Globally, oil and gas companies can strengthen climate goals by tackling methane emissions, eliminating all non-emergency flaring, electrifying upstream facilities with low-emissions electricity, adopting carbon capture, utilisation and storage, and expanding the use of low-emissions hydrogen in refineries, says a report by the International Energy Agency (IEA).
Oil and gas operations account for nearly 15 percent of energy-related greenhouse gas emissions today, and the industry has the ability and resources to cut them quickly and cost-effectively, the energy agency said.
“The production, transport, and processing of oil and gas emitted the equivalent of 5.1 billion metric tons of CO2 in 2022. In the IEA’s Net Zero Emissions by 2050 Scenario, a concerted effort by all oil and gas companies worldwide to limit the emissions intensity of their operations leads to a 60 percent cut in these emissions by the end of the decade,” the report said.
Around $600 billion in spending is required this decade to achieve the cut in oil and gas emissions. This is only a fraction of the record windfall income that oil and gas producers accrued in 2022.
These emissions from oil and gas operations come from extracting oil and gas from the subsurface, which requires large amounts of energy to power drilling rigs, pumps, and other process equipment and provides heat. Most oil is refined before use, requiring large quantities of energy, especially to produce the hydrogen used to upgrade and treat the crude oil.
Natural gas also undergoes processing to separate natural gas liquids and remove impurities such as CO2, hydrogen sulphide or sulphur dioxide. Crude oil, oil products, and natural gas are transported, often over long distances, by pipeline and ship, and these processes are also an important source of GHG emissions.
Tackling methane emissions
The global energy agency said that tackling methane emissions is the most impactful measure to reduce GHG emissions by 2030. It is also one of the most cost-effective and impactful measures to cut emissions across the economy and limit near-term global warming.
Methane is responsible for around 30 percent of the rise in global temperatures since the Industrial Revolution, and rapid and sustained reductions in methane emissions are key to limiting near-term warming and improving air quality, IEA said.
“Technologies and measures to prevent methane emissions from oil and gas operations are well known and have already been deployed in multiple locations worldwide. Key examples include leak detection and repair campaigns, installing emissions control devices, and replacing components that emit methane by design,” IEA said.
“Industry efforts can and should also be enhanced with companies adopting a zero-tolerance approach to emissions from all assets in which they hold an equity stake and actively pushing for others to do similarly.”
According to IEA, investors and financial actors can play an important role by taking the level of methane emissions into account when making financing decisions on oil and gas. Through satellite detection, better industry standards, and other monitoring tools, greater transparency will greatly accelerate these efforts.
Eliminating all non-emergency flaring
There are many options for using natural gas that is currently flared, including bringing it to consumers via a new or existing gas network, reinjecting it to support reservoir pressure, and converting it to compressed natural gas (CNG) or LNG. The gas can also generate power, which needs to be equipped with CCUS to curb emissions.
“The most cost-effective solution is to bring the gas to market via new pipeline connections to gas transmission or distribution grids, CNG, or LNG terminals, and this is where most of the capital expenditure is directed. Except for gas injection, the saved gas can be resold,” the IEA said.
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“Measuring flaring and venting levels is necessary for company accountability and to develop alternative options or lay the foundation for market-based mechanisms favouring low-emission oil and gas sources. Measurements should be publicly available to help buyers, consumers, and financial actors better understand production and transport emissions.”
Mini-LNG or CNG production equipment can reduce the need for flaring and venting during the well testing and other short-term operations. Automated air/fuel ratio controls can ensure compressors and engines operate optimally, reducing the amount of methane that escapes from combustion processes.
Electrifying upstream facilities with low-emission electricity
Oil and gas extraction requires a large quantity of energy to power drilling rigs, pumps, compressors, and other process equipment, while heat is used to keep drilling fluids or extracted oil at desired temperatures. The IEA said that a continuous supply of fuel to provide the energy required for upstream oil and gas operations is essential, and diesel is often used to provide the energy required before production has started.
A large portion of the energy required at upstream facilities is used to power electrical equipment, with the electricity produced using small-scale onsite natural gas generators. Using more efficient equipment, such as swapping an open cycle gas turbine for the combined cycle, can save around 30 percent of the energy required.
However, the energy at upstream facilities could be provided by electricity from a centralised grid or generated in a decentralised renewable energy system. It is also important to ensure a continuous, reliable energy source to maintain operations and ensure safety; several solutions are available, including using batteries, hybrid systems, or the retention of existing assets for backup power.
Equipping oil and gas processes with carbon capture, utilisation and storage
Several activities along the oil and gas supply chain result in highly concentrated sources of CO2 emissions suitable for CCUS. In addition, once the CO2 is captured and compressed, geological storage resources are often found close to existing oil and gas activities, and sometimes within their operational scope, the IEA said.
“Scaling up CCUS and expanding the use of low-emission hydrogen play complementary roles but have significant potential for positive spillovers into other aspects of energy transitions, by accelerating deployment and technology learning for these technologies.”
According to the IEA, gas processing, refining, bitumen upgrading, and LNG liquefaction are the main processes to which CCUS can be applied to reduce the emissions intensity of oil and gas operations.
Expanding the use of low-emissions hydrogen in refineries
“Achieving the scale-up of low-emissions electrolysis hydrogen requires policies to create a well-functioning market. The energy agency said that this can be achieved through a production-based economic incentive, such as direct payments or tax credits for producing low-emissions hydrogen or oil products with a low emissions intensity,” the energy agency said.
“Regulatory constraints could also be used, for example, by restricting the use of hydrogen or sale of oil products with an emissions intensity above a stated level (this could be in the form of a cap-and-trade system, including fuels standards with tradeable certificates).”
According to IEA, robust measurement and reporting frameworks are also needed, which would need to include clear rules on the eligibility of different sources of hydrogen for support programmes, based on emissions intensity, and compatible international agreements to govern any imports.
“Permitting timelines will also need to be shortened considerably for renewable power, pipeline, and electrolyser capacity and, for low-emissions electrolysis hydrogen produced by external sources and sold to refiners, rules established over pipeline and storage infrastructure access,” it said.
