Ann de Rouffignac
OGJ Online
TransAlta, a Canadian energy company, agreed to sell up to 210,000 tonnes of CO2 credits to Murphy Oil USA Inc. in what appears to be the first transaction of this kind with an oil company.
TransAlta has been active on the emissions credits trading front even though the market is not developed yet and international laws not mandatory either. Murphy Oil, likewise, is acting voluntarily and not required to take these steps to offset its increasing emissions volume.
�We think this is the first such transaction by an oil company,� says Evan Ard, spokesman for NatSource LLC, an energy brokerage firm in New York that brokered this transaction.
Murphy Oil�s output is increasing in response to growing demand for oil products. Consequently, emissions have also increased but not as a percentage of output, explains Kevin Melnyk, spokesman for Murphy Oil. Murphy is voluntarily participating in the effort to reduce emissions of greenhouse gases on a global basis through the market-based approach of emissions trading. In an emissions trade, a company or organization that can absorb or reduce greenhouse gases, sells emission credits to another organization wherever in the world. The result is a financial incentive to reduce emissions and a net reduction in global concentrations of CO2.
�We believe the science is uncertain behind the Kyoto discussions. That being said, it (buying the credits) is the responsible thing to do,� says Melnyk. �This agreement is totally voluntary. There is no requirement.�
Prices of the carbon dioxide credit range from $1 to $3.50 a tonne, says Ard. �This is a pre-compliance market. The price is low now but will go up as the risk of not buying the credits increases on the buyers side.�
Right now, buyers of the credits risk not really needing the credits since no US laws require them yet. There is also the risk that credits bought now won�t be applicable in the future. Because the risk is higher on the buyers side, there are fewer buyers in the market. Prices are pressured down. The market is not very liquid and is based only on bilateral trades.
�But when CO2 becomes a true commodity, it will become a true global market,� he says.
If someone increases production of a greenhouse gas in Kentucky, it can affect someone in Germany, he explains. As the rules and regulations become formalized the market will become more liquid and prices will probably range up to $20/tonne, he says.
NatSource, Arthur Andersen and French financial concern Credit Lyonaisse are setting up a trading platform for CO2 that is expected to be operational by the end of next year, says Ard.
Transalta has been actively buying and selling emissions credits in an effort to help meet Canada�s Kyoto obligations. In June, it bought 24,000 tonnes of Co2 from a German utility. In March of this year, TransAlta said it will reduce its net Canadian greenhouse gas emissions to zero by 2024 through new technology, renewable resources, emissions trading and offsets. TransAlta owns and operates 8,000 Mw of generation plus transmission assets in Alberta