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Carbon Value-at-Risk (VAR)

Learn what Carbon Value-at-Risk (Carbon VAR) is and how it has been applied in Lens Upstream

Sandra Sanchez avatar
Written by Sandra Sanchez
Updated over a month ago

What is Carbon Value-at-Risk?

Carbon VAR describes the asset's value at risk under a given carbon price assumption. It is a useful metric for quantifying the potential financial liability associated with carbon emissions.

💡 Tip:The VAR only reflects the impact of carbon costs on an asset’s base case valuation. It does not take into account the potential impact of shifts in demand for the commodity, together with the implications for commodity prices, under a lower carbon future.

Where can I find this in Lens Upstream?

  1. Search for an upstream field asset (e.g. 'Mero' in Brazil) and run an Upstream Valuation

  2. You can see what price assumptions are being utilized in the economic assumptions header.

  3. A new sub-heading under the assets economic summary stats card will show Carbon VAR metrics. (Carbon VAR and Remaining PV post-tax including VAR)

  4. A Carbon price grid is available at the bottom of the dashboard displaying the annual carbon prices for the country where the asset is located.

  5. Lastly, you can export the calc file to see the "Emissions' tab for assets where VAR is calculated.

What if a carbon cost has already been accounted for in an upstream field asset?

If carbon cost is already present in the asset's fiscal regime, it will already be modelled into the asset's fiscal model. Therefore, no Value-at-Risk will be calculated.

  1. The asset's economic stats card has a message showing users that Carbon VAR does not apply for this asset.

  2. The Carbon prices grid is still present at the bottom of the dashboard.

  3. The 'Emissions' tab is not available when exporting the calc file for that asset.

Company carbon VAR

In addition to calculating the oil & gas project's carbon VAR, we are also able to calculate the company carbon VAR by applying the same principle - of course while taking into account the company's participation in the project.

Aligned with the approach on regimes where carbon tax exists, if carbon cost is already present in the asset's fiscal regime, it will already be modelled into the asset's fiscal model. Therefore, no Value-at-Risk for that regime will be added in the Company VAR. Those regimes' carbon liabilities are calculated in the base case and accounted in the Remaining PV post-tax (incl. VAR).

Here are the steps to get the company carbon VAR:

  1. Filter for an upstream company (e.g. Kosmos Energy)

  2. Go to Upstream Valuations on the menu

  3. Value-at-Risk for the company is now available in the company stats card "Summary by economics" as well as the following areas:

    1. Company asset summary grid

    2. Consolidated company report --> Company Asset Summary tab (export)

    3. Company asset calc file (export)

Summary by economics

Company asset summary grid

Consolidated company report

Export the consolidated company report first:

Then go to the 'Company Asset Summary' tab:

Company asset calc file

Export the company asset model first:

Then go to the 'Emissions' tab:

What's next?

If you're working with carbon VAR, you may also be interested in the following articles:

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