Revision of the Petroleum Industry Guidelines for Reporting GHG emissions

1. Revision of the Petroleum Industry Guidelines for Reporting GHG emissions GHG Reporting Task Force March 2011

2. Overview of oil and gas GHG guidelines • 2001 – API Compendium of emissions estimation methodologies (also 2004;2009) • 2003 – Guidelines on reporting GHGs • 2005 – Guidance on Voluntary SustainabilityReporting • 2009 – Addressing uncertainty in GHGinventories • 2010/11 – Revision to sustainability reporting guidanceand the GHG reporting guidelines…

3. IPIECA GHG Reporting Guidelines • IPIECA / API guidelines are: • Based on WRI/WBCSD GHG Protocol. • But builds upon it – tailored for O&G industry. • Their Purpose • provide guidance, not prescribe standards. • promote consistency and reliability. • The Scope • Accounting and reporting at facility through to corporate level. • Not estimation approaches – subject of Compendium.

4. Genesis of 2011 revision of GHG reporting • After 7 years, Reporting Guidelines needed update… • To reflect scientific and technical developments. • To reflect the actual experiences of those having implemented the guidelines. • To maintain consistency with other oil industry documents and other nationally or international recognized GHG standards or guidelines.

5. Task Force IPIECA Task Force: • Marathon (Chair) • The Loreti Group (Consultant) • IPIECA secretariat (project management) • API • BP • Chevron • ExxonMobil • Hess • Petrobras • RepsolYPF • Shell • Total • Stakeholder comments from: • Ernst & Young • PricewaterhouseCoopers • UK DEFRA • World Resources Institute 25/08/2014 5

6. Structure The guidelines have chapters on: • Introduction, scope • Reporting principles • Setting the boundaries (organizational, operational) • Tracking emissions over time • Identification of industry GHGs to report • Evaluation of emissions (inc. uncertainty) • Reporting • Inventory assurance

7. GHG guidelines 2011: what has changed? • 2011 revision, has significant improvements: • Aligned with Sustainability Reporting Guidance • Chapter 3 on boundaries • Organizational consolidations (boundaries), intro financial control • Builds in concept of the reporting unit • Operational boundaries: scope 1, 2 and 3 improvements • Chapter 4 on tracking emissions over time • Chapter 5 – added AR4 GWP factors • Chapter 6 – incorporates discussion of uncertainty and de minimis • Chapter 7 on reporting emissions – in particular normalization

8. Ch. 3 Boundaries

9. Ch. 3 Setting organisational boundaries • 3 recognized approaches for organizational boundaries: • Equity share; operational control; and financial control; • If asset wholly owned/operated, boundaries are clear • But partial owner/operation, boundaries more complex • based on company’s equity share of ownership (X%) • based on whether the company controls the joint venture, in which case it reports 100% of the joint venture’s emissions Guidelines make no recommendation as to which approach to use but lays out the pros and cons of each approach.

10. Ch. 3 Identifying reporting units • A key step is to identify the Reporting Units • Smallest practical building blocks reflecting internal management • Can be all or part of a subsidiary company, joint venture, investment, facility, plant, office, or business location • Reporting units should: • Represent pieces of business unlikely to be split during restructuring • Operated by a single company • Have a single company equity share • Cover a narrow range of activities located within one country or region. • Allows data to be consolidated in multiple ways.

11. Ch. 3 Setting operational boundaries • Operational boundaries determine which emissions related to a company’s activities should be included SCOPE 1 Direct Emissions e.g. process emissions, flaring, fugitive emissions SCOPE 2 Indirect Emissions from energy consumption e.g. emission associate with the import of electricity, steam, heating (hot water), and cooling SCOPE 3 Other Indirect Emissions e.g. product use, 3rd party shipping, hydrogen production, purchased products/materials, business travel Companies should account & report Scope 1 emissions. Companies should account for Scope 2 emissions. They may choose whether to report Scope 2 and 3 emissions. Lays out pros and cons related to reporting indirect emissions.

12. Ch. 4 Tracking emissions over time • Desire to track performance over time. • Normally, reference point is base year emissions • Fixed base year approach: a single base year, or average of years • Rolling base year approach: rolls forward regularly • When monitoring for performance improvement, base year emissions should be adjusted when significant changes occur • e.g. significant mergers, acquisitions and divestment, ownership of sources, significant change in calculation methods No recommendation as to whether fixed or rolling base year is used.

13. Ch. 5 Identification of industry GHG emissions • IPCC SAR GWP factors recommended for use in corporate inventories until at least 2012 • Added IPCC AR4 GWP factors for information as UN may transition after 2012. • Of particular interest is the treatment of methane (21  25) 25/08/2014 13

14. Ch. 6 Evaluation of emissions - Uncertainties • Significantly reworked to address uncertainty. • Serves as companion to Uncertainty document. • Focuses on technical uncertainty from known sources. • But recognizes there are other factors that effect corporate inventory uncertainty. • The purpose of uncertainty analysis and quantification: • Can be part of a learning and feedback process to improve quality. • Provides transparency and increased credibility. • Common technical uncertainties in the industry • Combustion: Fuel composition. • Venting: Quantity and composition. • Fugitive emissions: composition, quantity. Address uncertainty from source types in the context of their potential contribution to overall uncertainty. Focus on the largest sources!

15. Ch.6 Evaluation of emissions - de Minimis • Sometimes companies need to decide on the significance of a source • Usually based on estimated % of total emissions, or a fixed value • Voluntary reporting guidance varies on de minimis • GHG Protocol does not recognize excluding emission sources that fall below a particular size, to promote the goal of completeness • The Climate Registry also does not allow for de minimis exclusion • ISO 14064-1 allows exclusion where sources are not material, or quantification is not technically feasible or cost effective Specific de minimis level is not recommended –a level may be significant for one facility, but not for another. Companies that do apply a numerical threshold should document it. May decide to use simplified estimation approach.

16. Ch.7 Reporting emissions – aggregation • GHG emissions can be aggregated across: • organizational • operational (always recommended) • others: geographic, organizational unit, source types • If reporting multiple scopes should report each separately • If reporting emissions associated with exported energy do so separately. • Companies who are able should report by sub-sector: • E&P • Refining • Petrochem’s, • Transport and Terminals, • Pipeline, • Marketing 25/08/2014 16

17. Ch. 7 reporting emissions - normalization • Reporting normalized GHG Emissions • facilitates comparisons between products and processes, allowing for differences in production levels • However, output measures: • represent gross indicators of production • Do not take into account varying nature of operations • Should only compare like-like • Bases for normalizing within our industry • Are only viable at a sub-sector level • Guidance recommends sub-sector factors

18. Thank you IPIECA the global oil and gas industry association for environmental and social issues www.ipieca.org

19. Ch. 2 Reporting principles • Principles are based on GHG Protocol • Main aim of the principles is to ensure that reporting is true, credible and unbiased • The reporting principles: • Relevance – boundaries selected to reflect organization’s emissions • Completeness – account for all sources, document exclusions • Consistency – use consistent methods and document any changes • Transparency – provide a clear audit trail; disclose assumptions • Accuracy– ensure no systemic bias; quantify and reduce uncertainty

20. (ch 6) Relative uncertainty: up and downstream Upstream Downstream

21. Ch. 7 reporting emissions - normalization

22. Ch. 8 Inventory assurance • Inventory assurance processes • based on two chapters from GHG Protocol: Managing inventory quality and Verification of GHG emissions • Companies not using inventory quality management systems should consider adopting them • Level of assurance required increases from internal to public to regulatory/financial reporting: • used within the firm only – internal assurance processes sufficient? • reported publicly – engage external assurance providers? • ETS / some voluntary programs – external assurance required • Materiality • Information is considered material if, by its inclusion or exclusion, it influences decisions or actions taken by users of that information