Are there any policies or regulatory requirements relating to the oil and gas industry which reflect/implement the global trend towards the low-carbon energy transition?
Oil & Gas
Following the global trend towards the low-carbon energy transition and in accordance with the rules set forth by Law No. 13,576/2017, which created the ‘RenovaBio program’, the ANP Resolution 791/2019 forecasted annual targets for reducing greenhouse gas emissions for fuel trading.
As Croatia strives to achieve a greater level of energy independence, the current regulatory framework does not intend to stifle the development of the oil and gas industries. However, in keeping up with EU requirements and renewable energy goals, as well as its own tendencies for clean energy, the energy strategy is shifting towards the renewable energy sources, as elaborated in the final draft of the Integrated National Energy and Climate Plan for the Republic of Croatia for 2021 - 2030, which emphasizes decarbonization as one of its most important objectives. The Plan also touches on the predicted decrease in the use of hydrocarbons, but acknowledges their nevertheless considerable share in overall energy consumption in Croatia and encourages the further development of exploration sites and infrastructure.
The Ministry of Energy and Climate Change and as well HHRM aim to gradually enter to low-carbon energy transition and harmonize the Greek regulatory and legislative framework with the international expectation.
The main requirements are certainly those laid down by the ETS EU system which operates according to the principle of limitation and exchange of CO2 emissions.
In this system, a cap is fixed on the total quantity of certain greenhouse gases which can be emitted by plants. The cap goes down over time so that total emissions reduced progressively.
Within this limit, undertakings operating in the Member States, receive or acquire credits which, if necessary, they can exchange. At the end of every year the companies must return a number of credits sufficient to cover their emissions otherwise they will suffer heavy fines. If a company reduces its emissions it can keep the unused credits to cover future requirements, or sell them to another company which does not have enough of them.
The exchange creates flexibility and guarantees that reductions in emissions will take place when they are most advantageous. A solid price of CO2 also favours investments in clean technologies and with low CO2 emissions. According to estimates, in 2020 emissions in the sector is governed by the system will be 21% lower than in 2005.
Other requirements are those laid down by Legislative Decree no.81 of 30 May 2018 containing Implementation of Directive (EU) 2016/2284, of 14 December 2016 (National Emission Ceiling Directive: NEC) which sets national emission reduction commitments for Member States and the EU for five important air pollutants: nitrogen oxides (NOx), non-methane volatile organic compounds (NMVOCs), sulphur dioxide (SO2), ammonia (NH3) and fine particulate matter (PM2.5). These pollutants contribute to poor air quality, leading to significant negative impacts on human health and the environment.
Finally, account must be taken of the obligations relative to the use of bio fuel, and of the sanctions provided for in the case of non-putting onto the market of the quantity of advanced bio fuels laid down by law (the relevant regulation is contained in Legislative Decree no. 28 of 3 March 2011, implementing EU Directive 2009/28 on the promotion of the use of energy from renewable sources, and by the MISE implementing ministerial decrees (M.D. 20 January 2015, M.D. 10 October 2014)
Yes, there are policies and regulatory requirements to tackle this trend which has included among other matters, regulations regarding waste, flares and vents, air emissions, compliance with goals as to decrease the low-carbon energy.
The Mexican environmental legal framework is intended to prevent and mitigate any possible soil pollution resulting from the incorrect management of waste products. There are several rules that must be observed when disposing of waste products, especially waste with hazardous characteristics, such as waste resulting from the oil or gas extraction or processing industry.
Additionally, ASEA has issued regulation, through Mexican Official Standards that aim to prevent an inadequate disposal of wastes.
Flares and vents.
The National Hydrocarbons Commission (CNH) has issued technical regulations for the use of natural gas associated with exploration and extraction of hydrocarbons.
For environmental emissions from fixed sources within the oil and gas extraction and process industry, a Federal Environmental Sole Licence must be obtained from the Environmental and Natural Resources Ministry (SEMARNAT) through the National Agency of Industrial Safety and Environmental Protection of the Hydrocarbons Sector (ASEA). In addition, it is necessary to file an annual report with SEMARNAT concerning emissions generated during the previous calendar year.
Additionally, on December 24, 2019 Mexican Congress enacted the Energy Transition Law which aims to regulate the exploitation of the sustainable energy.
Finally, Mexico has been signatory of international conventions regarding climate change and has committed itself to comply with the international commitments to reduce carbon emissions. Among these conventions Mexico has signed the Paris agreement
Morocco policies initiatives aim to diversify its generation mix in the electricity sector. Renewable energies are a priority for the Moroccan Government but the authorities are still acting to promote the development of oil and gas industry through the provision of several tax and customs incentives including:
- a total exemption from corporate income tax applicable to the holder or each of the joint holders of an exploitation concession for ten consecutive years from the commencement date of regular production from the exploitation concession;
- withholding tax exemption for profits and dividends distributed by exploitation permit holders to its shareholders;
- a VAT exemption applicable to goods and services acquired in the domestic market or imported from abroad that are necessary for the activities of reconnaissance authorisation, exploration permit and concession holders, as well as their contractors and sub-contractors.
No, but the increase in the number of renewable energies projects in the country indicates at least a diversification of energy sources.
There is no nationally recognised institutional framework or champion for the implementation of low-carbon development in Nigeria. Although, the National Assembly has passed a bill to establish a National Climate Change Commission, this has not yet been signed into law. However, since the Oil and Gas Industry is one of the main sources of greenhouse gas (GHG) emissions, the Federal Government of Nigeria (FGN) has some isolated activities which seek to promote low-carbon energy development and prescribe environmental and emission standards applicable to natural gas activities.
They include: the National Environmental Standards and Regulations Enforcement Agency (Establishment) Act (NESREA), the Environmental Impact Assessment Act (EIA) and the Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN). Notwithstanding the application of these laws, large quantities of associated gas are flared in the process of oil production.
Nevertheless, the government has been fashioning out ways of bringing a stop to flaring and harnessing Nigeria’s abundant gas reserve. Consequently, it is implementing policies that would reduce gas flaring by stimulating domestic gas utilization. One of the policies is the introduction of the Nigerian Gas Master Plan (NGMP) which introduced the Gas Infrastructure Blueprint, Gas Pricing Policy and Gas Supply Obligation. Articles 282, 335, 404-410 of the Gas Master Plan highlighted the significance of encouraging the use of in domestic markets as well as ending gas flaring.
Bulgaria, like the other EU member states, is preparing its Integrated National Energy and Climate Plan until 2030 and Long-term Strategy on climate change until 2050. The Plan and Strategy will lay down the political agenda for development of the countries’ entire energy system in the next decades in line with the global climate policies. Pending final publication of the two strategic documents, the publicly shared priorities of the Government affirm that diversification of the gas supplies and development of the Balkan Gas Hub are key priorities. It is expected that in future some existing coal or lignite fired thermal and power plants can switch to gas. Small gas power plants are expected to help with future balancing of potentially increased renewables. Bulgaria is expected to introduce new measures in the transport sector, including increased blending share of biofuels.
In March 2017, Indonesian President Joko Widodo issued a National Energy Plan, through Presidential Regulation No. 2 of 2017 regarding National Energy General Plan. Through this regulation, the Government introduced a target to increase the share of renewable energy in the energy supply mix from 5% in 2015 to 23% by 2025 and 31% by 2050. Along with the targeted increase in the share of renewable energy, the share of oil is targeted to decrease from 46% in 2015 to 25% by 2025 and 20% by 2050. The share of gas, on the other hand, is targeted to be optimized proportionally due to the country’s large reserves. The share of gas in the energy supply mix is targeted to go from 23% in 2015 to 22% by 2025 and 24% by 2050. With the expected rise in renewable energy production, we expect a decrease in Indonesia’s dependence on oil, while a continued dependence on gas is expected in proportion to the country’s reserves.
In 2019 the UK Government amended the Climate Change Act 2008 to commit itself to a new carbon reduction target of "net zero" by 2050. All industry sectors, including the oil and gas industry, are expected to play a role in reaching this target. The UK oil and gas industry has already committed to reducing the emissions intensity of oil and gas production in the UK, by developing, testing and deploying the technologies required to reduce emissions. Government and industry are also exploring opportunities to re-purpose old infrastructure, such as offshore pipelines, for carbon capture, usage and storage (CCUS) and hydrogen – both of which are expected to play a role in the UK's energy transition.
Although there are not regulatory requirements with respect to low-carbon energy transition within the current laws, there are projects conducted by the government and international obligations of Turkey arising from international with respect to reaching low-carbon environment in the long term.
EU has adopted an ambitious agenda for climate action and has complied by the 2012 deadline with its commitment under the Kyoto protocol to reduce its Greenhouse gas (“GHG”) emissions by 8% as compared with their 1990 levels. In 2007 the EU adopted a climate and energy package with the goal to reduce its GHG emissions by 20% by 2020 (against 1990 levels), and further targets have been set for 20% of EU energy consumption to come from renewable resources, and 20% reduction in primary energy use compared with projected levels to be achieved by improving energy efficiency. The EU Intended Nationally Determined Contribution (INDC) to the United Nations Framework Convention on Climate Change (UNFCC) formally put forward a binding, economy-wide target of at least 40% domestic GHG emissions reductions below 1990 levels by 2030 which is corresponding to the long-term vision towards a low-carbon economy in the EU as described in the 2050 Roadmap.
In the Instrument for Pre-Accession Assistance (IPA) Planning Document, it is stated that "The objective in this sector is for Turkey to fully comply with EU environmental and climate change legislation upon accession requiring adoption of all relevant Directives and legislation, including the necessary investments." One of the indicators to measure developments towards this objective is "Development of measures to mitigate and adapt to climate change, with convergence towards EU requirements and mainstreaming of climate change considerations into other sector policies."
The proposed project is intended to be a motivation for taking into account climate change issues into buildings, transport, waste and agriculture sectors by determination of costs and emission mitigation potentials and development of analytical basis for a long term low carbon development strategy, to reconcile climate, growth and energy security, and eventually to contribute to sustainability of these sectors. Review of existing strategies, legislative gap analysis and preparation of regulatory and sectoral impact assessment for EU climate acquis will be an important initial step to comply with EU legislation and the goals and intentions of the Paris Agreement.
Turkey does not have emission reduction targets under Kyoto Protocol, but national communication documents have been prepared and submitted by the government since becoming a party to the convention. Among Organization for Economic Co-operation and Development (OECD) and UNFCCC Annex 1 countries, Turkey's GHG emissions per capita are the lowest in terms of historical responsibility and primary energy consumption per capita. Energy sector is the major source of Turkish anthropogenic GHG emissions with the largest portion with 72.8% according to the Turkey's Seventh National Communication on Climate Change under the UNFCCC.
Turkey has developed the "National Climate Change Strategy" (NCCS) with the purpose to contribute to global efforts to reduce the impacts of climate change, considering its own particular circumstances and capacity. Two of the main actors in the project are Ministry of Environment and Urban Planning and Ministry of Energy and Natural Resources. A National Climate Change Action Plan (NCCAP) was published in July 2011, including strategic principles and goals on GHG emission control and adaptation to climate change to be implemented until 2023. The objectives of the NCCAP include the reduction of primary energy intensity by 20% compared to 2008 by 2023, and an increase of the share of renewable energy in electricity production is to be ensured.
The overall objective of the project is to reduce anthropogenic GHG emissions to contribute to the global efforts to reduce negative effects of climate change. In line with the overall objective, the main purpose of the project is to increase national and local capacity to prepare for medium and long term climate action towards climate resilient low-carbon development, which will gradually align with the EU climate policy and legislation by providing an analytical basis to support realization of low-carbon in the long-term.
The expected overall results are stated as following:
• Review of existing strategies in relation to Climate Change
• Preparation of regulatory and sectoral impact assessments for EU climate acquis
• Determination of the costs and emission mitigation potentials of the actions specified within the buildings, waste, transportation and agriculture sectors of the NCCAP
• Developing analytical basis for possible strategies and actions ensuring low carbon development in the long term
With these kinds of projects, the necessity to mitigate climate change and the danger ever increasing GHG emission poses to the environment will be acknowledged across the country and by the relevant authorities. In this context, Turkey can be considered as in a transaction period in adopting environmental rules and regulation; it is expected that legislative authorities are likely to fill the gaps in relevant legislation relating to oil and gas industry with respect to low-carbon energy transition in the following years.
Israel has not implemented any regulation that reflects the global trend towards the low-carbon energy transition. It has, however, issued numerous statements and encouraged the development of renewables as an alternative to the use of coal. In fact, Israel has been introducing steps to reduce the use of fossil fuels like oil, gas, and coal, and the use of coal-fired power plants so as to discontinue to the use of coal entirely by 2030. According to some estimates, the country should reach its goal with respect to coal use by 2025. The Israeli government's intent is to provide greater offerings to convert to natural gas and other alternative energy sources, thereby reducing overall emissions and moving away from coal long-term. To promote this plan, the Israeli government has provided the following incentives, amongst others: (1) providing financial incentives for the establishment of charging posts and compressed natural gas fueling stations in order to encourage the move to alternative energy run vehicles, (2) issuing tenders for the creation of small power stations for natural gas in regional distribution networks, for a total value of NIS 650 million, and (3) enhancing the natural gas distribution network and increasing accessibility.
To reduce its coal use, Israel has instituted a reform in the electricity sector and Israel Electric Corporation in compliance with this initiative has committed to selling five power stations, the first of which, Alon Tavor power station, was announced in 2018. In April 2019, GE announced that it has been awarded a contract by Israel Electric Corporation for the modernization of Orot Rabin power plant in Hadera.
Regulations relating quotas and trade in quota for emission of greenhouse gas together with CO2-tax remains the main regulatory instruments to enforce strict environmental requirements. Additionally, the functional regulatory requirements impose obligation on licensees systematically to improve performance by use of best available technology. New production projects are increasingly required to provide offshore facilities with electricity generated by hydropower. Recent development within carbon capture and storage is identified by the industry as technically possible and achievable contribution to reduced emission of climate gas.
At the federal level there are no policies or regulatory requirements in the U.S. relating to the oil and gas industry that reflect/implement the global trend towards low-carbon energy transition. The U.S. is currently producing more oil and gas than at any other time in its history and is a net exporter of both. Increased production of natural gas is seen as beneficial in that it contributes to the decrease in the use of coal, a more-contaminating fossil fuel.
The industry operates in a free market with thousands of participants in all segments of the industry. There are no specific governmental policies promoting or discouraging the development of any particular type of hydrocarbon resource. Capital investments in the U.S. respond principally to market forces and rise and fall accordingly.