Net Zero Oil and Gas Operations - An Important Transition Goal
Reducing the emissions intensity of oil and gas production is a viable and cost-effective opportunity for reducing global greenhouse gas emissions. The IEA suggests that halving the emissions intensity of oil and gas operations by 2030 would require around $600 billion in investment — a significantly smaller sum than other decarbonization opportunities.
Recent years have seen new efforts by governments and industry actors to reduce emissions from oil and gas operations. At COP28, 50 oil and natural gas producers, collectively accounting for 40 percent of global oil production, agreed to reduce their carbon emissions to net zero by 2050 and nearly eliminate methane emissions by 2030. Ensuring net-zero emissions becomes a reality will require international coordination, substantial investment and policy support. Much of the technology needed to achieve this is already available, including readily available ways to reduce methane leakages and flaring.
Tackling methane emissions
Greenhouse gas emissions generated by the production, transport, and processing of oil and gas — known as Scope 1 and 2 emissions — accounted for around 15 percent of total energy-related emissions worldwide in 2022, or around 5.1 billion tonnes, according to the IEA.
Methane emissions account for nearly half of these emissions, around 2 gigatonnes of carbon dioxide equivalent annually. Its potency as a greenhouse gas means that it has a significantly more potent climate warming effect than carbon dioxide, despite its shorter atmospheric lifespan. The main sources of methane emissions in oil and gas production are from venting, flaring, and from “fugitive” emissions — those which have escaped from valves or improperly sealed equipment.
At a corporate level, oil and gas companies which signed up to the Oil and Gas Decarbonization Charter at COP28 committed to setting interim targets that would reduce methane emissions to 0.2 percent of oil and natural gas production by 2030.
Methane emissions are hard to track and investment in methane detection technologies needs to increase significantly to address that issue. As part of the Oil and Gas Climate Initiative, companies including Shell, Saudi Aramco, and ExxonMobil have expanded their satellite monitoring campaign to detect emissions in emerging economies. That has already allowed them to plug leaks from two operators, the FT reported.
Firm policy action can help drive further action on reducing methane emissions, which remain stubbornly high. The US Inflation Reduction Act provides one such example: It provides financial incentives for methane monitoring and mitigation, and penalties for owners and operators of production facilities where methane emissions exceed a certain threshold.
Electrifying operations
The oil and gas industry is also investing heavily in clean energy technologies which could significantly reduce their emissions intensity. Extracting, refining, and transporting oil and gas is energy intensive. Currently, gas turbines typically generate the electricity required to power drilling rigs, pumps, and other equipment. Using more energy-efficient equipment and fully electrifying upstream operations can significantly reduce greenhouse gas emissions, according to the IEA.
Norway has been a leader in efforts to decarbonize upstream operations. As of 2023, an estimated 60% of its production is partly or fully electrified and powered from shore — where energy is largely renewable — or from floating offshore wind. As a result, it has the lowest emissions intensity of the major oil and gas-producing countries.
In 2022, Abu Dhabi National Oil Company (ADNOC) announced a $3.8 billion sub-sea transmission network to connect its offshore operations to low-carbon power network, which is expected to reduce the company’s offshore carbon footprint by up to 50 percent.
BP has also electrified large parts of its operations at its Permian Basin site in Texas, and other producers will need to follow to reduce emissions intensity to the levels required to meet decarbonization targets.
Carbon capture and storage
Carbon capture, utilization, and storage (CCUS) facilities hold significant potential for decarbonizing oil and gas operations. The oil and gas CCUS market reached US$3.7 billion in 2023 and is expected to grow nearly 15 percent annually from 2024 to 2032, according to Global Market Insights. ADNOC is one of several major industry groups investing heavily in carbon capture. Last year, it announced one of the largest carbon capture projects in the region, which will have the capacity to store 1.5 million tons of CO2 in geological formations deep underground.
Realizing the full potential of CCUS in decarbonizing oil and gas operations requires overcoming logistical, technological, and economic challenges. Reducing the costs of installation and retrofitting with CCUS will be critical for scaling up the technology more widely.
Towards net zero oil and gas operations
The pathway to net-zero emissions for oil and gas operations will be complex and demand concerted efforts from all sectors involved. While the advances made so far are encouraging, realizing net zero ambitions means accelerating these efforts. Increasing investment, strengthening policy support, and promoting international collaboration are critical to overcome the challenges ahead.
