THE oil and gas industry needs to “step up” climate change efforts, says the International Energy Agency (IEA). As the world increasingly shifts to clean energy transitions, it risks losing long-term social acceptability and profitability if it fails to address growing calls to reduce greenhouse gas (GHG) emissions.
In its recent report Oil and Gas Industry in Energy Transitions IEA maps out the risks facing different parts of the industry and lays out a range of potential responses. IEA says the industry’s landscape is diverse so there is no single strategic response, rather a variety of approaches depending on a company’s circumstances.
All parts of the industry need to reduce the environmental footprint of their operations, and the report states that many cost-effective opportunities exist that would allow it to do so.
15% of global energy-related GHG emissions come from the process of getting oil and gas from the ground and to consumers. The single most important and cost-effective way to reduce these emissions is by reducing methane leaks, says the report. Additionally, further cost-effective opportunities exist to help reduce GHG emissions by minimising flaring activity and venting of CO2, and integrating renewables and low-carbon electricity into new upstream and liquid natural gas (LNG) developments.
Industry needs to invest more significantly in renewables and other low-carbon technologies, according to the report. Whilst some oil and gas companies are diversifying their energy operations, investment into non-core businesses has only accounted for about 1% of total capital expenditure and there is little sign of major changes.
The reports states that investment in low-carbon hydrogen, biomethane, and advanced biomethane is vital, “as these can deliver the energy system benefits of hydrocarbons without net carbon emissions”. According to the report, within 10 years these low-carbon fuels need to account for around 15% of overall investment in fuel supply to help tackle climate change.
Fatih Birol, Executive Director of IEA, said: “Oil and gas companies can play a crucial role in accelerating deployment of key renewable options such as offshore wind, while also enabling some key capital-intensive clean energy technologies – such as carbon capture, utilisation and storage and hydrogen – to reach maturity.”
He added that without industry input these technologies may never achieve the scale required to impact emissions.
IEA expects low-carbon electricity to play a central role in the future energy mix. However according to its report, the investment in oil and gas will still be required – even in rapid clean energy transitions. This is because if investment in existing producing fields were to stop, production would decrease by about 8% per year, which is larger than any plausible fall in global demand.
According to the report, whilst it would possible for the energy sector to transform without the oil and gas industry it would be “more difficult and more expensive”.
Birol said: “The scale of the climate challenge requires a broad coalition encompassing governments, investors, companies and everyone else who is genuinely committed to reducing emissions.”
“That effort requires the oil and gas industry to be firmly and fully on board.”
Previously, Oil and Gas Authority Chairman Tim Eggar also called on the industry to do more to help solve climate change and to drive net zero.
Last year, Transition Pathway Initiative, which assesses companies’ preparedness for the transition to a low carbon economy, reported that among 100 energy companies only two of the oil and companies it has analysed – Shell and Repsol – were aligned with national emissions reductions pledges made in line with Paris climate change targets.
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