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Chinese collaboration sees carbon emissions offset from lifecycle of crude oil cargo

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Chinese collaboration sees carbon emissions offset from lifecycle of crude oil cargo

Highlights

Sinopec, COSCO, China Eastern Airline collaborate in first such exercise

Crude cargo was Angolan Olombendo

Emissions offset using locally certified carbon credit units

China's state-run Sinopec, in collaboration with shipping giant COSCO and China Eastern Airlines, has neutralized emissions associated with the entire lifecycle of a crude oil cargo it bought from Angola in July this year. The deal is the first of its kind in China and one that Sinopec aims to present as an example of carbon-neutral oil to other domestic companies.

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Shanghai Environment and Energy Exchange on Sept. 22 granted certificates to Sinopec, China COSCO Shipping and China Eastern Airlines as proof that the volume of offsets applied against the cargo was sufficient to cover the expected GHG emissions from the entire lifecycle including oil extraction, transport, storage, shipping, refining, subsequent use and combustion.

This is part of efforts by the three companies to meet the country's 2060 net-zero target, Sinopec's senior vice president Ling Yiqun said at the certificate ceremony.

"And it is the first cooperation of Chinese companies to offset emissions from water, land and air transportation," Ling added.

"Sinopec aims to set this as an example of carbon-neutral oil barrels to pave the way for China to export carbon-neutral oil products," a company official told S&P Global Platts.

The crude was Angolan Olombendo, which was delivered by COSCO after a 9,300 sea mile voyage to Sinopec's Gaoqiao Petrochemical in eastern China's city of Shanghai in late July. The refinery produced 8,953 mt of gasoline, 2,276 mt gasoil, 5,417 mt of jet fuel, 2,786 mt LPG, 6,502 mt of MGO and 2,998 mt of low sulfur bunker fuel oil from the cargo, according to Sinopec's statement.

China Classification Society Certification Company, which conducted the emission assessment, said the 30,860 mt cargo (226,203 barrels) of Olombendo generated 103,526.19 mt of CO2 from the entire lifecycle.

According to the US Environmental Protection Agency, 2 million barrels of crude generates about 860,000 mt of CO2 emissions.

Sinopec offset the emission from crude production, refining and combustion of all the oil products, except jet fuel. COSCO offset the emission from shipping the oil while China Eastern Airlines offset emissions from jet fuel combustion, according to the Shanghai Environment and Energy Exchange.

All the oil product barrels are sold in the domestic market. End users will refuel the net-zero gasoline or gasoil in designated Sinopec service stations, or take designated net-zero domestic flights provided by China Eastern Airlines.

CCER to offset lifecycle emissions

China Certified Emission Reduction or CCER, the locally certified carbon credit units, were used to offset the carbon emissions, according to a statement by the companies.

The CCER projects were of diverse types and located in different provinces across China. These include the afforestation project in Jiangxi in southeast China, solar power generation projects in Yunan and Hainan in south China, wind power generation project in Heilongjiang in northeast China and biomass power generation projects in Inner Mongolia in North China.

The companies did not disclose the exact amount of CCERs purchased from individual projects.

Notably, CCERs are considered as eligible units that can be used to offset carbon emissions under Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which is considered the world's most well-established industry-wide scheme.

However, afforestation projects certified under the CCER scheme are excluded by CORSIA.

China stopped its CCER registration in 2017 to enhance related regulatory framework. Hence, for the above-mentioned projects, no updated information or emission data is available on China's CCER platform after 2016.

The latest available data for CCER trading price was in May from Beijing Green Exchange, which showed CCERs were traded at Yuan 16-20/mtCO2e ($2.47-$3.09/mtCO2e), which were close to the Platts assessment for CORSIA-eligible carbon credits in May. The CORSIA-eligible carbon credit price has increased sharply in recent months and hit $7.40/mtCO2e as of Sept. 21, according to the Platts assessment.

Beijing Green Exchange is expected to manage China's CCER nationwide registration, expected to resume in the foreseeable future.