The role of oil and gas in a transitioning world
The oil & gas industry works to reduce emissions and help the world reach the Paris Agreement objectives. Throughout this transition, both oil and natural gas will retain an important role as affordable, reliable, and versatile energy products for a growing global population. The challenge is to address climate change through emission reduction while also meeting global energy demand and supporting economic development in the long-term.
The oil and gas industry core mission remains to guarantee access to affordable and reliable energy which is essential for economic growth, sustained improvements in the quality of life, and the eradication of poverty. For this reason, oil and gas will continue to be part of our energy future.
According to the International Energy Agency, in 2019, oil and gas together accounted for more than 50% of global energy demand and, even in their most ambitious energy scenario (Sustainable Development Scenario), 47% of the world’s energy mix in 2040 will still come from oil and gas (EIA, 2019, World Energy Outlook). Despite the expected energy demand inflection of 6% in 2020 due to Covid-19 (IEA, 2020, Global Energy Review), it is reasonable to expect that – in the long-term – global energy demand will still grow by ~25% by 2040 as previously forecast by the EIA (EIA, 2019, World Energy Outlook) due to the rising incomes and additional 1.6 billion people on the planet.
There is no single pathway to a lower-emissions future. The oil and gas sector has a wealth of experience, skills and resources which it continues to deploy in order to help find a balanced way forward, one which benefits society as a whole. While many pathways exist, the IEA recalls that the transition to a cleaner energy system will be more difficult and expensive without the oil and gas industry (EIA, 2020, The Oil and Gas Industry in Energy Transitions).
Our industry’s efforts can be grouped in three main areas:
Reducing greenhouse gas emissions
The most cost-effective method of reducing greenhouse gas (GHG) emissions is to save energy. According to the Sustainable Development Scenario of the International Energy Agency (EIA, 2019, World Energy Outlook), energy efficiency could contribute to reduce energy related CO2 emissions by 37%. An ongoing focus of the oil and gas industry on energy efficiency has resulted in improvements and technological innovations in finding and producing oil and gas, with attendant energy savings.
The industry has also been taking action to reduce methane emissions and gas flaring. Oil and gas companies have been taking action to mitigate emissions, as well as participating in collaborative initiatives and voluntary industry groups, including the World Bank Global Gas Flaring Reduction Partnership and its Zero Routine Flaring by 2030 initiative, the Global Methane Initiative, the Methane Guiding Principles, the Climate and Clean Air Coalition Oil and Gas Methane Partnership, and the Oil and Gas Climate Initiative.
Supplying cleaner energy
Over the past decade, switching from coal to gas has proven to be a highly effective way to reduce power generation emissions while minimizing costs and preserving grid stability. Such a switch can reduce emissions by 33% when applied to heating, and up to 50% in electricity generation (EIA, 2019, The role of gas in Today’s energy transition).
A number of oil and gas companies are also increasingly investing in renewable energies such as biofuels, solar PV and wind energy, and carbon offsetting schemes. In parallel, there has been a significant increase in R&D spending on such low-carbon technologies.
Developing low-carbon technologies
Carbon Capture and Storage (CCS) and carbon capture and utilization storage (CCUS) plays a vital role for a lower carbon emission future, especially in the most ambitious scenarios. The Intergovernmental Panel on Climate Change has attached considerable importance to CCS without which the cost of achieving atmospheric CO2 stabilization levels would be much higher. CCS would enable low-carbon fuels and electricity to be used in transport, homes, and industry. In the long-term, the deployment of CCS would enable near-zero-emissions or even negative-emissions when combined with bioenergy. Large-scale CCS is a reality today, and the oil and gas industry has a long experience in this technology which has been in use for decades. For an overview of the global CCS projects see IOGP Map on Global CCS projects here, and to learn more about CCUS process and its contribution to a lower carbon emissions future please see our CCUS webpage.
Hydrogen from natural gas with CCS is another key technology on which our sector is working. The so-called “Blue hydrogen” is produced by splitting natural gas molecules into carbon dioxide and hydrogen in combination with CCS resulting in low carbon hydrogen with a potential emission reduction of up to 90%. Hydrogen offers a solution to support the energy transition in sectors that are technically difficult to decarbonize such as the building sector, certain industries and freight or air transport. To learn more, visit Clean hydrogen for a lower carbon future, and Scaling up Hydrogen in Europe.