July 30, 2021 [OilPrice] – Pressure is mounting on the oil and gas sector to clean up its act and reduce emissions from operations, the so-called Scope 1 and Scope 2 emissions.
Many of Europe’s largest oil corporations, including Shell, BP, Eni, Repsol, and Total, have imposed their own targets to cut carbon intensity from their upstream operations as they have pledged to become net-zero emission businesses by 2050 or sooner.
The pressure from investors and shareholders is also growing, including on the oil industry to reduce the so-called Scope 3 emissions—those emissions generated by the use of their products.
Low-carbon power would be a key to cutting emissions, says Wood Mackenzie, which estimates that around two-thirds of emissions come from power consumption – production, processing, and liquefaction.
Between 2021 and 2025, the region with the highest carbon intensity will be Oceania, mostly due to the large emissions from liquefaction, according to the Wood Mackenzie Emissions Benchmarking Tool. Africa comes next, also because of the large share of flaring in upstream operations, followed by Asia with high production and liquefaction emissions, and North America, where production and methane losses account for much of the carbon intensity.
There are projects to mitigate emissions.
“But technical, logistical and commercial challenges need to be overcome,”
Jessica Brewer, Principal Analyst, North Sea Upstream Oil and Gas at WoodMac, notes.
Africa, for example, hosts some of the most polluting assets because of a lack of infrastructure to solve the gas flaring problem, Wood Mackenzie said last month.
“Reducing emissions and considering new energy diversification is really unavoidable,” WoodMac said in a report.
As investors want proof of solid efforts for emission reduction, international oil majors should work to address the problem in Africa, where new liquefied natural gas (LNG) projects are being planned.
The oil industry has proposed ways to slash emissions from operations, not only in Africa, especially after shareholders and courts delivered a warning, the starkest yet, about Big Oil’s license to operate.
Oil firms have started to address investor concerns about emissions. Some are accelerating the electrification of oilfields with renewable sources of energy, others—most actually—are looking at carbon capture, storage, and utilization (CCSU) technologies to remove the carbon dioxide during operations.
Norway’s Equinor, for example, is electrifying operations, replacing a fossil-based power supply, mostly from gas turbines, with renewable energy.
“Electrification in the North Sea is one of the main measures to reach our climate ambitions for the next decades,” the Norwegian energy giant says.
U.S. supermajors Exxon and Chevron, who—unlike Europe’s giants are not investing in solar or wind energy—are betting on carbon capture and storage. So are many European oil firms in hopes of reducing their carbon footprint and helping whole industrial clusters to decarbonize.
In the United States, Exxon created earlier this year a new business, ExxonMobil Low Carbon Solutions, to commercialize its low-carbon technology portfolio, focusing first on CCS. Chevron also bets on CCS as one area in which it would invest in the coming decades.
The biggest oil firms believe that CCS is one of the ways to help carbon-intensive industries to reduce their emissions, as a growing number of companies in various sectors are committing to net-zero operations within the next two to three decades.
Oil majors are already working on several large-scale CCS projects aimed at decarbonizing industrial clusters in parts of Europe.
Even in Canada, home to the oil sands—one of the most emission-intensive crude resources in the world—the biggest producers announced a net-zero collaboration initiative to achieve net-zero emissions from oil sands operations by 2050. The initiative includes companies that operate some 90 percent of Canada’s oil sands production: Canadian Natural Resources, Cenovus Energy, Imperial, MEG Energy, and Suncor Energy.
The initiative is ambitious and “will require significant investment on the part of both industry and government to advance the research and development of new and emerging technologies,” the group said.
The warning from the Canadian groups is valid for all technologies emerging to save the day and reduce emissions from upstream operations—those technologies need a lot of investment, and not just from Big Oil.
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