How can an oil and gas company prepare for a low carbon world?

 

In the run-up to the Paris 2015 UN Climate Change Conference (COP21), countries have been submitting their plans to curb greenhouse gas emissions beyond 2020. But what steps is the oil and gas sector taking to help limit emissions?

At a recent Grantham Institute talk, John Knight from Statoil spoke about the progress and actions his company is taking in addressing climate change. Zara Qadir, Communications Manager for the Sustainable Gas Institute (SGI) shares some insights from the talk, entitled, ‘Preparing Statoil for a low carbon world’.

It is obvious that the oil and gas industry has responsibilities and significant challenges ahead in meeting future energy demand and improving energy access, while managing their environmental impact and addressing the climate risks. Given that the sector has been a major contributor to emissions, how is industry working towards curbing emissions, and what ways can technology help to reduce their environmental impact?

A coal to natural gas shift

Even with increased investment in alternative energy sources, most energy forecasts predict that fossil fuels will account for at least 50% of the global energy demand in 2040. Despite this, there is still potential to reduce carbon dioxide (CO₂) emissions by growing the share of natural gas relative to coal in the energy mix. Burning natural gas produces nearly half as much carbon dioxide per unit of energy compared with coal.

However, there is still ongoing debate regarding the contribution that natural gas could make to meeting global climate change targets. Although research on global warming has typically focussed on carbon dioxide, methane (the chief component of natural gas) leakage also has a significant impact potentially undermining natural gas’s low carbon credentials.

More needs to be done to understand emissions from the supply chain

Due to the potency of methane, much more forward thinking is required, says John Knight. The future focus should not only be on carbon dioxide targets, but imposing stricter methane emissions targets. Unfortunately, there is still some uncertainty as to the relative potency of methane and a lack of consensus on the amount emitted from exploration and extraction, through to delivering gas to the end-user. Last month, the Sustainable Gas Institute published a review paper that attempted to consolidate global emissions across the whole supply chain, in order to see where they could possibly be minimised (see video).

Statoil’s methane emissions are in fact relatively low; 20% of the global industry average. The company, along with others, is a member of the Climate and Clean Air Coalition (CCAC) Oil & Gas Methane Partnership which is helping industry better understand and systematically manage their methane emissions.

Making sure sustainability is at the heart of their business

Statoil is embedding sustainability into their decision-making and future business models. So what does this actually mean? According to John Knight: “The industry needs to evaluate its portfolios, not only for technological, commercial and financial risk, but also on climate risk”. This does provide an opportunity for industry to become more innovative in terms of carbon efficiency and competitive on their sustainability performance.

A trend towards innovation in commercial renewable energy

Oil and gas companies also have the opportunity and also growing impetus to diversify into renewable energy. Statoil have already begun investing in renewable energy; harnessing wind power at sea. Their first floating wind farm is currently being built off the Scottish coast. As John Knight explains, this strategy also requires a major step-change in strengthening expertise in alternative energy sources across the company. In order to do this, Statoil set up a ‘New Energy Solutions’ business division to grow and cultivate their knowledge on renewable energy technology performance and to establish best practices for integrating these technologies into their core operations.

A higher carbon cost

One of the ways to ensure major emitters take a fair share of responsibility is by introducing a global carbon price. This could potentially be an effective technique to encourage technology options that are the most low-carbon or carbon efficient.

A number of political and business leaders, including a group of oil and gas companies (BG Group, BP, Eni, Royal Dutch Shell, Statoil and Total), have recently stepped up a call for a global carbon pricing policy.

Norway, where Statoil is primarily based, has had a carbon tax in place for twenty six years. The company also has an internal carbon price of $50/tonne, which may have been a strong commercial influence for Statoil reducing its emissions to half of the oil industry average emissions.

Carbon capture and storage (CCS)

So what role can technology play in managing greenhouse gas emissions? Many oil and gas companies including Statoil, are investing in carbon capture and storage. This process can theoretically prevent 75-90% of the CO₂ generated from a power plant being released into the atmosphere. Statoil has already invested in CCS; a strong motivator may have been the Norwegian carbon price.

In the last few years, large-scale CCS power projects have become more commercially viable and are beginning to become a reality. A year ago, the world’s first large-scale power sector CCS project became operational in Canada. CCS could be an important part of a sustainable clean energy portfolio.

Working together: one voice

Paris has helped to galvanise collaboration between oil & gas companies. Last week, the chief executives of ten of the World’s largest oil and gas companies declared their collaborative support and their overall strategy for action in addressing climate change.

Beyond Paris

Paris should not be the end of the road but the beginning of a global-step-change in efforts to tackle climate change. Despite UNFCCC (1990) and Kyoto (1997) greenhouse gas emissions have risen since 2000 – 2014:  the roadmap for the next two decades is really important.

While many talk about a transition to a low carbon economy, few of us know how exactly we will get there. The oil and gas sector has to be part of the solution because they do have a wealth and experience to tackling large scale engineering problems. However, there are various environmental, commercial and technical challenges that still need to be explored through research. As the sixth largest gas supplier in the world, and one of the top 50 carbon dioxide emitters globally, Statoil does seem to have a long-term commitment to climate change.

 

The Sustainable Gas Institute at Imperial College London, founded by BG Group, aims to explore the role of natural gas in the world energy mix. @SGI_London. For news from the SGI, sign up to our bimonthly newsletter via SGI@imperial.ac.uk.

 

Event video