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In the complex landscape of carbon offsetting, the credibility of carbon credits hinges on their being real, additional, and measurable.


These three principles form the bedrock of effective carbon credit initiatives:

  • "Real" implies that the emissions reductions or removals associated with the credits are genuine and verifiable.

  • "Additional" indicates that the credited activities go beyond business-as-usual scenarios, resulting in emissions reductions that would not have occurred otherwise.

  • "Measurable" underscores the importance of accurately quantifying these reductions. It is imperative that carbon credits adhere to these principles to deliver meaningful contributions to global climate goals.

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To comprehend the significance of real, additional, and measurable carbon credits, it's crucial to delve into the intricacies of the oil extraction process. The journey from exploration licenses to the first barrel drilled is a multifaceted progression. 

Here is a explicit illustration : 


Source: Investing in Disaster : recent and anticipated final investment decisions for new oil and gas production beyond the 1.5°C limit, Oil Change International

It all begins with a government bidding process, where O&G companies compete for exploration and extraction licenses. Once a company wins the bid, the exploration phase commences, involving intensive seismic surveys with the objective of proving static reserves with composition characteristics.

The pivotal moment arrives with the commercial discovery, identifying a well with the potential for financial viability in drilling. Following the discovery, the appraisal phase unfolds, marked by additional surveys and securing the necessary financial backing to obtain the required permits. This phase is critical for thoroughly assessing the commercial potential of the discovered reserves, especially proving the dynamics of the reserve during production.

The journey culminates in the final investment decision (FID), a decisive point where the O&G company enters into contractual agreements with the mineral owner to proceed with the extraction phase. This decision is accompanied by a comprehensive business plan, solidifying the commitment to extracting resources and setting the stage for the subsequent steps in the oil and gas extraction process. The FID sets the stage for the development phase, where the infrastructure necessary for oil extraction is planned and implemented.

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For carbon credits to be truly additional, they must be tied to projects where the risk of drilling is imminent. This timing is not arbitrary but rooted in the dynamics explained above.


Contractual arrangements with mineral rights owners and the O&G should occur after appraisal phase and right before the final investment decision.


At this juncture, geologist reports can quantify the oil reserves with greater accuracy and oil and gas companies are on the verge of the development phase, where the infrastructure necessary for oil extraction is planned and implemented.


Without the financial support provided by the offsetting mechanism, the carbon associated with the extraction process would be released into the atmosphere. 

If you're seeking additional information on:

  • Exploration and extraction licenses 

  • Calculations converting oil reserves in Scope 1, 2, 3 emissions

  • Production Sharing Contracts 

  • How can O&G be included in project development

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