Ten million people in the Caribbean are without access to electricity due to a lack of financial resources for needed advancements. The Caribbean transportation and power sectors rely on dirty and expensive fuels. Natural gas vented into the air during oil production in Trinidad can be used to generate resources for transformative low emission and renewable energy projects in the Caribbean.
The World Bank-managed Global Gas Flaring Reduction Partnership (GGFR), comprised of governments, oil companies, and international institutions, is working to end routine gas flaring at oil production sites around the world. The U.S. National Oceanic and Atmospheric Administration (NOAA) and GGFR have developed the flaring estimates in cooperation with the Colorado School of Mines, based on observations from advanced sensors in a satellite launched in 2012.
In 2015, the UN Secretary-General and World Bank President joined 25 governments, oil companies and international development institutions to launch the “Zero Routine Flaring by 2030” Initiative (the Initiative) that commits endorsers to not routinely flare gas in new oil field developments and to end routine flaring and natural gas venting at existing oil production sites as soon as possible and no later than 2030. The Initiative has now been endorsed by nearly 90 governments, oil and gas companies, and development institutions. GGFR want Trinidad to become an endorser.
“The current endorsers of the Zero Routine Flaring Initiative account for well over half of global gas flaring. Their commitment to avoid routine flaring at new oil fields is encouraging and imperative if we are to end this 160-year-old industry practice,” said Zubin Bamji, Program Manager for GGFR. “The Initiative is also a catalyst for actions to address ongoing legacy flaring. We’ve made progress: over the last two decades, legacy flaring has declined while oil production has risen sharply. But we must remain focused, accelerate efforts, and look for creative ways to end routine flaring.”
GGFR provide grants and facilitates loans for projects that eliminate natural gas venting and flaring in oil fields. A typical project can be structured under a Build, Own, Operate and Transfer (BOOT) project investment model. BOOT is a model for privately financed projects that ensures certainty of price, time and performance. A BOOT agreement account for allocation of all risks. A developer will receive a concession from a government or private sector company in the form of an off-take agreement, and in return will finance, design, build and operate a facility for a specified period, after which ownership will be transferred to off-taker. A third party will carry the loan. The BOOT agreement incorporates in its arrangement’s property and carbon equity rights.
The Energy Chamber of Trinidad and Tobago (ECTT) will use its knowledge and expertise of carbon markets, renewable energy technologies, the United Nations Climate Change and World Bank emission reduction carbon finance special programmes, to assist its members or qualified local developers in the development of natural gas emission capture and utilization projects in Trinidad and Tobago. ECTT has the cross-cut network and problem-solving capacity with multilateral bank policy makers, Trinidad government officials, major oil and gas companies, UN Climate Change, the German Emissions Trading Authority (DEHSt) and developed country cap and trade market jurisdictional stakeholders to make eligible projects work.
Projects contemplated under the Initiative cover organizational, environmental/social and financially feasibility assessments. The Initiative also addresses construction documents, procurement of trade contractors, construction, commissioning of improvements, operation and maintenance, as well as Monitoring, Reporting and Verification of energy savings and/or CO2/CH4 emission reductions, depending on the type of project.
The success of a project relies on the application and use of multiple funding options and private sector investment. The development options require Trinidad and Tobago government participation, transparency and consent. In those instances, ECTT will use its best efforts to acquire the necessary governmental participation and consent, as well as empower the local developer or member to seek such government participation and consent. At all times, ECTT will maintain an open and transparent relationship with the developer under the Initiative and support the actions needed to develop an investment-grade project and monetize the emission reductions.
ECTT will be responsible for the development and maintenance of the relationship with the DEHSt. DEHSt is the national authority for European Emissions Trading. German statutes allow regulated sources in DEHSt jurisdiction the option to reduce upstream emissions beyond 2020 by offsetting. It is estimated that there is a potential to generate 50 million euros of equity from DEHSt regulated sources for natural gas venting and flaring projects in the Trinidad land oilfields.
Trinidad and Tobago is the third largest emitter of GHG globally on a per capita basis. The country’s carbon footprint is twice that of the United States and three times that of Russia. Vented natural gas accounts for over 20% of upstream emissions. Projects the Initiative will support are those that release natural gas into the atmosphere from onshore oil production operations. The gas is released during oil production activity and remains unrecovered due to prohibitive capital improvement requirements.
Underlying projects of the Initiative presents Trinidad developers with several strategic opportunities:
1. Improving project economics with the addition of offset revenues;
2. Providing Trinidad developers and entrepreneurs additional export and expansion resources and capital regionally and internationally;
3. Fulfilling environmental responsibility by reducing national and international CO2 emissions;
4. Improving gross domestic product, optimizes asset value and retention, generates sustainable employment, promotes technology transfer, and operational efficiency by capture and monetization of waste gas in Trinidad oilfields;
5. Adding to diversification of the economy through export of services to other regional countries such as Guyana and Mexico;
6. Ultimately reducing greenhouse gas emissions in Trinidad by more than 700,000 tons of CO2 equivalents per year. This translates to the removal of close to a million cars from the Trinidad roads when independent oil producers are included in the calculation; and
7. Job creation.
The Initiative offers opportunities for Trinidad project developers at home and abroad. Working with the ECTT, the Trinidad private sector and government can navigate the complex world of financing low-carbon and renewable energy development, including accessing the international sources of finance, and participating in international project financing instruments that will create high-and middle-income jobs in Trinidad and Tobago.
Fossil fuels are used to produce electricity region-wide. Natural gas remains the perfect transitional fuel and is cost effective with a carbon output of 30% less than diesel. Oil sector emitters and multi-lateral institutions will fund soft costs and help produce the finance for natural gas capture and utilisation projects in Trinidad. The equity generated from developed country regulated sources from offset purchase agreements will generate bankable projects for local developers.
Caribbean region job creation, technology transfer, sustainable climate finance, local business opportunity, foreign investment and energy security are just some of the spin-off benefits that will be derived from the Initiative. The Initiative also serves as a catalyst for a natural gas to clean energy systems transitional philosophy in the Caribbean and a Jobs Act for Trinidad.
If you would like further information about the Initiative, contact: tamara@cadaenergy.com.