Rang Dong CO2 Project Approved Under Kyoto


Rang Dong Oilfield
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Nippon Oil Corporation President Mr. Shinji Nishio reports that the Rang Dong oil field associated gas recovery and utilization project in Vietnam (the "Rang Dong CO2 Project") was approved as a Clean Development Mechanism Project ("CDM Project") under the Kyoto Protocol, the first CDM Project reducing CO2 emissions by utilizing associated gas that is produced along with crude oil from oil fields.

The Japan Vietnam Petroleum Company, Ltd. ("JVPC") a subsidiary of Nippon Oil Exploration Limited ("NOEX"), the wholly owned subsidiary and the exploration and production arm of Nippon Oil operates Rang Dong oil field located at Block 15-2, offshore southern Vietnam. The Rang Dong CO2 Project is expected to contribute in preventing global warming through the reduction of CO2 emissions by 6.77 million tons, or 677,000 tons per annum annualized over the 10-year period 2001-2011 by supplying the associated gas, which would otherwise to be flared, to power plants, fertilizer plants and nearby industrial zones in Vietnam through a specially-built pipeline and by efficiently utilizing it as fuel there.

Nippon Oil, as a world-wide energy supplier, considers that it is important to maintain and improve "Harmony with the Global Environment", which is a theme central to the organization's code of conduct. Nippon Oil aims to further reduce greenhouse gas emissions and will strive to contribute to other activities for the creation of a sustainable society.

Nippon Oil outlines the features of the Rang Dong CO2 Project as follows:

1. The first ever CO2 reduction methodology in the world by means of the recovery and utilization of associated gas.

Under the Kyoto Protocol's Clean Development Mechanism, the effect of each project must be evaluated under a certain methodology approved by the CDM Executive Board. Because the Rang Dong CO2 Project was the first CO2 emission reduction project proposing to utilize associated gas, Nippon Oil developed a new methodology that was approved by the CDM Executive Board to evaluate the effect of the utilization of associated gas and the reduction of CO2 emissions to be achieved by the Rang Dong CO2 Project.

Nippon Oil's approved methodology will apply to future projects around the world that seek to reduce CO2 emissions through the utilization of associated gas.

Nippon Oil is proud that the new methodology will contribute in promoting the reduction of CO2 emissions in the future.

2. The largest CO2 emission reduction project in the world registered under the CDM Program to date

The majority of CDM Projects handle greenhouse gases which have high global warming potential such as HFC or methane. Whilst CO2 emissions are generally increasing, the largest CO2 emissions reduction that a CDM Project has achieved to date is 150,000 tons per annum, whereas the Rang Dong CO2 Project will reduce CO2 emissions by 677,000 tons per annum annualized over the 10-year period 2001-2011 the largest ever CO2 emissions reduction in the world registered under the CDM Program to date.

3. Contribution to the sustainable development of Vietnam.

The Kyoto Protocol requires contribution to the sustainable development of developing countries as an important prerequisite for a project to be approved as a CDM Project. The Rang Dong CO2 Project will contribute to the sustainable development of Vietnam by utilizing natural resources in a manner that will improve the standard of living and enhance energy self-sufficiency in the Vietnam.

In addition, Nippon Oil and JVPC have contributed to the development of Vietnam by providing:

(a) assistance in education (such as the building of new school buildings);

(b) training to disabled pupils; and

(c) housing and food for underprivileged people and people affected by natural disasters such as storms and floods.

Rang Dong oil field lies within Block 15-2, offshore southern Vietnam, in which JVPC as the operator of the field has a 46.5% interest. JVPC's partners in Block 15-2 are ConocoPhillips (UK) Gama Limited, a United Kingdom based subsidiary of ConocoPhillips of the USA and PetroVietnam Exploration and Production of Vietnam, each having a 36% interest and a 17.5% interest respectively. The field started commercial production of crude oil in August 1998 and currently produces about 55,000 barrels per day of crude oil.

All associated gas produced along with the crude oil from the Rang Dong oil field was previously used for fuel, used to improve oil production, or was flared at the offshore platform. The utilization of associated gas by supplying it to local power generation plants, fertilizer plants and nearby industry zones through a sub-sea pipeline has led to the reduction of the flaring of associated gas at JVPC's offshore platform, provided an additional source of clean-burning natural gas fuel for Vietnam, and will reduce CO2 emissions by 6.77 million tonnes over the 10-year period 2001-2011. This also lowers factor costs for such industries and helps them stay competitive in the global marketplace.

The successful application for the Rang Dong CO2 Project as a CDM Project came about by first obtaining approval from the CDM Executive Board for Nippon Oil's new methodology, followed by approval of the project by the governments of Japan, the United Kingdom and Vietnam. After validation by the Designated Operational Entity and the CDM Executive Board, the Rang Dong Gas Project was today registered as a CDM Project.

After verification of the level of CO2 emissions reduction at the Rang Dong CO2 Project, the reduction of CO2 emissions will be certified and certified emission reduction (CER) will be issued to the Rang Dong CO2 Project.

The Clean Development Mechanism is one of three "flexibility mechanisms" aimed at lowering costs of achieving emissions targets under the Kyoto Protocol. Developed countries implement project activities in developing countries by supporting those projects with technology and/or finance. CERs are issued by the CDM Executive Board in line with CO2 emissions reduction as a result of the project activity.

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