There are mounting pressures from regulatory authorities, investors, and market peers for oil and gas(O&G) companies to move towards lower emissions. There is a 20% increase in investment-related reporting instruments and about 18% rise in corporate sustainability-related instruments for disclosures. It is also becoming an existential question of competitiveness, with various oil and gas companies competing to leverage different technologies for making their energy transition.

Technologies in use

Large O&G sector companies are using technologies to reduce methane emissions, while some such as BP, Shell, Total, Equinor, and Repsol are also focusing on minimising the flaring of all associated gases and venting of CO₂. Several companies are also integrating renewables and low-carbon electricity into new upstream and liquefied natural gas developments. These are all largely operational tweaks to O&G operations.

Further, there is also a strong push among O&G companies to leverage Carbon Capture, Utilisation and Storage (CCUS) technologies to achieve lower emissions. Globally, it is estimated that just over 700 Mt CO₂ of Scope 1 emissions from oil and gas operations could be avoided using CCUS technologies. Many of these reductions – especially from natural gas processing and refining processes – are possible at relatively low costs. Over 250 Mt CO₂ emissions could be avoided at a price of less than $50 per tCO₂.

Technologies for the future

We believe that the operational tweaks to reduce leakages, flaring, and venting as well as use of CCUS technologies to adapt to a low-carbon economy mark the start of a large-scale energy transition in the O&G sector. This is supported by data from the IEA which indicates that by 2030 the use of CCUS technologies will be partially replaced by the surge in new emission reduction technologies. These technologies will also include the use of renewables in operations, continued reductions in methane, reduce leakages, flaring, and venting as well as the oil-to-gas shift and new zero-carbon fuels. Companies such as BP are already using low-carbon gases while Eni and Total are using advanced biofuels.

Transition of O&G to ‘Energy’ companies

While serving the important purpose of fulfilling energy security, companies in the O&G sector are at early stages of rethinking ‘how’ they do so. While the changes related to the ‘how’ will cater to lower emissions in the operations and production processes of the O&G sector, the greatest challenge for the sector remains to be emissions from the use of oil and gas or Scope 3 emissions. In fact, Scope 3 emissions from oil and gas are around 3 times the Scope 1 and Scope 2 emissions, varying across different companies.

There is therefore an urgent buy-in needed from the sector not only for scaling up existing ways to lower emissions, but also innovate to create new technologies that will support the O&G sector to continue to produce energy and for consumers to use the energy without the associated carbon.