To play its part in mitigating climate change to the degree required, the oil and gas sector must reduce its emissions by at least 3.4 gigatons of carbon-dioxide equivalent (GtCO2e) a year by 2050, compared with “business as usual” (currently planned policies or technologies)—a 90 percent reduction in current emissions. ( McKinsey & Company)
The Oil and Gas industry accounts for 42% of the global emissions of Greenhouse gas. 33% from the value chain and 9% from direct and indirect operations. (OECD 2018) According to a recent report from Mckinsey & Company several factors are playing an important role in influencing the decarbonation of the oil and gas production. These are occurring on four fronts.
The world’s largest pension funds and insurers which control over $2.4 trillion in assets have aligned their management to transition investments to net zero by 2050.
Renewable energy technology is becoming much cheaper with solar now 70% lower than in 2011 and wind by as much as 66%.
Governments plan to implement binding GHG emission targets through carbon taxes and credit systems which currently cover 20% of world emissions
New Oil & Gas technology is creating ways to reduce emissions at little or no cost to the operator.
While consumers can reduce emissions through buying decisions the oil and gas industry must look at productions methods for opportunities. Upstream operations account for two-thirds of their emissions. New technology in this area can have a lasting impact on improving our climate change outlook. Three areas have been identified as having great potential to improve operations and reduce CO2 and GHG emissions. These include changing power sources onsite and replacing diesel powered generation with alternate energy choices. By reducing fugitive emissions from leaks in valves, seals, compressors and pump this reduces the need for flaring and can allow for captured gas to be saved and used. By electrifying equipment used in the upstream processing that has relied on gas for power reducing emissions is further improved.
CO2 Capture, use, and storage will play and important part of the equation to meet GHG reduction goals by 2050. However, these initiatives will not happen without a regulatory framework in place. Programs are underway in the United States and UK to build CO2 capture, use, and storage in oil and gas production facilities. CO2 is currently used in enhanced oil recovery to improve old oil reservoir production. These programs are supported by government incentives and new bills to improve tax credits and provide financing for research and development into CO2 reduction, storage and sequestering.
Depending on the industry carbon capture, use and storage can cost between $20/tCO2e in the oil and gas sector to $100 – $200/tCO2e in industries like cement. Clean gas technology that creates power while capturing greenhouse gas emissions can offset this cost and help move towards a net-zero process.