With Decarbonization Pressures Mounting, Oil Companies Step Up

A line of oil rigs drilling in a field with the sun setting behind them

(Credit: Canva Pro)

by | Oct 5, 2023

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The demand for fossil fuels must fall by 25% by 2030 if the global community is to meet its targets under the Paris Climate Agreement. That’s what the International Energy Agency said, which notes oil and gas demand must drop by 80% by 2050.

The IEA published its outlook, the Net Zero Roadmap, at the end of September. However, oil and gas companies still have roles to play during decarbonization. Indeed, they do — everything from creating the pipeline infrastructure to investing in new carbon technologies, which companies already do.

“[W]e also have a very clear message: Strong international cooperation is crucial to success. Governments need to separate climate from geopolitics, given the scale of the challenge at hand,” said Fatih Birol, the executive director of the IEA.

The agency said the demand for oil, coal, and natural will peak later this decade before seeing declines. At the same time, it predicts that renewable energy demand will skyrocket over the next six years. Hitting net-zero goals remains a challenge, requiring an investment of $45 billion yearly. It said that global spending on clean energy must rise from $1.8 trillion annually this year to $4.5 trillion yearly in 2030.

The good news is that knowledge and technologies exist to cut the emissions associated with oil and gas development. In other words, it takes energy to produce energy. Batteries and green hydrogen can power oil rigs. The value chain stretches from the upstream producers to the downstream consumers at the industrial level. Decarbonization can occur at multiple points along the way. For example, green hydrogen can run diesel engines.

The industry can first cut its methane emissions and stop flaring natural gas, both of which are heating the planet. Methane is more potent than CO2, although it remains in the atmosphere for a shorter time. Still, technologies can capture and resell 75% of escaping methane.

Companies can also scale up their hydrogen production and invest in carbon capture and storage — something that accrues to the benefit of other economic sectors. For example, the steel, cement, and fertilizer industries will benefit from their investments in low-emission hydrogen.

European Oil Giants Make Major Moves

U.S.-based GGE says it is shaping the trend toward decarbonization and can lead the oil and gas sectors in their quest to reduce heat-trapping emissions.

It invests in the technologies and partnerships to make all companies greener, especially those that need to clean up their processes. It says the solutions have a quick payback, enabling companies to reduce emissions and save money. The focus is on emerging energy resources such as batteries, wind, hydro, solar, and green hydrogen.

“Energy has always been a key indicator of economic growth, and without sustainable energy resources, there is no sustainable economy,” says Junaid Ali, chief executive officer of GGE, in an interview. “The mission is to help companies decarbonize. It means teaming up with companies that are serious about the message. Oil, gas, power generation, transportation, and mining operators are obvious partners. But so are businesses dedicated to clean energy and the circular economy, which takes waste and pushes it back into the market.”

Take Chevron Corp., which has just formed a unit dedicated to hydrogen and carbon capture: it says it is advancing the hydrogen cause through strategic partnerships. That includes one with the U.S. Department of Energy to explore the potential for renewable natural gas — gas from landfills, for instance — to make hydrogen. The oil company also collaborates with Toyota and Cummins to build new hydrogen value chains for heavy-duty trucks.

Meanwhile, Exxon has invested $10 billion in emissions reduction technologies. That includes everything from carbon capture to battery technology to advancing green hydrogen. While those tools are improving, he says they must attract more investment to get mass-produced and reduce cost — something the Build Back Better plan would do.

The CDP, formerly the Carbon Disclosure Project, said that Europe’s Equinor, Total, Shell, and Eni ranked highest for leading the low-carbon transition. And BP says it will increase its annual investments in clean energy from $500 million today to $5 billion in 10 years.

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