1,000 field surveys were conducted in 2016. Occidental follows all state and federal regulatory requirements for leak detection and repair and we continuously explore options for conducting enhanced surveys under voluntary programs being developed by industry groups and government agencies.
Occidental is an industry leader in applying carbon dioxide enhanced oil recovery (CO2-EOR) techniques for increased oil production. CO2-EOR is a key competitive advantage for our company. Operating more than 30 active CO2-EOR projects, Occidental injects 2.7 billion cubic feet per day or 1 trillion cubic feet of CO2 each year, making Occidental the largest injector of CO2 for EOR in the Permian Basin, and among the largest globally. From this CO2, about 40 to 50 percent is newly sourced from Occidental and other commercial suppliers, and the remainder is recycled from producing wells. Over time, virtually all injected CO2 becomes sequestered in the oil and gas reservoir.
Occidental continues to pursue measures to manage and control greenhouse gas (GHG) emissions - while continuing to expand our operations - and to promote the viability of CO2-EOR and Carbon Capture Utilization and Storage (CCUS) applications in oil and gas reservoirs. Underground injection of CO2, especially as practiced during EOR, is a ready and proven method for the large-scale geologic sequestration of CO2 that otherwise would be emitted to the atmosphere. In fact, the U.S. Government and the Intergovernmental Panel on Climate Change (IPCC) both support CCUS as part of a suite of pathways to reduce anthropogenic carbon emissions. Crucially, the IPCC and International Energy Agency project that most climate change models cannot meet the 1.5-2 degrees Celsius global warming scenarios without using CCUS technologies.
In 2015, the U.S. Environmental Protection Agency (EPA) approved a Monitoring, Reporting and Verification (MRV) Plan for simultaneous CO2 injection and sequestration for Occidental's Denver City unit operations in Texas. This is the first-of-its-kind MRV Plan approved by the EPA and represents an important milestone in the development and commercialization of CCUS technology as an approach for long-term management of greenhouse gas emissions. Since then, Occidental has received approval for a second MRV Plan at an additional CO2 facility. The continuing use of natural sources of CO2 in EOR is essential to support investment in and expansion of infrastructure that can be used in the future to transport and inject CO2 from anthropogenic sources.