Oil & Gas at Odds with Climate Change
As organizations increase their focus on addressing climate change and controlling greenhouse gas (GHG) emissions, one particular industry surfaces to the top of mind for many: Oil & Gas. According to the EPA, the oil & gas sector is the second-highest contributor of global GHG emissions, at 231 million metric tons of CO2 emitted in 2015, surpassed only by the power plant industry . To address this issue, the US government has imposed stringent emissions-related regulations onto all US refineries. Having faced significant emissions challenges in 2012, BP now hopes to re-position itself as the environmental leader in its refining operations.
Emissions Concerns at Whiting Refinery
Whiting is BP’s largest refinery globally and processes 430,000 barrels of oil daily, which is enough to fuel 1.6 million cars . Amidst a complex refining process, BP has identified two sources that it believes are the primary contributors to GHG emissions:
- Flares – In the refining process, flares are a constant source of greenhouse gas emissions. While a critical safety feature, the EPA tightly regulated their efficiency, expecting flares to produce a 98% combustion efficiency to meet the minimum required emissions . See Figure 1 for an illustration of the flaring process.
- Leaks – A second source of GHG emissions is gaseous leaks throughout the entire refinery process. Leaks are of particular concern to refineries because gases more toxic than CO2, such as methane or benzene, are often released into the environment through leaks .
Emissions Impact on BP
Over the past decade, EPA regulations on emissions control have significantly impacted Whiting Refinery’s business operations. In 2012, the EPA fined Whiting $8 million for violating a 2001 legal agreement based on previous pollution problems at the plant. Specifically, federal regulators stated that Whiting repeatedly exceeded emissions limits on its flares, causing toxic pollutants to be released into the atmosphere. Following this penalty, the EPA additionally required BP to invest in a $400 million project to implement new pollution controls on its flares, with the expectation that these controls would reduce the refinery’s flare emissions by 90% . Lastly, the EPA tasked BP with performing a $9.5 million emissions study on the refinery process to determine areas for future improvement, as well as a $2 million monitoring system to record future emissions data (accessible to public) . Altogether, BP Whiting faced a substantial financial implication of nearly $420 million, driven by EPA regulations on emissions control. Aside from a significant financial cost, the EPA regulations also led to operational changes in BP’s refining strategy.
Where to next?
Following this incident, BP shifted its downstream strategy to become more proactive at identifying projects to further reduce emissions . While Whiting has invested heavily in reducing its GHG emissions over the past five years, there are still significant improvements that need to be made. In particular, BP will need to achieve the EPA’s goal of having the oil and gas sector reduce GHG emissions by 40-45% by 2025 . While Figure 2 illustrates a 20% reduction so far, BP will still need to target an additional 20-25% over the next decade.
Over the next nine years, Whiting plans to undergo significant operational changes in order to stay ahead of EPA emissions regulations. For example, three months ago, the refinery announced the launch of a new multimillion-dollar project that would reduce harmful chemical pollutants from its process, and thus decrease GHG emissions .
Additional steps for the future
In addition to the emissions improvement projects mentioned above, I believe BP Whiting should communicate a clear messaging both internally and externally around its environmental goals. Additionally, the refinery could explore the following opportunities:
- Partnerships with universities to research future process improvement technologies that can be implemented down the line
- Add performance metrics for emissions leakage, so refining teams and management are held accountable for emissions reduction
- Aggregate emissions data globally and leverage best practices to develop projects with the most significant impact in emissions reduction
Given that BP’s business model consists of a commitment to the environment, specifically stated as “no accidents, no harm to people and no damage to the environment” , I think these initiatives will align well with its overall messaging on emissions reduction and operating strategy.
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- “Greenhouse Gas Reporting Program.” Environmental Protection Agency, October 2016. https://www.epa.gov/ghgreporting/ghgrp-reported-data.
- “BP Whiting Settlement (Flaring).” Environmental Protection Agency, January 2016. https://www.epa.gov/enforcement/bp-whiting-settlement-flaring.
- “Whiting Refinery.” BP Global. bp.com.
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- “EPA and BP Agree on Penalties at Whiting Refinery.”Oil Spill Intelligence Report (2016): 4. ProQuest. http://search.proquest.com.ezp-prod1.hul.harvard.edu/abicomplete/docview/1807689107/fulltextPDF/4B834B8B10234DECPQ/1?accountid=11311.
- “The Energy Challenge and Climate Change.” BP Sustainability Report, http://www.bp.com/content/dam/bp/pdf/about-bp/energy-challenge-climate-change.pdf.
- “Greenhouse Gas Emissions Data.” Environmental Protection Agency. https://ghgdata.epa.gov/ghgp/service/html.
- Hawthorne, M. “BP’s Whiting Refinery Agrees to Cut Air Pollution.” Chicago Tribune, May 2012. http://articles.chicagotribune.com/2012-05-24/news/ct-met-bp-settlement-0524-20120524_1_whiting-refinery-u-s-refinery-sprawling-refinery.
- Flare Image. http://www.theecologist.org/.