written by Max Peile & Safina Jivraj
cleaning up upstream operations
Independent oil and gas companies (“Independents”) are having to balance between rapidly adapting their operations to ‘the great existential challenge of our times’ whilst still maintaining an acceptable return to their investors. The pace of change is perceived by many to be too slow, but the process of change is difficult and there is no one solution.
Independents come in many forms, cover different geographies, asset classes and face widely differing levels of Environmental Social Governance (ESG) demands. Whilst some leading Independents have taken the leap and begun to diversify their portfolios to low carbon pathways, many remain focused on investment in traditional core oil and gas areas. Irrespective of societal pressures and the speed of transition, oil and gas looks set to remain central to many Independents for as long oil and gas supply is in demand and returns on investment are sufficient.
For most Independents who intend to continue to compete to supply oil and gas through the energy transition, one responsibility is paramount: to do so as cleanly and efficiently as possible. Whilst a significant amount of attention surrounding climate change has focused on carbon dioxide (CO2) emissions, there is growing interest in the role of methane (CH4) and other greenhouse gas (GHG) contributors. In the near to mid-term concrete action to reduce all GHG emissions from existing operations is necessary for Independents to demonstrate leadership in meeting climate impacts.
Many Independents have proposed to halve their carbon footprints by 2050 or sooner and cap methane emissions at 0.2% by 2025. Announced targets vary in their scope and materiality, ranging from firm commitments for most publicly listed companies to more aspirational plans, or even no plans beyond meeting statutory obligations, via climate related disclosure and ESG reporting. However, Independents that can demonstrate tangible reductions in their GHG emissions can credibly argue a competitive position amongst their peers, with their oil and gas resources being perceived as “cleaner and therefore preferred” over higher-carbon intensity options. The dual investor and societal pressure to reduce GHG emissions makes the change a necessity for Independents in order to have a social licence to operate.
The solutions exist. GHG emissions reduction technology is both well established and fast evolving and, crucially, many of the techniques available to Independents can be achieved at net zero cost.
upstream emissions sources & solutions
Indirect GHG emissions from the supply of oil and gas – which excludes combustion by the end user – are not trivial, representing approximately a quarter of full lifecycle emissions.
Sources of emissions along the oil and gas supply journey from “well to tank” include: the combustion of oil and gas to power extraction, transport and processing, operational inefficiencies, gas flaring, the intentional release of gas due to operational constraints (venting) and unintended leakages (fugitives).
A comprehensive overview of global indirect GHG emissions from the supply of oil and gas by the IEA, shown in Figure 1, indicates that it is above ground operational practices that are responsible for the majority of GHG emissions rather than the type of oil and gas that is produced and processed.
Figure 1: Breakdown of indirect GHG emissions from the supply of oil & gas by element for 2017 (IEA, World Energy Outlook, 2018)
There is an array of technical solutions for reducing carbon emissions from oil and gas operations, from the use of carbon capture usage and storage (CCUS) in refining to fuel switching from oil to gas, but in the upstream arena the big levers are:
- Reduction of methane releases;
- Reduction in combustion (for the energy used for extraction); and
- Associated gas flaring.
the big challenge is methane
Methane has 84 times more impact per tonne than carbon dioxide on global warming during the initial 20 years after being emitted and is about 28 times more potent over 100 years. According to the IEA, globally, the oil and gas industry can cost effectively reduce up to 75% of its methane emissions, and 40 to 50% of global methane reductions can be realized at zero net cost. This level of reduction would deliver the same long-term climate benefit as immediately closing all the existing coal-fired power plants in China.
Fortunately, momentum is building with respect to methane, but the challenge with methane is its detection. The effectiveness of methane leak detection and repair (LDAR) is dependent on the accuracy and frequency of monitoring and measurement programmes. A balance between the incremental cost of higher frequency programmes and the value of the methane recovered is not always easy to strike.
Encouragingly, innovation in atmospheric methane detection techniques – from methane quantifying satellites to drone mounted sensors to stationary, continuous monitors and a greater understanding of how methane disperses in the atmosphere – is enabling a new era of higher quality, comprehensive methane emissions data. Such real time methane monitoring programs, have the potential to provide a better understanding of where leaks occur and at what magnitude, prompting direct and more effective maintenance regime.
operational efficiencies & electrification
Upstream combustion of oil and gas can be reduced through optimising equipment run time, increasing combustion efficiency and substituting to less emissive fuels. The biggest impact on reducing emissions is through the electrification of operations from the grid or – even better – through decentralised renewables.
Electrification of operations from the grid reduces the carbon intensity of power generation, with combustion of the hydrocarbon produced onsite nearly always less efficient than the grid. But today, onsite combustion often proves to be cheaper since most oil and gas fields are far from cities or a centralised power plant.
However, led by Norwegian projects, grid electrification is rapidly evolving, and it is now possible to electrify fields 200km from shore in 100m water depth. In addition to the power generation efficiency benefit, grid-based electrification reduces topsides equipment, enables remote operation and minimises maintenance requirements.
Electrification of operations from decentralised renewables on greenfield projects is emerging as the cost of wind and solar energy drops. However, grid reliability is not guaranteed in many countries and balancing power is necessary to compensate for the intermittency of wind and solar to ensure consistent operations.
associated gas flaring
Flaring of associated gas is still widespread in many parts of the world, especially Africa. Lack of markets for the gas or infrastructure constraints most often thwart efforts to address flaring. Where these barriers can be overcome, additional revenue from the sale of previously vented or flared gas can help to offset the additional cost.
Governmental regulatory efforts to eliminate flaring are gaining traction and increasingly affordable modular gas processing technologies as well as digital asset performance management tools are helping to combat flaring and eliminate incomplete flares, when a portion of natural gas is not combusted on flaring.
The investor community, through enforcement of ESG factors in evaluating project risk, is also playing a part in mitigating associated gas flaring with refusals to finance new projects if suitable solutions for the utilisation of excess gas or associated gas cannot be achieved in design.
emissions reduction sprint
The io Energy Transition practice is working with Independents to reduce their GHG emissions. A five day “Sprint Workshop” is proving to be an effective way of kick starting a GHG emissions reduction programme for Independents that are yet to formulate one. The structure of the sprint can be tailored but broadly entails:
- / Framing the problem;
- / Establishing an emissions baseline and identifying the big-ticket emissions actors;
- / Developing a catalogue of emissions reduction options;
- / Quantification of the ranges of potential emissions reduction and associated costs;
- / Screening the catalogue, option selection and further definition if necessary; and
- / Construction of an emissions reduction business case and accompanying execution roadmap.
Of course, the sprint cannot claim to reduce GHG emissions in a week, but it can quickly demonstrate cost effective emissions reduction solutions to corporate decision makers.
By bringing direct insight from our parents’ technology stack we estimate that we can achieve up to a 30% reduction in GHG emissions from oil and gas operations. Tackling venting and flaring offer some of the lowest-cost options but reductions in combustion, carbon intensity and fugitives as well as CCS form part of a broader GHG emissions reduction strategy that can help Independents to achieve net zero emissions.
The highly collaborative nature of sprints also instigates conversation around wider ESG themes and can act as a platform for dialogue between Independents, their key stakeholders and service companies on how to find the best pathway through an accelerating energy transition.
 IEA. (2020). The Oil and Gas Industry in Energy Transitions. IEA.
 Studies, O. I. (2019). The Energy Transition & Oil Companies Hard Choices. Oxford: University of Oxford.
 IEA. (2018). World Energy Outlook
IPPC. (2014). Fifth Assessment Report.
 CCAC, U. &. (2018). Oil and Gas Methane Partnership (OGMP): Third-Year Report.
 EDF. (2020). Hitting the Mark: Improving the Credibility of Industry Methane Data. EDF.