LOTOS

Header

In the context of industrial emissions, the issue that attracts public attention is greenhouse gases. According to many researchers, GHG emissions produce environmental impacts that may affect the entire planet. At the LOTOS Group, we attach great weight to the continuous enhancement of our systems designed to monitor and minimise greenhouse gas emissions.

The greenhouse effect occurs when excessive thermal radiation emitted by the Earth is trapped in the atmosphere by certain substances. Gases which cause the greenhouse effect (known as greenhouse gases or GHGs) include: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6). It is widely believed that excessive GHG emissions are one of the main factors contributing to global climate changes that we are witnessing today. However, it should be noted that water vapour (H2O(g)) is also a major contributor to the greenhouse effect, although its emissions have never been subject to any legal regulations.

The first major document which set out the framework for intergovernmental cooperation in combating GHG emissions was the United Nations Framework Convention on Climate Change, signed in Rio de Janeiro at the 1992 Earth Summit. Initially, it did not impose any concrete obligations on the signatories. Therefore, to review and verify the provisions of the Convention, the annual Conferences of the Parties are held around the world. At the third Conference held in 1997 in Kyoto, an intergovernmental agreement was reached, later commonly referred to as the Kyoto Protocol. It was the first document to impose an obligation on developed countries to cut their GHG emissions by at least 5% on the 1990 levels by 2012. The Protocol came into effect in 2005, following its ratification by 141 countries, accounting in aggregate for more than 60% of global GHG emissions.

The use of natural gas at the refinery and CHP plant has led to the reduction of CO2 emissions in 2013 by 185 thousand tonnes.

The use of natural gas at the refinery and CHP plant has led to the reduction of CO2 emissions in 2013 by 185 thousand tonnes.

As an immediate follow-up of the entry of the Kyoto Protocol into force in the European Union, a scheme for greenhouse gas emission allowance trading within the Community was established under the provisions of Directive 2003/87/EU of the European Parliament and of the Council of 13 October 2003 (known as Emissions Trading Scheme, or EU ETS). Grupa LOTOS, LOTOS Asfalt, RCEkoenergia and Energobaltic have been covered by the ETS ever since its inception, which entails an obligation to meet a number of stringent requirements for the monitoring and reporting of GHG emissions. To simplify the system, all greenhouse gas emissions from the plant are reported in the CO2 equivalent. As a rule, the EU ETS is meant to operate on a free market basis, and its cornerstone is the Cap-and-Trade mechanism, which provides for the allocation of a specific number of free emission allowances to individual sectors (and then to individual plants) covered by the ETS. The plants are obliged to settle their CO2 emissions in tonnes on a regular basis, by 'surrendering' the corresponding number of emission allowances. This is to encourage industrial operators to reduce their emissions by upgrading production processes or investing in environmentally-friendly technologies. Reduced emissions will require fewer emission allowances, bringing measurable financial benefits. Ultimately, the entire system is meant to be based entirely on auctioning. To avoid unexpected significant costs and prevent carbon leakage (the transfer of production outside the territory covered by the ETS), a portion of GHG emission allowances is allocated free of charge. The only exception to that rule are power plants, which are not entitled to any free allowances (subject to certain exceptions). It should be noted that the number of free-of-charge allowances allocated per year is gradually reduced.

The main rules of the EU Emission Trading Scheme

One emission permit allows for emission of one tonne of carbon dioxide.


 

The implementation of the EU ETS was broken down into trading periods. In the first trading period (2005−2007), the same number of free allowances was granted in each year of that period based on average annual historical emissions (grandfathering rule). In the second trading period (2008−2012), forecast emissions were also taken into account. Back then, only 4% of allocated emission allowances could be sold in auctions. For the current trading period (2013−2020), a new allocation methodology has been developed based on the classification of installations by their emission intensity (benchmarking), that is by comparing the amount of CO2 emissions they produce with the quantity of processed feedstock. However, during work on the refinery benchmarking system it was determined that crude throughput would not be a reliable indicator of a plant's processing performance as the configurations of European refineries differ substantially. In 2008, CONCAWE (Conservation of Clean Air and Water in Europe), an organisation of European refineries promoting safety and environmental protection, proposed a new methodology, developed in cooperation with the US consulting company Solomon Associates – the Complexity Weighted Tonne (or CWT) method. Put simply, the CWT mechanism compares the amount of CO2 emitted by a plant with the total throughput, adjusted by appropriate ratios, of all units generating CO2 emissions at that plant (not only crude oil distillation units, but also isomerisation, reforming, hydrogen production, hydrocracking, consumption of purchased heat and electricity, and other processes). The CWT was approved by the European Commission, and the process of collecting plant data began. The allocation of free emission allowances is based on the average emissions of the 10% most CO2 efficient European refineries according to the 2007−2008 data, i.e. 29.5 kg CO2/CWT per annum (refinery benchmark). The chart below presents historical changes in emission intensity of our production plants.

Emissivity of Grupa LOTOS' production plants

Although the plant underwent major extension under the 10+ Programme , which doubled CO2 emissions, its emission intensity, expressed in kilograms of CO2/CWT, has been markedly and steadily going down. This shows our strong commitment to the environmentally responsible approach, being the cornerstone of the LOTOS Group's social responsibility strategy. We have achieved our most pronounced reduction in emission intensity, which has been observed since 2011, mainly by:

  • Using low-emission natural gas as:
    • Component of the refinery fuel gas (May 2012),
    • Feedstock in hydrogen production (June 2012),
    • Fuel in four CHP boilers (September 2012 – November 2014),
  • Building a flare gas recovery unit (June 2013),
  • Almost complete replacement of heavy fuel oil with fuel gas used in refinery furnaces (July 2013).

(For more information about our investment projects, go to: Continumous improvement).

Considering the modifications implemented to date, the planned replacement of burners currently used in the last CHP boiler with gas-and-oil burners, and the steps taken to improve the refinery's energy efficiency, we expect to see further reduction in the emission intensity of our installations in the coming years.

In the context of global climate changes, attention is often drawn to the profile of emissions produced over the entire life cycle of a product, from crude oil extraction, through processing and transport, to its consumption by end users. Therefore, we have decided to set up a special task force to investigate the matter. Despite the absence of binding regulations that would impose a methodology for calculating GHG emissions over the life cycle of fuels, we are planning to make attempts at reducing emissions of these gases at all stages of the product life cycle.