Can The Oil And Gas Sectors Deliver On Their Decarbonization Promises?

LONG BEACH, CA - MAY 29: Oil wells are silhouetted at sunset near Signal Hill on May 29, 2003 in ... [+] Long Beach, California. The Signal Hill Oil Field, now known as the Long Beach Oil Field, reportedly had the world's highest oil production per acre by the mid-twentieth century. Hundreds of companies and individuals became rich on minute leases, some locations so close that derrick legs overlapped. New housing and stores are now being built among operating oil wells. Farther north, a cancer scare has swept over Beverly Hills High School where environmental activist Erin Brockovich and her boss, lawyer Ed Masry, are alleging that toxic fumes from oil wells on the campus have created a "cancer cluster" that is 20 times higher than the national average. (Photo by David McNew/Getty Images)

The oil and gas sectors had prospered when most of the world paid record-high energy prices — profits that can get redirected to reduce their carbon footprints. That's the view of the International Energy Agency, which says drilling, processing, and delivering energy accounts for 15% of global energy-related emissions.

The good news is that knowledge and technologies exist to cut the emissions associated with oil and gas development. In other words, it takes energy to produce energy. Batteries and green hydrogen can power oil rigs. The value chain stretches from the upstream producers to the downstream consumers at the industrial level. Decarbonization can occur at multiple points along the way. For example, green hydrogen can run diesel engines.

"Our latest report, Emissions from Oil and Gas Operations in Net Zero Transitions, shows how the oil and gas industry can reduce these emissions by 60% between now and 2030," writes Executive Director Fatih Birol. "This would require upfront spending of around USD 600 billion – much less than the trillions of dollars the industry accrued last year off the back of record high energy prices."

The industry can first cut its methane emissions and stop flaring natural gas, both of which are heating the planet. Methane is more potent than CO2, although it remains in the atmosphere for a shorter time. Still, technologies can capture and resell 75% of escaping methane.

Companies can also scale up their hydrogen production and invest in carbon capture and storage — something that accrues to the benefit of other economic sectors. For example, the steel, cement, and fertilizer industries will benefit from their investments in low-emission hydrogen.

The International Energy Agency says oil and gas will still make up 46% of the global energy portfolio in 2040. But net zero does not mean the elimination of fossil fuels. It means off-setting those emissions by creating modern transmission grids to carry more green electrons and building underground pipelines to transport CO2.

Exxon Mobil Corp. has invested $10 billion in emissions reduction technologies. That includes everything from carbon capture to battery technology to advancing green hydrogen. And Chevron CVX Corp. is investing $300 million into a low-carbon technology fund.

"The simple facts are already clear: the oil and gas industry has the technologies, the money, and the know-how to cut its emissions by 60% by 2030," writes Birol.

Unwanted natural gas is burned off at an oil field on Kharg Island in the Persian Gulf, off the ... [+] coast of Iran, 13th March 2000. (Photo by Kaveh Kazemi/Getty Images)

U.S.-based GGE says it is shaping the trend toward decarbonization and can lead the oil and gas sectors in their quest to reduce heat-trapping emissions.

It invests in the technologies and partnerships to make all companies greener, especially those that need to clean up their processes. It says the solutions have a quick payback, enabling companies to reduce emissions and save money. The focus is on emerging energy resources such as batteries, wind, hydro, solar, and green hydrogen.

"Energy has always been a key indicator of economic growth, and without sustainable energy resources, there is no sustainable economy," says Junaid Ali, chief executive officer of GGE, in an interview with this writer. "It's our mission to reduce carbon and find sustainability in the new energy world. My plan is simple: invest in any technology that leads to clean energy output."

For example, natural gas or coal enhances oil recovery. But solar power can generate steam, which goes downhole to loosen up the oil. Solar can also generate steam to make aluminum, lithium, or copper. It is clean and efficient. Consider that 74% of the energy used in industry is in the form of steam or heat. Solar is more expensive than natural gas but is emissions-free.

Notably, fossil fuels now provide 80% of the world's energy supply. Therefore, the processes to produce oil, gas, and coal must become cleaner.

About 34% of the world's largest corporations have carbon neutrality goals. But 93% of them won't hit their 2030 targets unless they speed up their emissions reductions. That's according to Accenture ACN , which says the pursuit of net zero is critical to avoiding the worst-possible effects of climate change.

A separate study by CDP generally agrees, saying that of the 4,000 companies it reviewed, only 81 had credible climate plans. It said that power generators and infrastructure companies were furthest along. Conversely, it noted the apparel, fossil fuel, and hospitality sectors disclosed the least.

"We are using our financial resources and investing in the electrification of the oil, gas, power generation, and mining sectors," says CEO Ali. "The mission is to help companies decarbonize. It means teaming up with companies that are serious about the message. Oil, gas, power generation, transportation, and mining operators are obvious partners. But so are businesses dedicated to clean energy and the circular economy, which takes waste and pushes it back into the market."

Indeed, there is an urgent need. Electricity now makes up 20% of all energy consumption in this country. Estimates say it will be 60% by 2050, enabled by industrial users that will electrify their processes.

Oil and gas companies will benefit from their decarbonization efforts. The marketplace will applaud them, while investors will reward them. But policymakers are also pressuring them to cut emissions, all part of a global push to hit net zero by 2050. As Fatih Birol says, talking is cheap and easy. But acting on those words is a more noble concern — and thankfully, something that is also affordable.