Decarbonisation Technology – August 2021

Towards 2030 The oil and gas industry strives to balance fossil fuel market challenges during the transition to sustainable fuels and energy Rene G Gonzalez Consultant

T he 2015 Paris Agreement calls for keeping global average temperature increases less than 2°C (3.6˚F) above pre-industrial levels. Against this backdrop, oil and gas industry programmes to curtail greenhouse gas (GHG) emissions are taking on more urgency. More capital is needed, but environmental, social and corporate governance (ESG) focused investors are cautious about the industry’s ability to meet impending 2030 targets (let alone net-zero emissions by 2050). In this decade, moderate investments can deliver the capabilities needed to meet near-term improvements, such as upgrading refinery diesel hydrotreaters with reactor and catalyst technology for converting biomass into biofuels. Meanwhile, strategic reviews conducted by oil and gas companies emphasise the urgency to begin the multibillion-dollar transition into LNG, hydrogen, solar-PV, wind, and more. Double-digit pre-pandemic returns from hydrocarbon extraction and processing projects have sunken into the low single digits. Meanwhile, capital constraints make it

challenging to invest in the complexity necessary to ensure sustainable operations. The low returns are driving up the cost of capital for drillers, refiners, and so on, further complicating the transition to decarbonisation. Predictions The World Economic Forum predicts that by 2030 there could be over $1.2 trillion invested annually in global renewables, more than five times the investment in fossil fuels. Some companies are exiting their oil and gas role altogether to focus on clean areas of the energy system. Other oil and gas companies continue building their hydrocarbon value chain while making renewables just a fraction of their portfolio. Most population growth is occurring in non- OECD countries; their energy consumption will predicate ramping up oil production above 100 million bpd. Demand is also increasing from expanding petrochemical production. Just as concerning, some regions are meeting electrical demand by building new coal-fired power plants, which is why a global consensus is needed to move away from fossil fuels.

Scope Emission type

Definition

Examples

Scope 1

Direct emissions

GHG emissions from operations owned or controlled by the reporting enterprise

Onsite energy use of facilities, buildings &

offices (e.g., heating, cooling)

Scope 2

Indirect emissions Indirect GHG emissions from generation

Purchased electricity, steam, heating & cooling (e.g, at hydrocarbon processing

of electricity, steam, and thermal load requirements at the reporting company All indirect upstream, midstream and downstream emissions (not included in Scope 2) of the reporting company

facilities)

Scope 3

Indirect emissions

Upstream, midstream and downstream supply and distribution, and transportation

(rail, pipeline, barge, etc). Waste generated in operations

Table 1 Scope 1, 2 and 3 emissions measure a company’s GHG emissions. Scope 1 and 2 are classified as mandatory to report, whereas Scope 3 is voluntary and the most complex to monitor on the road to decarbonisation Source: Anthesis