Real progress in reducing emissions from oil and gas operations

As the world confronts the urgent need to reduce greenhouse gas emissions, the oil and gas industry finds itself at a crucial juncture. The task ahead is clear: reducing the emissions intensity of oil and gas production is not just a viable option but a cost-effective and essential opportunity to combat climate change. According to the International Energy Agency (IEA), halving the emissions intensity of oil and gas operations by 2030 would require an investment of around $600 billion. This figure, while significant, is relatively modest compared to the costs associated with other decarbonization efforts.

In recent years, there has been a noticeable shift in the industry, with both governments and key players taking proactive steps to mitigate the environmental impact of oil and gas production. The recent COP28 summit marked a watershed moment when 50 leading oil and natural gas producers, responsible for 40 percent of global oil output, committed to reducing their carbon emissions to net-zero by 2050 and nearly eliminating methane emissions by 2030. However, turning these pledges into reality will require coordinated international efforts, substantial financial investments, and robust policy support.

Tackling methane emissions: a priority

One of the most pressing challenges in reducing the emissions intensity of oil and gas operations is addressing methane. In 2022, greenhouse gas emissions from the production, transport, and processing of oil and gas — known as Scope 1 and 2 emissions — accounted for approximately 15 percent of total energy-related emissions globally, equivalent to around 5.1 billion tonnes, according to the IEA. Of these emissions, methane — a potent greenhouse gas with a much higher climate warming effect than carbon dioxide — constitutes nearly half, or around 2 gigatonnes of carbon dioxide equivalent annually.

At the corporate level, companies that signed the Oil and Gas Decarbonization Charter at COP28 have committed to setting interim targets to reduce methane emissions to 0.2 percent of oil and natural gas production by 2030.

However, one of the main challenges in reducing methane emissions is tracking them effectively. Investment in methane detection technologies needs to increase significantly. Companies such as Shell, Saudi Aramco, and ExxonMobil, as part of the Oil and Gas Climate Initiative, have expanded their satellite monitoring campaigns to detect emissions, particularly in emerging economies. This has already resulted in the identification and plugging of leaks from two operators, highlighting the potential of advanced detection technologies.

Firm policy action is crucial to driving further progress in reducing methane emissions, which remain stubbornly high. The U.S. Inflation Reduction Act serves as a model in this regard, offering financial incentives for methane monitoring and mitigation and imposing penalties on owners and operators of facilities where methane emissions exceed certain thresholds.

Electrification of operations: a game changer

Beyond methane reduction, the electrification of oil and gas operations presents another significant opportunity to lower emissions intensity. The industry is increasingly investing in clean energy technologies to power extraction, refining, and transportation activities, which are traditionally energy-intensive. Gas turbines, typically used to generate electricity for drilling rigs, pumps, and other equipment, can be replaced with more energy-efficient equipment or electrified using low carbon energy sources.

Norway has emerged as a leader in this area, with an estimated 60 percent of its production as of 2023 partly or fully electrified and powered by renewable energy sources from shore or offshore wind. This has given Norway the lowest emissions intensity among major oil and gas-producing countries. Similarly, Abu Dhabi National Oil Company (ADNOC) has announced a $3.8 billion subsea transmission network to connect its offshore operations to a low-carbon power network, supported by nuclear energy, potentially reducing the company’s offshore carbon footprint by up to 50 percent.

BP is also making strides in this direction, having electrified large parts of its operations in the Permian Basin in Texas. As more producers follow suit, the industry will make significant progress toward meeting its decarbonization targets.

Carbon capture and storage: unlocking potential

Carbon capture and storage (CCS) is another critical tool in the industry’s decarbonization toolkit. The global market for oil and gas CCS was valued at $3.7 billion in 2023 and is expected to grow by nearly 15 percent annually from 2024 to 2032, according to Global Market Insights.

However, realizing the full potential of CCS in decarbonizing oil and gas operations will require overcoming several challenges, including logistical, technological, and economic barriers. Reducing the costs associated with installation and retrofitting with CCS will be essential for scaling up the technology more widely.

The road to net-zero operations

The pathway to net-zero emissions for oil and gas operations is complex and demands concerted efforts across all sectors. While significant progress has been made, achieving net-zero ambitions requires accelerating these efforts. Increased investment, strengthened policy support, and enhanced international collaboration are critical to overcoming the challenges ahead.

The future of the oil and gas industry hinges on its ability to adapt and innovate. By prioritizing the reduction of emissions intensity, particularly through methane mitigation, electrification of operations, and the expansion of CCUS, the industry can play a vital role in the global transition to a low-carbon economy. The stakes are high, but so too is the potential for meaningful impact.