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New Energy World magazine logo
New Energy World magazine logo
ISSN 2753-7757 (Online)
Close up of flaming gas flares set against cloudy sky Photo: Adobe Stock
The IEA suggests the oil and gas sector should invest $600bn to cut greenhouse gas emissions this decade – emitting non-emergency flaring is a priority

Photo: Adobe Stock

A new report by the International Energy Agency (IEA) suggests there are five key levers for the oil and gas industry to significantly reduce its carbon emissions footprint. New Energy World Features Editor Brian Davis reports.

The IEA estimates that the oil and gas sector emitted about 5.1bn tonnes of CO2 in 2022. However, the Agency suggests in its Net Zero by 2050 scenario that the emissions intensity could be cut by 50% by 2030, if the sector takes sufficient action and ups its game.


Significant decarbonisation of the fossil fuel sector will depend on five key levers, according to a new IEA report Emissions from oil and gas operations in net zero transitions.


Recommended measures include tackling methane emissions; eliminating non-emergency flaring; electrification of upstream facilities; equipping oil and gas processes with carbon capture, utilisation and storage (CCUS); and expanding the use of low-emission hydrogen in refineries.


Although there is nothing particularly innovative about these suggestions – and most of the technology required is already available – the IEA calls for a significant increase in pace and a tripling of investment in clean technologies by the oil and gas sector.


Interestingly, the IEA scenario does not take into account the use of offsets to achieve emission reductions, and yet again calls for the oil majors to stop developing new oil and gas fields. Considering this scenario is being presented for discussion at COP 28 in Dubai in November, there are likely to be a number of oil and gas producers who frown at this suggestion.


Big investment 
The IEA suggests an investment of $600bn is required to achieve this level of cuts in oil and gas emissions this decade. The Agency remarks that: ‘This is only a fraction of the record windfall income that the oil and gas producers accrued in 2022.’ Moreover, many of the measures recommended could generate additional streams of income by ‘avoiding the use or waste of gas, so they can rapidly recover the upfront spending required’.


Although the oil and gas organisations studied account for about half of global production, the IEA stresses that a far broader coalition – with much more ambitious targets – is needed to achieve meaningful emission reductions across the oil and gas industry.


Tackling methane – a priority 
The IEA sees tackling methane emissions ‘as the single most important measure that will contribute to the overall fall in emissions from oil and gas operations’. This is followed by the elimination of flaring and electrification of operations. Meanwhile, the scale-up of CCUS and expanding the use of green hydrogen can also play complementary roles.


The Scope 1 and 2 emissions from oil and gas are seen as one of the most viable and lowest cost options to reduce total greenhouse gas (GHG) emissions. A number of oil and gas companies have announced targets to reduce their Scope 1 and 2 emissions, but these vary markedly in their scope and timelines, and most plan to use carbon offsets to achieve their targets.

Here again, there is a call for companies to move faster, with a consistent approach required to monitor, report and verify emissions from oil and gas activities, based on robust, accurate and more transparent emissions data.


‘Tackling methane emissions is the single most important measure that will contribute to the overall fall in emissions from oil and gas operations.’ – International Energy Agency 


The IEA admits that its Net Zero by 2050 scenario is ‘unparalleled in its speed and scope of transformation’, with a call for clean energy investment to triple in the period to 2030 from $1.4tn in 2022 to more than $4tn in 2030.


The IEA argues that the decline in oil and gas demand under this scenario would be sufficiently ‘steep’ to meet them without the need for new long lead-time upstream conventional projects. However, the agency recognises that ‘continued investment in existing oil and gas assets is essential in this transition scenario’, which builds on the modelling of its World Energy Outlook.


Where emissions come from 
There is a broad range of emissions for different types of oil and gas production. The highest 10% for oil results in four times more Scope 1 and 2 emissions than the lowest 10%, where oil is easy to extract or where refining and consumption take place close to the point of extraction. Emission intensities are also lower in locations that have low methane emissions or produce light oil or natural gas liquids (NGLs). For natural gas, transporting by long-distance pipeline has higher overall emissions intensity, as does transporting LNG.


Cutting methane emissions and stopping non-emergency flaring are amongst the most readily implementable and cost-effective measures to reduce GHG emissions, notes the IEA.


As oil and gas demand declines on the road to net zero, operators may also be able to sell low-emissions electricity or hydrogen to other users to generate additional revenue streams. Reducing emissions through CCUS and the use of greener hydrogen is also likely to reduce in cost with broader deployment.


Where oil and gas companies stand on emissions 

Most companies are focused on the reduction of Scope 1 and 2 emissions, with long-term targets and one or more interim targets. Only a quarter of global oil and gas companies have announced a target for 2050, and most indicate that their reduction targets cover only ‘directly operated assets’, rather than covering production from any asset in which they hold an equity stake.

 Moreover, the IEA points out that ‘mergers and acquisition will impact the progress of companies towards their targets’. 



Methane reduction 
Methane is responsible for about 30% of the rise in global temperatures since the Industrial Revolution. It also has a global warming potential around 86 times that of CO2 over a 20-year period, and around 34 times greater over a 100-year timeframe, according to the Intergovernmental Panel on Climate Change (IPCC).


So, cutting methane emissions by 75% is one of the most impactful measures to reduce GHG emissions to 2030. The oil and gas industry is responsible for 80mn tonnes of methane emissions, and a wide variety of technologies are available which could cut emissions by over 60mn tonnes in this scenario.


Effective technologies include leak detection and repair campaigns installing emissions control devices, and replacing components that emit methane by design. Most abatement measures cost less than $20/tCO2e to deploy.


As part of the Global Methane Pledge, 150 countries have committed to work together to reduce methane emissions by at least 30% below 2020 levels by 2030. Greater transparency through satellite detection and better industry standards and other monitoring tools will greatly accelerate these efforts.


Eliminating non-emergency flaring 
Around 140bn m3 of natural gas was flared in 2022, causing 260mn tonnes of CO2 emissions and 8mn tonnes of methane emissions. If all non-emergency flaring globally was eliminated by 2030 it would result in a 95% reduction in flared volumes, avoiding 365mn tCO2e. The gas could be used by consumers or reinjected to support reservoir pressure or converted to compressed natural gas (CNG) or LNG. Alternatively, it could be used to generate power, if equipped with CCUS to reduce emissions.


The Zero Routine Flaring by 2030 initiative launched by the World Bank and the United Nations in 2015 committed governments and companies to end routine flaring by 2030. However, progress towards this goal has been relatively limited, and the volumes of natural gas flared in 2022 were about the same as in 2010.


Electrifying upstream operations 
The IEA notes that oil and gas production requires large quantities of energy to power drilling rigs, pumps, compressors and other process equipment. The energy required for upstream oil and gas operations resulted in more than 700mn tonnes of CO2 in 2022. Most of the energy required by upstream facilities is to power electrical equipment using small, onsite natural gas generators, which are inefficient and use valuable products.


The IEA report suggests that swapping open cycle gas turbines for combined cycle systems, can save about 30% of the energy required. What’s more, over half of global oil and gas production lies within 10 km of an electricity grid – and 75% takes place in an area with good wind or solar resources. Therefore, upstream facilities could be provided with electricity from a centralised grid or generated in a decentralised renewable energy system.


Norway has been leading the way to electrify upstream operations, with grid connections and dedicated offshore wind installations, in a plan to reduce emissions on the Norwegian Continental Shelf by 70% by 2040. BP has also electrified assets in the Permian Basin in Texas, US.


The IEA has carried out a detailed geospatial analysis to assess the most feasible and cost-effective solution for electrifying 8,200 oil and gas production sites under its net zero scenario and estimates that about 400mn tonnes of CO2 emissions from upstream energy could be avoided through electrifying facilities using grid connections and developing decentralised hybrid solar photovoltaic, wind and battery storage systems.


The IEA notes that oil and gas companies are involved in about 90% of CCUS capacity around the world today. They highlight 15 large CCUS projects in operation that capture 35mn t/y of CO2 from natural gas processing, mostly in Australia, Brazil, China, the Middle East and the US, and another three refinery or upgrader facilities in Canada and the US that capture about 1mn t/y CO2.


In the Net Zero by 2050 scenario, CO2 captured from gas processing, refining and bitumen hydrogen to refiners, upgrading or LNG liquefaction could grow from 25mn tonnes of CO2 emissions in 2022 to 160mn tonnes in 2030. In fact, the largest increase in emissions reduction will come from deploying CCUS in the oil value chain, both onsite at refineries and at production sites of external suppliers who sell hydrogen to refiners. Achieving this level of CCUS deployment is estimated to cost $100bn to 2030.


Low-emission electrolysis hydrogen 
Electrolysis of hydrogen is likely to play a smaller role in oil and gas emissions reduction to 2030. However, it could lead to much larger emission reductions later on. Four of the five largest projects under construction globally to produce hydrogen from electrolysis are being developed by oil and gas companies or will supply hydrogen to a refinery.


Projects include a 260 MW electrolyser to produce hydrogen for a refinery and a 200 MW electrolyser for use in a coal-to-chemicals plant, both in China; and a 200 MW electrolyser to replace hydrogen from a natural gas reformer in the Netherlands. Oil and gas companies are involved in development or operation of nearly 50 electrolysis projects round the world, representing 1.6 GW of capacity.


In the Net Zero by 2050 scenario about 6mn tonnes of low-emissions electrolysis hydrogen is projected to be used in refineries in 2030, at a cost of just over $80bn.


COP 28 will show whether more oil and gas companies get the urgency of the IEA’s demand for faster emissions reduction.