Oil and gas industry unveils new carbon intensity targets

Oil and Gas Climate Initiative hails ‘further step in support of the Paris Agreement’ as national oil majors back new emissions goals

The world’s largest oil companies have today announced a new target to reduce carbon intensity across the industry, in a bid to bring its upstream greenhouse gas emissions into line with the Paris Agreement.

The Oil and Gas Climate Initiative (OGCI) – which represents 12 of the world’s largest oil and gas companies including BP, Shell, Exxon, Chevron, Aramco, and Petrobras – said the group had agreed to a new collective average carbon intensity target for member companies’ aggregated upstream oil and gas operations, which would see emissions fall to between 20kg and 21kg CO2e/boe by 2025down from a collective baseline of 23 kg CO2e/boe in 2017.

The OGCI said the range was “consistent with the reduction needed across the oil and gas industry by 2025 to support the Paris Agreement goals” and would result in a reduction of between 36 and 52 million tonnes of CO2e per year by 2025, assuming constant levels of marketed oil and gas production.

The target covers both carbon dioxide and methane emissions from OGCI member companies’ operated upstream oil and gas exploration and production activities, as well as emissions from associated imports of electricity and steam. Progress against the goals is to be reported on an annual basis.

In a joint statement, the CEOs of the OGCI member companies said the group had been encouraged by the progress it had made towards meeting previously announced methane intensity targets and as such had “come together to reduce by 2025 the collective average carbon intensity of our aggregated upstream oil and gas emissions”.

“Together we are increasing the speed, scale, and impact of our actions to address climate change, as the world aims for net zero emissions as early as possible,” they added.

The group said the new targets build on a range of measures already underway across the industry to tackle methane leakage and reduce emissions from upstream activity, such as projects to improve energy efficiency, minimise flaring, electrifying operations using renewable electricity, co-generate electricity and useful heat, detect and fix methane leaks, and deploy carbon capture, utilisation and storage technologies.

The new targets were welcomed by analysts and campaigners, but critics were also quick to point out that the goals did not cover the use of oil and gas products and that the use of carbon intensity targets meant actual emissions could conceivably rise if demand increases.

OGCI also acknowledged that it has decided not to include liquefied natural gas (LNG) and gas-to-liquids (GTL) in the upstream carbon intensity target, as originally planned, but would instead work on a specific set of initiatives to tackle emissions from these areas.

Andrew Grant, head of oil, gas and mining at think tank Carbon Tracker, said the new targets were welcome, particularly given they covered national oil companies that to date have largely failed to emulate the new long term net zero emissions goals recently announced by the likes of Shell, BP, and Total.

“National oil companies have been the missing piece of the puzzle on emissions, so it’s good to see them coming to the table,” he said.

However, he also warned the industry was still a long way from having business plans that are genuinely aligned with the goals of the Paris Agreement. “Having some targets to reduce carbon pollution is better than none,” he said. “But the industry can never consider itself ‘aligned’ with the Paris goals when business plans assume steady investment in fossil fuel production on a planet with absolute limits.

“This target is based on intensity, so it allows increases in emissions overall, and a group average may let poor performers off the hook. Furthermore it only applies to a small proportion of emissions; a 13 per cent reduction in upstream emissions translates to only a two per cent reduction in lifecycle CO2 for oil and gas.”

The OGCI defended the use of a carbon intensity target, insisting it was not designed to “open up wiggle room to increase production, but to retain a meaningful target regardless of shifts across the portfolios of member companies, and to allow new members to join the target and others to adopt the metric as a benchmark”.

“Reducing intensity means reducing the amount of greenhouses gases emitted per unit of energy produced,” the group explained in a briefing note accompanying the announcement. “If production levels remain the same, absolute emissions will fall by at least nine per cent. If they fall – as they are now – absolute emissions will fall much further. And conversely if production levels rise, absolute emission levels could stay flat or even rise.”

However, Mark Campanale, founder and executive director at Carbon Tracker, insisted the new targets did not go far enough in tackling the structural challenges the oil and gas industry will face as decarbonisation efforts gather pace.

“OGCI is an important industry bridge that brings together key players in the oil and gas sector to address the climate challenge,” he said. “So it’s for this reason that we welcome attempts to reduce emissions, for example flaring and methane leakage. 

“But the initiative cannot, however, ignore the real and glaring issue facing its members, namely commitments for absolute reductions in emissions. This means doing the serious accounting work necessary for writing down fossil fuel assets – what we call the carbon bubble overhang – such as we’ve seen from BP and Repsol. Here we hope that OGCI can show similar leadership and commence with that real discussion, with the clear urgency the climate crisis demands.”

OGCI acknowledged that its focus on upstream emissions was “just one step”, but insisted it was “an important one to take now”. “It not only accelerates action within member companies, but is intended to have a broader impact across the industry,” it added.

The new targets are the latest in a string of moves from across the oil and gas industry to step up efforts to curb emissions. In recent months both BP and Shell have unveiled new net zero targets and announced major write downs of fossil fuel assets.

Meanwhile, Brazil’s Petrobras last week issued its second climate report, confirming new emissions targets and announcing its support for the Task Force on Climate-Related Financial Disclosures (TCFD) reporting guidelines, making it the first oil and gas company outside Europe to make an explicit commitment to support the TCFD.

In addition, China’s largest oil and gas producer, CNPC, this month announced a new target to reduce methane emission intensity by 50 per cent between 2019 and 2025.

Green groups and investors have welcomed the renewed focus on tackling climate risks across parts of the industry, but have also warned that the sector is continuing to pursue investment plans that would result in emissions well in excess of the carbon budgets set by the Paris Agreement’s goals, leading to significant climate and stranded asset risks.

In related news, Aberdeen Renewable Energy Group (AREG) and OGUK, the trade body for the UK’s offshore oil and gas industry, have this week signed a reciprocal membership agreement to reflect their “aligned goals in supporting the energy industry to achieve net zero emissions”.

AREG, the membership body for renewable energy in the north east of Scotland, and OGUK, said they will now work closely on low carbon project opportunities and promote the work of members within their organisations.

“There has been a longstanding connection between AREG and OGUK and I am pleased that we have been able to formalise this relationship to work closer together,” said Jean Morrison, chair of AREG. “The agreement will allow us to promote the energy transition in the north-east and highlight market opportunities. With decades of expertise in energy and engineering, Aberdeen and the north-east is well placed to deliver the energy transition.”

Source : Businessgreen.com

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