Decarbonizing the Oil and Gas Industry
Today, the oil and gas industry’s operations account for 9% of all human-made greenhouse gas emissions. It also produces the fuels that create another 33% of global emissions. Thus, the oil and gas industry will have a major role to play for the world to meet its climate-change goals. Investors are pushing companies to disclose consistent, comparable and reliable data of their sustainability targets and investments. Activist shareholders are challenging US- and Europe-based oil majors on their climate policies and emissions-reduction plans. There are other developments which are shaping the way forward for a more sustainable future and which put the future of petrochemicals at stake. Where does the oil and gas industry fit in this scenario? Let’s find out in this blog.
Actions by Upstream Operators
Upstream operations account for two-thirds of sector-specific emissions. Some of the actions which oil and gas upstream operators can take are listed as follows: –
Changing power sources – One oil and gas company is using on-site renewable-power generation to provide a cost-effective alternative to diesel fuel. By replacing on-site renewable power generators with a solar PV and battery setup, oil and gas companies can reduce emissions significantly. Connecting onshore or nearshore rigs and platforms to the central grid (as opposed to decentralized diesel generation) can also work well: for example, in its drive for electrification, Equinor recently connected its Johan Sverdrup field, which lies 140 kilometers offshore, to the grid.
Reducing fugitive emissions – Companies can cut emissions of methane, a powerful greenhouse gas, by improving leak detection and repair (LDAR), installing vapor-recovery units (VRU), or applying the best available technology (such as double mechanical seals on pumps, dry gas seals on compressors, and carbon packing ring sets on valve stems).
Electrifying equipment – One oil and gas company replaced gas boilers with electric steam-production vessels, including high-pressure storage for nighttime steam supply, to support separation units with the expectation that the project will pay for itself in less than ten years. In many circumstances, there is already a good business case, on purely financial grounds, for combining the use of solar and gas in place of conventional boilers.
Actions by Downstream Operators
Energy efficiency – Efficiency is a factor in every part of the industry but new downstream-specific technologies can make a big difference. Waste-heat-recovery technology and medium-temperature heat pumps in refineries, for example, reduce the amount of primary energy used in distillation.
Green hydrogen – Hydrogen production through electrolysis has become both more technically advanced and less expensive. Bloomberg New Energy Finance estimates that the cost of hydrogen could drop as much as two-thirds by 2050. Using renewable energy rather than steam methane reforming to power the electrolysis could offer refineries a way to reduce emissions—a result known as “green hydrogen.” To know more about methane emissions in the US, click here.
Greener feedstocks – Replacing some conventional-oil feedstocks in refineries with bio-based feedstocks or recycled-plastic materials (initially, through pyrolysis or gasification) would also reduce emissions—including Scope 3 emissions. In an increasingly decarbonizing world, this may extend the lifetime of refining assets.
Conclusion
There are multiple options available by upstream and downstream oil and gas operators to reduce emissions. It would come as a pleasant surprise to know that cutting emissions is not necessarily expensive; and an analysis observed that implementing initiatives would most likely lead to a positive Net Present Value (NPV) in the long run. However, implementing these options would require the oil and gas players to come out of their comfort zone and adapt to the sustainable way of working. Climate change is real and these companies need to wake up and smell the coffee!