In a recent analysis by Wood Mackenzie, a leading research and consultancy firm in the energy sector, findings indicate that efforts to reduce carbon emissions in the upstream oil and gas industry have resulted in a 12% reduction in scope 1 and 2 emissions intensity since 2017. Despite these advances, the report titled “Is upstream oil & gas delivering on decarbonisation?” warns that the overall reduction in emissions may not continue due to an increase in production. The study highlights significant improvements achieved through initiatives aimed at reducing flaring, enhancing methane detection and repair, advancing electrification, and the deployment of Carbon Capture, Utilization, and Storage (CCUS) technologies. Nonetheless, the escalation in production volume is causing absolute emissions to rise in some areas, potentially surpassing pre-pandemic levels by 2028 when considering the complete oil and gas value chain.
Adam Pollard, a principal analyst at Wood Mackenzie, emphasized the importance of extending beyond initial steps like flaring and methane management. Despite these efforts, over 10 billion cubic feet of gas is still flared daily, and combustion remains the primary source of emissions without significant abatement progress. Pollard pointed out that while electrification presents a substantial opportunity for emission reduction, its effectiveness is contingent on the availability of low-carbon power sources.
The report also sheds light on the discrepancy in emission reduction efforts between Major and International Oil Companies (IOCs) and National Oil Companies (NOCs). With NOCs responsible for over half of the upstream emissions, their lag in adopting measures akin to their IOC counterparts poses a significant challenge to the industry’s overall decarbonization goals.
Furthermore, Wood Mackenzie identifies “super emitters,” including habitual flaring sites, large Middle East oil fields, oil sands projects, and integrated LNG operations, as significant contributors to the sector’s emissions, accounting for half of the total emissions from merely 165 oil and gas fields.
Looking ahead, Wood Mackenzie suggests that future developments in the industry are expected to feature lower-than-average emissions. Companies might leverage mergers and acquisitions to enhance the proportion of low-emission assets in their portfolios. However, the report calls for a collective ramp-up in decarbonization efforts, starting with setting explicit targets, developing robust strategies, and participating in decarbonization initiatives to align with the progress demonstrated by leading majors, IOCs, and some NOCs in the journey towards net-zero emissions.
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