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Oil and Natural Gas Supply

Not on track
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About this report

Emissions from oil and gas extraction, processing and transport increased by 5% in 2021 to about 5.5 Gt CO2-eq – around 15% of global energy sector greenhouse gas emissions.1 About half of these emissions came from flaring and methane released during oil and gas operations. Emissions from the oil and gas sector are increasingly under the spotlight as governments and companies set emissions reduction targets and investors and board members push for greater disclosure and more ambitious goals.  

Emissions performance varies considerably across the industry. Government policy, alongside efforts by leading companies to share and extend best practices, could therefore be very effective in reducing emissions from methane leaks and flaring. Further endeavours are needed to align the oil and gas industry with the Net Zero Emissions by 2050 Scenario 

GHG emissions

Oil and natural gas currently satisfy more than half of global energy demand. In the Net Zero Emissions by 2050 Scenario, oil and gas demand falls by around 15% by 2030, but emissions from oil and gas supply drop by almost 55%. Limiting methane venting and leaks from across oil and natural gas supply chains and eliminating all non-emergency flaring are the two central elements needed to drive emission reductions. A variety of well-established technologies are available to do this, and there have been major advances recently to improve the timely detection and measurement of leaks, for example using aerial and satellite monitoring. 

Along with co-ordinated actions by governments, the industry and investment community have important roles to play in driving rapid cuts and advancing abatement efforts. The oil and gas industry should share results, solutions and best practices. Investors’ financial support for emissions reduction opportunities will be essential, particularly in emerging market and developing economies. 

In addition to methane emissions and flaring, emissions from process operations and refining are also important, as they are energy-intensive elements of the oil and gas supply chains. Electrifying operations, using grid or distributed low-carbon sources, equipping facilities with carbon capture storage and utilisation, and deploying all available energy efficiency measures will be needed to effectuate further emission reductions across the value chain. 

Scope 1 and 2 GHG emissions from oil and gas operations in the Net Zero Emissions by 2050 Scenario, 2021 and 2030

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International cooperation

Share of emissions from oil and gas operations covered by international initiatives to tackle methane emissions, 2021

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Share of emissions from oil and gas operations covered by international initiatives to tackle flaring, 2021

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Gas wasted in flaring, venting and methane leaks from oil and gas operations led to around 2.7 Gt CO2-eq emissions in 2021. Rapid action to deploy all available abatement technologies over the next decade would cut around 0.1°C from the global temperature rise by mid-century. This is the same effect on the global temperature rise by mid-century as immediately eliminating the GHG emissions from all of the world’s cars, trucks, buses and two- and three-wheelers.  

Flaring and methane emissions from oil and gas operations have remained stubbornly high despite a number of commitments to address them, underscoring the need for ambitious mitigation efforts. Through the Zero Routine Flaring by 2030 Initiative, launched in 2015, governments and companies pledge to end routine flaring no later than 2030 (about a 90% decrease from current levels). The Global Methane Pledge, launched at the 26th UN Climate Change Conference of the Parties (COP26), includes 120 countries that commit to a collective goal of reducing global methane emissions from human activity by at least 30% compared with 2020 levels by 2030. 

Worldwide flaring and methane emissions from oil and gas operations, 2000-2021

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Recommendations for policy makers and the private sector

Policies should encourage operators to maximise abatement opportunities at the early stages of project planning and development, in addition to incentivising better management of existing facilities. Regulatory measures to prevent methane emissions from oil and gas operations include requiring leak detection and repair programmes, the installation of emission control devices, and the replacement of components and devices that emit methane in their normal operations. Major oil- and gas-producing countries can add commitments to reduce methane emissions to their nationally determined contributions. Government and industry should not delay action: the lack of a baseline should not preclude the introduction of abatement goals and policies to prevent methane leakage and flaring. 

Non-emergency flaring and venting should be prohibited, and fiscal or contractual terms should clarify responsibilities for ensuring the productive use of associated gases and their ownership. Many alternatives to flaring and venting are available to companies, including reinjection, on-site use and new market opportunities. Regulations need to address venting and flaring in tandem, as clamping down on flaring could create an incentive to vent methane directly to the atmosphere (which is much worse from a GHG emissions perspective).  

A common gap in regulatory systems involves the combustion efficiency of flaring systems. While methane emissions should be minimal if a flare is designed, maintained and operated correctly, higher emissions can occur as a result of faulty operation, adverse climatic conditions or changes in production. Occasionally a flare may be totally extinguished, resulting in gas being vented directly to the atmosphere when it should be combusted. With current global operations and maintenance practices and regulations, we estimate average global combustion efficiency (including both normally operating and extinguished flares) to be around 92%, resulting in methane emissions of about 8 Mt. Policymakers need to develop regulations to address this gap. 

The oil and gas industry can reduce emissions by: 

  • Ensuring that GHG monitoring and emission reductions are a strategic priority and an essential element of day-to-day operations. 
  • Supporting governments in the development of regulations on flaring and methane emissions that promote best standards for monitoring, reporting and emission reductions. 
  • Routinely categorising, tracking and prioritising emission reduction opportunities as part of well reservoir and plant maintenance. 
  • Developing consistent measurement and reporting methodologies and nomenclature for GHG emissions and communicating progress on reduction targets. This includes establishing third-party verification systems and transparency for data and reporting. 
  • Building partnerships and expanding emission reduction criteria to cover oil and gas produced from all equity operations, such as joint ventures and non-operated assets. Large volumes of methane are emitted and flared from assets operated by companies that have not yet committed to reduction targets. 
  • Supporting innovation in all oil and gas subsectors, including oilfield services, to achieve emission reductions across the supply chain.  
  • Switching to low-carbon electricity to power operations. 
  • Capitalising on talent and innovation in industry and academia to develop new detection and abatement methods, especially through new digital technologies. 
  • Private sources of financing can support the investment needed to lower the emissions intensity of oil and gas supplies. Transition bonds (or equivalent measures) can monetise avoided carbon emissions and help raise the funding needed to implement mitigation measures. 
  • Clear and comparable disclosure and reporting, including climate metrics and standards, should help establish emission reduction targets while discouraging asset sales that transfer assets to poor environmental performers. 
Acknowledgments

The authors would like to acknowledge and thank Mark Davis (Capterio), Benjamin Heras (Carbon Limits) and Manon Simon (Carbon Limits) for their review of this report. 

References
  1. Methane is converted to CO2‐equivalent based on the 100‐year global warming potential reported by the IPCC 6th Assessment Report (IPCC, 2021), with one tonne of methane equivalent to 30 tonnes of CO2. 

Analysis