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Tracking Fuel Supply 2021

Not on track
Fuel supply

In this report

Emissions from oil and gas extraction, processing and transport dropped marginally in 2020 to about 5.4 GtCO2-eq – close to 15% of global energy sector GHG emissions. 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 policies, along with efforts by leading companies to share and extend best practices, could therefore be very effective in reducing emissions from methane leaks and flaring. Further efforts are needed to align the oil and gas industry with the Net Zero Emissions by 2050 Scenario, which requires that its emissions decline by nearly 55% to 2.5 GtCO2-eq by 2030.

GHG emissions from oil and gas operations in the Net Zero Scenario, 2020-2030

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Tracking progress

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 almost 55%. Limiting methane leaks from across oil and natural gas supply chains and eliminating all non-emergency flaring are the two central elements needed to drive emissions reductions. A variety of well-established technologies are available today 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 readings.  

Policy action and cooperation among countries and the oil and gas industry to share results, solutions and best practices are critical to minimise emissions. Furthermore, investor financial support for emissions reduction opportunities would help provide funding for low-emissions and low-cost supplies, 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 portions of the oil and gas supply chains. Electrifying upstream and transport operations, using either grid or distributed low-carbon sources, and deploying all available energy efficiency measures, will be needed to effectuate further emissions reductions across the value chain. 

Policies should encourage operators to maximise abatement opportunities at the early stages of project planning and development in addition to incentivising maintenance and leak-prevention programmes for existing infrastructure. Commitments to reduce methane emissions could be added to the NDCs of major oil- and gas-producing countries. Governments 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 the ownership of these gases. 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. Policymakers need to develop regulations to address this gap.

  • Ensuring that GHG monitoring and emissions reductions are considered a strategic priority and an essential element of day-to-day operations. 
  • Developing consistent measurement and reporting methodologies and nomenclature for scope 1, 2 and 3 emissions, and communicating progress on emissions reduction targets. Consistent reporting will help ensure transparency and realise the full scope of abatement opportunities. 
  • Routinely categorising, tracking and prioritising emissions reduction opportunities as part of well reservoir and plant maintenance. 
  • Building partnerships and expanding emissions-reduction criteria to cover oil and gas produced from 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 emissions reductions across the supply chain.  
  • Switching to low-carbon electricity to power operations. 
  • Establishing third-party verification systems and transparency for data and reporting 
  • Capitalising on talent and innovation in all industrial and academic areas to develop new detection and abatement methods, especially through new digital technologies. 

For many listed companies, investors can influence industry decisions through climate-related shareholder resolutions and board influence.  

  • Private sources of financing can support the investments needed to lower the emissions intensity of oil and gas supplies. Transition bonds or approaches that monetise avoided carbon emissions can be used to raise the funding necessary to implement mitigation measures. 
  • Clear and comparable disclosure and reporting can help establish emissions reduction targets and direct funding towards emissions reduction technologies in the oil and gas sector. 

Analysis