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Carbon Dioxide Mitigation: A Challenge for the Twenty-First Century

David C. Thomas

BP Amoco Corporation

Life requires energy to survive. All living things consume fuel, generate the energy they need, and emit waste products. Our society is no different from the smallest one-cell organism in that we search for fuel and consume it to generate the energy we need to survive. The common denominator is that the primary fuel is carbon-based and the dominant waste is CO2. As our society grows, its desire for more energy grows. Over the past 150 years, we have consumed enormous amounts of carbon-based fuels in developing our civilization. Increasingly, society has become concerned with the impact our actions are having on the planet and its ability to sustain our continued development.

The twentieth century was characterized by the development of an active environmental agenda that demonstrated society's concerns for clean air and water, minimizing waste and developing recycling, controlling chemical and radioactive emissions, and protecting endangered species. These concerns had dramatic effects on how we live and carry out our business affairs. As our understanding of this agenda matured, other concerns with an even greater potential for impact on the world have emerged. Climate change, deforestation, availability of plentiful potable water, biodiversity, and the interactions between them may be the defining environmental issues for the twenty-first century.

Climate change issues became an active topic for both scientific and political debate during the last decade. The recent Sixth Convention of the Parties of the United Nations Framework Convention on Climate Change (COP–6) meeting showed the intensity of concern and the range of viewpoints among the earth's nations. Some people counsel for mitigation action now, while others argue for more definite signs of climate change before taking action. The scientific community around the world is evaluating the validity of the climate change claims, critiquing approaches to mitigation, and developing mitigation options and strategies. The political community is developing equitable policies to share the burden of mitigation among the world's peoples. It needs the results from the scientific community as the basis for the decisions that will affect the lives and livelihoods of billions of people. The public, on whose behalf these activities are occurring, shows a wide range of understanding about climate change—extending from those who are largely unaware of the issue to those who are well informed.

The business community shows the same range of concern and understanding. Some are barely aware of the issue, whereas others have been involved in the discussion from the beginning. Many



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Page 33 2 Carbon Dioxide Mitigation: A Challenge for the Twenty-First Century David C. Thomas BP Amoco Corporation Life requires energy to survive. All living things consume fuel, generate the energy they need, and emit waste products. Our society is no different from the smallest one-cell organism in that we search for fuel and consume it to generate the energy we need to survive. The common denominator is that the primary fuel is carbon-based and the dominant waste is CO2. As our society grows, its desire for more energy grows. Over the past 150 years, we have consumed enormous amounts of carbon-based fuels in developing our civilization. Increasingly, society has become concerned with the impact our actions are having on the planet and its ability to sustain our continued development. The twentieth century was characterized by the development of an active environmental agenda that demonstrated society's concerns for clean air and water, minimizing waste and developing recycling, controlling chemical and radioactive emissions, and protecting endangered species. These concerns had dramatic effects on how we live and carry out our business affairs. As our understanding of this agenda matured, other concerns with an even greater potential for impact on the world have emerged. Climate change, deforestation, availability of plentiful potable water, biodiversity, and the interactions between them may be the defining environmental issues for the twenty-first century. Climate change issues became an active topic for both scientific and political debate during the last decade. The recent Sixth Convention of the Parties of the United Nations Framework Convention on Climate Change (COP–6) meeting showed the intensity of concern and the range of viewpoints among the earth's nations. Some people counsel for mitigation action now, while others argue for more definite signs of climate change before taking action. The scientific community around the world is evaluating the validity of the climate change claims, critiquing approaches to mitigation, and developing mitigation options and strategies. The political community is developing equitable policies to share the burden of mitigation among the world's peoples. It needs the results from the scientific community as the basis for the decisions that will affect the lives and livelihoods of billions of people. The public, on whose behalf these activities are occurring, shows a wide range of understanding about climate change—extending from those who are largely unaware of the issue to those who are well informed. The business community shows the same range of concern and understanding. Some are barely aware of the issue, whereas others have been involved in the discussion from the beginning. Many

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Page 34companies view the climate change issue as a threat to their existence and economic health; others see potential opportunities. All are concerned that mitigation will raise the cost of the goods and services they provide to the public, with negative consequences for all. INDUSTRIAL GOALS The prospect of global climate change is a genuine concern for the public and one that BP shares. The amount of CO2 in the atmosphere is increasing and the temperature of the earth's surface is rising. Although there is uncertainty about the magnitude and consequences of these developments, the balance of informed opinion is that humans are having a discernible effect on the climate, and scientists believe that there is a link between the amount of CO2 in the atmosphere and increased temperature. Faced with this uncertainty, BP believes that adopting a precautionary approach to climate change is the only sensible way forward in these circumstances. BP proposes to make real, sustainable, and measurable changes in its business practices. This is why BP has set for itself a voluntary goal to reduce its direct, equity share emissions of greenhouse gases by 10% from a 1990 baseline by 2010. BP is active in a broad range of climate change issues in both the policy and the scientific arenas. 1 BP engineers and scientists study the effects our businesses have on greenhouse gases, water management, and biodiversity. We sponsor internal and external research that adds to both our understanding of business opportunities and our scientific understanding of environmental issues. BP Solar is the largest manufacturer and marketer of photovoltaic devices for producing electricity from solar radiation. 2 BP Energy provides energy management services to diverse businesses worldwide. BP recently sponsored the Hydrogen Interactive—First Contact as a way to introduce our interest in hydrogen as a fuel source and provide a forum for discussion and debate about the hydrogen economy. 3 BP's refining and marketing arm is developing clean fuel technology and innovative marketing concepts that introduce and showcase technologies to the consumer. 4 We have worked with Environmental Defense to develop an emission-trading methodology and market within the group as a learning and implementation tool. 5 This list of actions and activities is not exhaustive but gives a flavor of the voluntary actions that BP is using to support our group's commitment to its environmental responsibilities. BP's reduction goals are even more aggressive when projected business growth is considered. The targeted 10% reduction below our 1990 baseline translates into a real reduction of more than 30% in projected 2010 CO2 emissions. It is even more daunting when one considers that there are no economic incentives outside our internal goals. Many of our business activities involve partnerships with other companies that do not share our specific goals. Many of our partners are working through the process to develop targets that make sense for their companies, and we are gratified by the positive reception that our goals have received. Our discussions suggest that many companies are going through the same evaluative process that BP began in the 1990s. In Chapter 1, Jae Edmonds presents predictions of climate change over the next several centuries. 6 This chapter discusses the approach that BP has taken to address the growing worldwide concern about carbon management or CO2 mitigation. CO2 mitigation as a way to reduce man's impact on the environment is in its earliest stages of development. Economic incentives to mitigate CO2 are rare and must be developed. These incentives can come through revenue streams from useful products, savings from the CO2 mitigation activity, taxation, or government-sponsored emission-trading programs. Companies cannot remain viable if they disadvantage themselves economically with respect to their competitors. Present CO2 management projects concentrate on emission reductions from current operations through energy efficiency improvements, operating practice changes, or process changes. These

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Page 35actions must compete with other investment opportunities within the company and must generate a favorable return on the capital or operating funds invested. Figure 2.1 provides a schematic view of the relative capital investments that will be needed to mitigate large amounts of CO2. Mitigation costs will increase as the simpler options are completed. It will be necessary to reduce the costs of new mitigation technologies to ensure implementation. Our overall goal is to extend the low-cost curve while reducing the slope of the curve for higher-cost options. BP is active in addressing each of the technical directions indicated. BP's CO2management strategy can be stated simply as follows: Reduce energy consumption from manufacturing our products, develop cost-effective separation technologies for the CO2 we do emit, find ways to use CO2 in beneficial ways, and finally store any remaining CO2 safely. Figure 2.2 shows the overall approach schematically. In addition to implementing CO2 reduction options now, we are also developing needed technology improvements in separation and storage. Lead development of a viable CO2 emission trading credit system to ensure that the lowest-cost options for abatement of CO2 are found and implemented. BP's approach to this important option is described on its Web page and is not discussed further in this chapter. 7 CO2 EMISSION REDUCTION Emissions reduction is the starting point for any mitigation program. This involves taking a fresh look at ongoing operations to challenge standard operating practices from the new perspective of reducing CO2 emissions. Each plant or refinery strives to optimize its operations for efficient production of the desired product. In the past, this process has not specifically included reduction in CO2 emissions. BP has reviewed many of its operations and continues to do so through an ongoing program of energy ~ enlarge ~ FIGURE 2.1 Relative capital expenditures needed for greenhouse gas emission reductions, y-axis represents relative capital investment: upper curve; technology of 1990; lower curve; technology of 2000.

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Page 36 ~ enlarge ~ FIGURE 2.2 Strategic options for CO2 reduction. management. We have found numerous opportunities to minimize emissions through changes in processes, equipment, or procedures. A few examples follow: Site energy audits and implementation of energy management technologies have reduced refinery emissions by 5% through careful attention to energy consumption and measurement of energy performance parameters. One business unit saved $265,000 per year and reduced emissions by 8,000 tonnes a year by challenging the practice of maintaining spare capacity in on-site electricity generators. It developed procedures to balance the load between two turbines rather than running lower loads on three. The procedure includes regular rotation of the load and shutdown of the spare turbine. The procedure allows longer intervals between maintenance, less wear, and routine maintenance on the spare turbine while keeping it ready for rapid startup. Fired heater tubes can be fouled with certain crude oil components, thus reducing heat transfer efficiency, increasing pressure drop, shortening run times, and increasing operating and maintenance costs. Specially designed springs installed in the tubes increased heat transfer by 50%, reduced fouling by 70%, and doubled run length. Fluid passing through the tubes makes the springs vibrate so that they continuously scrape the inside of the tubes, keeping the tubes cleaner. Boiler and fired heater tubes develop scale on the fired side of the tube. Past procedures required furnace shutdown for cleaning on a regular basis. On-line cleaning with combustible abrasives allows treatment without shutdown. With on-line cleaning, one refinery experienced a CO2 emissions reduction of 1,800 tonnes per year, $60,000 fuel per year savings, $300,000 per year yield improvement, $800,000 per year throughput increase, and an overall 1.5% improvement in efficiency for the unit. A petrochemical complex implemented improved divided wall column technology. Energy efficiency increased by 30%, CO2 emissions were reduced by 30%, and capital equipment costs were reduced by 10%. New turbine technology that allows us to take advantage of the pressure drop as fluid is brought into a terminal is generating 3 MW(e) (megawatts of electrical power) of extra electricity from previously wasted energy. BP participated in the development of a new biphase turbine that converts reservoir energy to shaft power by passing reservoir fluid through a multistage turbine. It saves 10% in weight and area in cramped offshore platforms. Flaring (burning) of waste hydrocarbon streams has been routine practice from the earliest days of the oil and chemical industry because it is the safest disposal method. When CO2 emission reduction

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Page 37targets challenged this routine practice, opportunities to reduce emissions while enhancing revenue were found. An offshore business unit aggressively reviewed its procedures and found larger volumes of salable gas being burned than previously believed. Ways to capture the gas were developed and are being implemented. The business unit is well along in eliminating all nonemergency flaring while generating substantial extra revenue. Full implementation will reduce CO2-equivalent emissions by more than 2 million tonnes per year. Replacement of conventional gas-actuated valves to control flow from gas wells with no-loss systems eliminated cold venting of methane from a large production operation. This change gave the business unit an additional 5 million standard cubic feet per day of sales gas. These examples are only a few of those found within BP. Other companies evaluating their operations through the filter of a CO2 mitigation challenge will undoubtedly find similar improvements they can make. Energy efficiency improvements have allowed BP to reduce its emissions by more than 5% in the past two years. Efficiency improvements and process changes provide substantial reductions in emissions and play a major role in CO2 mitigation. However, they will not be sufficient to reduce world emissions to the needed levels. This reduction will require a combination of energy efficiency, capture, and storage of large volumes of CO2 for very long periods. CO2 SEPARATION Norway's Statoil operates the only purpose-built plant designed to capture CO2 and to store it in geologic formations. Norway implemented a carbon tax system in the early 1990s as part of its response to climate change concerns. The Norwegian carbon tax provided the economic driver to motivate Statoil and its partners to invest in a platform, separation and compression equipment, and an injection well. Carbon dioxide injection began in 1996 with approximately 2.2 million tonnes of CO2 being stored by late 2000. The plant separates CO2 from natural gas produced from the Heimdal formation in the Sleipner field to increase the fuel value of the sales gas to meet customer and pipeline specifications. Normal practice would have been to vent the separated CO2 to the atmosphere. CO2 separation plants intended specifically for large-scale CO2 separation and storage have not been built. Several vendors build and sell plants for relatively small applications, such as food and chemical processing. These plants have a capacity range of 100 to 1,000 tonnes per day. These processes use a basic chemical—usually an aqueous organoamine—to interact with the acidic CO2. The resulting mixture is heated to recover the amine and CO2 streams. Costs depend upon the required CO2 purity and availability of process heat used in the separation process. CO2 mitigation plants will have to be 10 to 100 times larger than present plants. We believe that at least 1 million tonnes per year (about 2,740 tonnes a day) is the minimum capacity that will provide the needed economies of scale and that world-class plants will be larger than 4 million tonnes per year. Preliminary engineering estimates suggest that the cost of separating CO2 from combustion gases ranges from around $65 to more than $200 per tonne of CO2 separated when capital and operating costs are included. Definitive cost estimates are inherently site and process specific. BP believes that the cost of greenfield separation facilities will have to provide CO2 capture for $15 to $20 per tonne to be economically viable. BP is leading a systematic evaluation of the options for CO2 capture from combustion processes in cooperation with a group of other energy companies. 8 The joint industry project has attracted international energy companies and government attention. The Carbon Capture Project (CCP) is a 3.5-year project to investigate CO2 capture from combustion processes and to develop the criteria for safe storage of CO2 by geologic means. Its objectives are to reduce the cost of capture in new construction to 25% of present technology and, in retrofit projects, to 50% of present technology costs.

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Page 38 Figure 2.3 is a schematic representation of the feasible combustion processes. Fuel can be burned in air to generate power and heat. Power generation methods include direct-fired heaters used to heat process fluids, boilers used to generate steam for electricity generation and process heat, and gas turbines used for electricity generation and shaft power. In normal practice, the combustion products (flue gases) are vented to the atmosphere. CO2 capture from flue gas requires handling large volumes of hot, wet, and corrosive gases at low pressure. Flue gases range from about 2.5 to 17% CO2 by volume, so the handling equipment is very large. Industrial operations were not designed with capture of flue gas in mind; therefore the sources are usually dispersed around the complex where they fit best to meet the design objectives. The only commercially proven process for postcombustion separation is an amine-based process. Substantial research is needed to improve postcombustion processes and reduce their costs. Reduction in size and weight of the systems is an important objective when remote and offshore operations are considered. Improving the contact efficiency and mass transfer between the gas phase and the separation chemicals is needed. Novel methods that do not depend on large volumes of expensive chemicals would be very attractive because of industry's concerns about the waste products of the separation process. A second combustion approach is precombustion decarbonization (PCDC) to produce hydrogen for subsequent combustion to generate heat and power. PCDC has an advantage over postcombustion because hydrogen can be produced in a central facility where the CO2 capture process will be easier. The most common current production method is steam reforming of a high-hydrogen fuel such as methane to generate hydrogen and CO2. The hydrogen can be burned in existing equipment with modest modifi- ~ enlarge ~ FIGURE 2.3 Separation and storage options for carbon dioxide.

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Page 39 cations. Research needs in hydrogen combustion include development of better, more efficient reforming processes that reduce cost and improve CO2 capture; hydrogen-burning fired heaters, boilers, and turbines; improved materials resistant to hydrogen embrittlement and degradation; high-performance fuel cells to replace turbine-generator sets; and other novel approaches to using hydrogen efficiently. A third combustion approach is to burn the fuel in an oxygen or oxygen-enriched atmosphere—the oxyfuel, or oxygen fuel combustion process. This method generates a high-concentration CO2 stream that can be processed more easily for subsequent handling. Oxyfuel processes depend on precombustion separation of oxygen from air to produce the necessary high-oxygen-content stream. Research needs in oxyfuel processes include development of advanced materials to handle the higher flame temperatures of direct oxygen firing, development of advanced turbines and fired heaters with recycle capabilities to allow flue gas recycle to combustion control, methods to seal conventional furnaces to minimize mixing of unwanted air with the oxyfuel mixture, and improved methods of oxygen separation from air. Acid gas removal from natural gas at the production facility is another major source of CO2 emissions. Most natural gas contains some CO2, with concentrations ranging from near zero to close to 100%. Energy companies regularly handle gases that contain up to 50% CO2. The Sleipner field mentioned above contains about 11-12% CO2. Pipeline specifications may require that the CO2 content be reduced to less than 1%. Normal practice would be to separate the gases and vent the CO2 to the atmosphere. Since produced gases are normally at high pressure, the size of the separation plant is smaller and the costs of separation are consequently lower. Processes and costs are well established, so research needs are modest. Improved column packing, solvents, and regeneration processes are areas that need improvement. Once CO2 is separated from other flue gas components, it must be compressed and transported to a storage site. The large volumes make transport by pipeline the lowest-cost option. Several pipelines in the United States transport large quantities of CO2 from naturally occurring sources to enhanced oil recovery projects in the western United States. These pipelines operate at approximately 150 bar so the CO2 is transported as a supercritical dense-phase fluid. This technology is well established and needs little technology development. Other transport methods, such as liquid by truck, rail, or ship, are possible, but the costs of such operations would radically affect the cost of CO2 mitigation. CO2 STORAGE BP and others in the energy industry are concentrating on geologic storage methods. We are most familiar with technologies needed for successful implementation because of our use of CO2 in enhanced oil recovery (EOR) operations. We understand the processes that determine whether or not a reservoir will hold CO2 for long periods well enough to feel confident with the method. However, there is need for research into sealing mechanisms and how they might be affected by CO2 over long periods. Monitoring of long-term storage sites is another area in which technology development is needed. Other methods such as biofixation and chemical feedstocks hold promise but require research before they could play a significant role in CO2 mitigation. Figure 2.3 lists a series of options for storage of large quantities of CO2. EOR provides an opportunity for beneficial use of CO2 as part of a storage program. Enhanced oil recovery and enhanced coal bed methane (ECBM) have the most potential in the near to mid-term (0-50 years) because the CO2 is used to improve production from assets that otherwise would have marginal value. The revenue stream developed from the increased or continued production can pay for the cost of CO2 separation, transportation, and storage. Present EOR practices will have to be modified to provide long-term storage (>1,000 years). Technology convert from EOR to storage is needed and under devel-

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Page 40opment. Availability of CO2 in areas too far from natural sources of CO2 for EOR projects may lead to recovery of additional oil from well-known fields. Coal formations offer another opportunity to store CO2 because it adsorbs strongly on the coal surfaces. Contacting coal surfaces with CO2 via flue gas injection may have application at coal-fired power plants near coal mines and in other areas where suitable coals are accessible. Since CO2 adsorbs more strongly than methane on coal surfaces, there is the potential for increasing methane production from coal bed methane operations. The effectiveness of adsorption processes will depend heavily on the type and permeability of the coal formations. BP operates an ECBM project in northwestern New Mexico and southwestern Colorado. We are adding a commercial-scale demonstration of CO2-nitrogen injection during 2001-2002. Saline water-bearing formations are broadly distributed across the United States and other parts of the world. The Sleipner project mentioned earlier is one example. Similar projects are under consideration elsewhere in the world. Little attention has been paid to saline aquifers by the energy industry since they have no commercial value. Research efforts are needed to determine the geologic and fluid transport properties of saline water-bearing formations so that their applicability for long-term storage can be determined. Depleted or nearly depleted oil and gas reservoirs may provide other geologic targets for long-term CO2 storage. Inactive fields could be reopened and used for direct storage projects. A concern is that old well bores may have not been sealed to present-day standards and may have degraded casing or well hardware left in place. Considerable evaluation would be required before they could be put into service. CHEMICAL INDUSTRY CHALLENGES Biofixation of CO2 includes agriculture, forestry, soil science, and enhanced photosynthesis as potential methods for carbon fixation. Photosynthesis is the most effective carbon fixation method available and is the basis for life on our planet. It plays a major role in climate change mitigation. Managing croplands, forests, and grasslands is a short-term way to capture large amounts of carbon dioxide. Unfortunately, the CO2 can be released back into the atmosphere nearly as quickly as it was stored if management practices are changed. Deforestation is recognized as a driver in climate change. Carbon dioxide as a chemical feedstock has been under study for many years. Most of the processes evaluated are highly endothermic and require large amounts of energy input for successful use. Substantial research would be needed to make CO2 a significant feedstock in the chemical industry. The recent U. S. Department of Energy publication Carbon Sequestration—Research and Development is the most current review of overall technology needs in carbon dioxide mitigation and possible chemical pathways to mitigation. 9 It is the result of a 2.5-year effort by a largely volunteer team of scientists and engineers active in the field. Halmann and Steinberg have published an exhaustive review and evaluation of mitigation technologies, including chemical processes. 10 These two references would provide good starting points for researchers entering the field. REFERENCE 1. http://www.bp.com/_nav/world.htm, the section of BP's homepage dedicated to world issues for information regarding our climate change and green activities. 2. http://www.bpsolar.com for an overview of BP Solar's activities. 3. See http://www.h2interactive.net/ for information about this innovative meeting held October 11-13, 2000, in Toronto,Canada .

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Page 41 4. http://www.bp.com/pressoffice/bpconnect/ for a description of the latest concepts in fuel marketing and http://www.bp.com/cleanerfuels for a discussion of cleaner fuel introduction around the world. 5. http://www.bp.com/alive/index.asp?page=/alive/performance/health_safety_and_environment_ performance/issues/ climate change for a discussion of emission trading issues. 6. See Chapter 1. 7. http://www.bp.com/alive/index.asp ?page=/alive/performance/health_safety_and_environment_ performance/issues/ climate change for a discussion of emission trading issues. 8. www.co2captureproject.org for details of the project. 9. Carbon Sequestration—Research and Development, U. S. Department of Energy, Office of Science and Office of Fossil Energy Washington, D.C. , 1999 . 10. Halmann, M.M., and M. Steinberg. Greenhouse Gas—Carbon Dioxide Mitigation: Science and Technology. Lewis Publishers , Boca Raton, Fla. , 1999 . DISCUSSION Alex Bell, University of California at Berkeley: The reutilization of CO2, particularly by the chemical industry, is hampered by the fact that you have to add hydrogen to the CO2 to make useful chemicals. Reformulating a carbon source to make hydrogen just adds to the problem; using water as a hydrogen source takes energy. Do you see a resolution to this problem? David Thomas: Once the CO2 is formed, it is very difficult to convert to a more active form without the addition of large amounts of energy. The most reasonable approach that I can think of is to use a syngas reaction to make carbon monoxide and hydrogen. The hydrogen could be used as fuel, while the carbon monoxide could be used with other reactants to generate intermediate feedstocks. I have not done thermodynamic or mass-balance calculations to determine whether this approach makes sense. My question to the chemical community is, Could such a route be feasible? Chandrakant Panchal, Argonne National Laboratory: The 10% goal for reduced greenhouse gas emission by 2010 is an ambitious goal for a refinery. For an average refinery, it takes 450,000 Btus (British thermal units) to process one barrel of crude oil, which is equal to 5 to 9% of the energy value of the crude oil. Is the reduction 10% of your current CO2 emission? If it is, does selling a refinery, which reduces your emission by the amount of that refinery, count toward this reduction? David Thomas: The 10% reduction target is computed against a baseline of our equity direct emissions of all our operations. These are emissions that result from the manufacture of products that we unambiguously own and are able to affect. They do not include the total CO2 content of all products sold in commerce. Your second question is related to the handling of a sale or divestment of a company asset and how that affects our target. This basis is also affected by acquisitions. BP has established firm rules on the handling of these situations based on materiality. Small divestments or acquisitions (less than approximately 5% of our total) do not change the baseline. The range between 5 and 10% is handled on a case-by-case basis. Those over 10% will result in an adjustment of the baseline and the overall target. The view that we could sell several high-emitting assets to meet our goal is incorrect. Such a sale would reduce the gross emissions but would also reduce the baseline. Acquisitions require us to determine a baseline for the acquired asset, which can take considerable effort depending upon the availability of information about the emissions of the acquired asset. Very

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Page 42few assets have hard data on their 1990 emissions. Obtaining valid estimates of these emissions is very complex and difficult. In an effort to be transparent, BP has commissioned external and independent audits of its emissions by internationally known auditing firms. Their names and results are posted on our external Web site. Tobin Marks, Northwestern University: Are there data for the chemical industry in terms of what percentage of the products go through a syngas route? Is this a major pathway? David Thomas: I participated in several reviews of our chemical and refinery groups during which the chemistry being practiced was discussed. A fair number of them used syngas processes to generate hydrogen or to alter the chemical species. I haven't attempted to determine how many or what the percentage actually is, but I think it is a substantial number. This suggests a fertile area for research. Dahv Kliner, Sandia National Laboratories: Could you provide further details of your internal carbon-trading experiments? What is the range of costs? What ended up being the most common way you reduced emissions? Were there any surprises in the approaches you ended up taking? David Thomas: The trading program is in its early days. Trading was piloted with a limited number of business units in 1999. In 2000, the program was opened to all business units. During 2000, approximately 2,000,000 tonnes of CO2 were traded with an average cost of less than $ 10 per tonne. Most of the CO2 reductions being done to generate trading credits resulted from improvements in energy management or process changes. These modest changes are not too expensive and frequently generate additional product or reduced costs. Reduction of flaring by one business unit gave it an additional 5 million standard cubic feet per day of gas to sell! None of the reductions have come from new or newly implemented capture and sequestration activities. They are still immature technologies. Our biggest surprise was the lower-than-expected cost of the program. Tom Brownscombe, Shell Chemical Company: We have been asked publicly about similar internal reductions and so on. I think we are actually ahead on the 10% reduction goal, having almost achieved it. So we are looking intensively at the same sorts of questions that you raise here. I wanted to make one point concerning Alex Bell's comment. Opportunities to use CO2 without having to use hydrogen are obviously of great interest. We have a set of patents coming out on the use of CO2 to make chemical intermediates for polymers that don't involve the use of hydrogen. I think these will probably issue in the next couple of months. Jack Solomon, Praxair: Can you give us examples of some of the energy efficiency things that have been done? David Thomas: Several examples are shown in my vugraphs: Improvement of valve actuators to minimize venting of methane on a large number of producing wells Consolidation of power generation in certain fields Shutdown of running spares, which has saved considerable energy and reduced emissions Process and procedure changes to improve operations and reduce emissions

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Page 43 Improved maintenance (looking at maintenance through the lens of CO2 emissions opened up some opportunities) Improved burner efficiencies and heat exchange processes Glenn Crosby, Washington State University: First, a comment. I certainly am impressed with trading credits. It also gets at what is easy to do, but that's finite. In other words, you'll run through this pretty quickly if, as is suggested, two-tenths of a gigatonne of carbon is consumed as the feedstock of the chemical industry annually. Do you know if this includes all chemical production or just the chemicals themselves? David Thomas: To be precise, I would have to return to the original reference. My recollection is that it is the chemicals constituting the sum of the seven major chemical precursors produced from petroleum production. I don't recall if it included all chemical production or fertilizers. Glenn Crosby: Could you give me some feel for how many gigatonnes of carbon are used in the production of energy relative to this—that is, just for power generation, not even the transportation? David Thomas: The best I can say offhand is that approximately 40% of the 6 gigatonnes of anthropogenically emitted carbon annually comes from transportation, around 45% from power generation, and the remaining 15% from all other sources. Glenn Crosby: So there is approximately 30 times as much carbon used for power and transportation than there is actually in the production of chemicals. David Thomas: I believe so. The chemical industry is a relatively small emitter compared to transportation and power generation. Alan Wolsky, Argonne National Laboratory: In the units that come to my mind, roughly 3 quads per year are burned under distillation columns. This is the principal component of energy consumption and concomitant CO2 generation from the production of organic chemicals, including plastics.