Measuring the socio-economic value created by ecosystem services

What value is Saipem creating and sharing as a result of the way it manages its projects or due to its presence? And how can this value be quantified?

The GLNG Pipeline Project is an ongoing Saipem project in Queensland, Australia. Pipeline construction, and activities associated with the Oil&Gas industry in general, are often linked to the disturbance and degradation of the social and environmental context. Specifically, impacts on the environment or on particular ecosystems are nearly always perceived as adverse. In reality, however, outputs of goods and services do in fact generate benefits for the human population.

To understand better the real social and environmental footprint of GLNG Pipeline Project activities, Saipem decided to quantify the ecosystem service value created from a specific aspect of the Project Environmental Management Plan.

The term ‘ecosystem’ refers to a dynamic complex of plant, animal and micro-organism communities and their non-living environment all interacting as a functional unit (MA, 2005). Effectively, ecosystems are the habitats of, for example, coral reefs, forests, grasslands, rivers, farmland and urban parks that support various species.

‘Services’ refers to the functions and products of the ecosystem that benefit humans in the short or long term. They depend on the attributes of the ecosystem and include crops, fish, freshwater and timber.
They also comprise climate regulation when trees sequester carbon, and there are cultural services, such as tourism, to say nothing of spiritual benefits.

The aim of the study was to understand the real footprint by quantifying the value of the ecosystem services created and associated with an increase in human wellbeing. Specifically, it examined the translocation and management of an ancient species of plant known as the Cycas Megacarpa (Cycad). The Cycads, which can reach a height of 5-6 m, is a small group of plant that has existed for over 200 million years. However, its decreasing numbers and distribution are due to human induced destruction of their habitat.

The ‘Cycas Megacarpa Translocation and Management Plan’ (CTMP), developed by the Client, GLNG, aims to protect and increase the Cycads population in the area crossed by the project pipeline. In accordance with the Environment Protection and Biodiversity Conservation Act 1999 of the Australian Government, through the application of the CTMP the Client has committed to preserving a population of 3,990 Cycads over 5 years following planting in the some selected sites along the pipeline route. Of these 3,990 Cycads, approximately 3,220 will be nursery grown Cycads and 770 will be from GNLG Pipeline right of way (ROW) translocation activities.

The CTMP provides specific assessment, management, monitoring and reporting measures on:

  • Translocation of individual Cycads from ROW activities.
  • Nursery cultivation of Cycads, including not only seed collection and propagation, but also monitoring, management and evaluation.

For the purpose of the study, nursery grown Cycads were examined, since they represent the additional environmental and social value, whereas the ecosystem services value from the translocation of the Cycads was deemed negligible.

The ecosystem services value created by the CTMP was calculated by applying the model developed by the World Business Council for Sustainable Development (WBCSD) and the International Institute for Sustainable Development (IISD). It is given by two components. The first is the indirect use value given by the social cost of carbon storage and sequestration, whereas the second is the optional value of future direct and indirect uses of Cycads seeds and plants.

20 mln AUD

ESTIMATED VALUE CREATED OVER A 20-YEAR TIMEFRAME

72 mln AUD

ESTIMATED VALUE CREATED OVER A 200-YEAR TIMEFRAME

The study shows that, over a 20 year timeframe, the project investment for implementation of the CTMP will create a socio-economic value for local stakeholders of approximately 20 million AUD (net present value), with a social return on the investment of about 300%. Considering a broader timeframe, in 200 years the value created can be estimated at about 72 million AUD with a social return on investment of about 833%.

The study outcomes are important confirmation that management of project operations through a sustainable approach is a key way to create value for local stakeholders and that proper communication of the shared value created is essential for fostering a more supportive environment within which to conduct operations.