By Stephany Romanow, Global Energy Writers
The global oil and gas (O&G) industry continues to recover from the COVID-19 pandemic and 2020 supply/demand swings. Consequently, major integrated O&G companies are revising their 2021 spending.
Indeed, Climate change and less-carbon-intensive operations are part of the budget-balancing. Accordingly, The American Petroleum Institute (API) released a proposed framework to address the risks of climate change.
Building a lower-carbon future requires a combination of government policies, industry initiatives, and continuous innovation, according to API President and CEO Mike Sommers. Therefore, the O&G industry has made significant progress in reducing emissions. However, market-based policies and actions are needed to achieve a net-zero carbon world:
- Accelerate technology innovation to reduce emissions and still meet growing energy needs.
- Advance cleaner fuels to provide lower-carbon choices for consumers.
- Endorse a carbon-price policy.
Net-zero carbon needs a multipronged approach
Companies making major transformations need time to develop new solutions, create tax and performance standards, and demonstrate and apply innovative solutions. More importantly, transforming into a net-zero-carbon organization requires significant investment.
Following 2020 demand destruction, O&G companies are cautiously rebuilding operations. For instance, new budget modifications address ever-changing market conditions and the progressive shift to lower-carbon operations. Yet, during this transition, shareholders still expect profits from O&G companies.
Likewise, consumers demand reliable supplies of transportation fuels and other hydrocarbon-based products. Thus, the energy-mix transition is a complex problem. Numerous elements are involved, as shared by Chevron:
“Our energy transition strategy is focused on actions that are good for both society and shareholders,” Chevron Vice President of Strategy and Sustainability, Bruce Niemeyer.
Accelerated technology innovation must occur
Extensive investment and research and development (R&D) are critical to commercializing innovations aimed at the hard-to-decarbonize sectors—commercial transportation, power generation, and heavy industry. Hence, carbon capture, utilization, and storage (CCUS) is an existing technology to reduce carbon dioxide emissions and is used for enhanced oil recovery applications.
Deployment of CCUS solutions is still lacking. To develop CCUS hubs, consortiums of industry operators, technology developers, and investors equally share the funding and project risks. Thus, next-generation CCUS development requires clear, long-term policies and tax credits that support investment by consortiums.
CCUS can manage carbon emissions from all major industrial sources, not just the O&G industry. Accordingly, economic opportunities must be attainable in any carbon-capture project. Hence, Achieving a market price on carbon will enlist market forces and spur cost-effective carbon-emission reduction efforts.
Cleaner-fuel options for o&G consumers
Growing global demand for lower-carbon fuels is propelling changes in refinery feedstock choices and processing options. In fact, multiple low-carbon-fuel standards require increasing inclusion of renewables into the transportation fuel markets. Therefore, renewable diesel is an emerging solution to reuse existing refinery assets and meet low-carbon-intensity requirements. Unlike biodiesel and ethanol, renewable diesel is a drop-in fuel. More importantly, it is compatible with current vehicle engines.
Switching operations to renewable diesel processing repurposes less-efficient refining assets. In addition, it provides economic incentives through merchant sales of lower-carbon fuels. For instance, for refiners, it is a win-win. Hence, renewable diesel replaces crude oil with vegetable oils and animal fats. As the availability of waste oils and fats decreases, O&G industry-backed R&D is exploring algae, agriculture, and forestry wastes as future feedstocks. Again, low-carbon fuels and petrochemical solutions require innovation, sensible legislation, and policy support.
O&G remains a major part of the global economy
The O&G industry will be part of the energy mix for many decades. Governments, consumers, and investors are demanding carbon-emission reductions and lower-carbon-intensity energy. However, rom the outside, it appears that O&G companies are not transitioning fast enough. Major O&G organizations are “leaning in” on climate change while still supporting society’s present and future needs. For example, the O&G industry is exploring lower-carbon (blue and green) hydrogen production for refining operations and future transportation fuel. Breakthrough solutions, time, investment, and sensible policies are needed to achieve a net-zero carbon world.
Nearly two-thirds of senior O&G professionals reported that their organizations are adapting to a less carbon-intensive energy mix. In fact, this is a substantial increase from 44% of respondents in 2018.DNV GL
In brief, CCUS can manage carbon emissions from all major industrial sources, not just the O&G industry.
 “API outlines path for low-carbon future in new climate action framework,” March 25, 2021, https://www.api.org/news-policy-and-issues/news/2021/03/24/climate-action-framework.
 ” Chevron reinforces plan to deliver higher returns, lower carbon,” March 9, 2021, https://www.chevron.com/stories/chevron-reinforces-plan-to-deliver-higher-returns-lower-carbon.
 “ExxonMobil outlines plans to grow long-term shareholder value in lower carbon future,” March 3, 2021, https://corporate.exxonmobil.com/News/Newsroom/News-releases/2021/0303_ExxonMobil-outlines-plans-to-grow-long-term-shareholder-value-in-lower-carbon-future.
 Slater, Neil James, “Oil and gas industry doubles down on transformational green investments, despite crash in confidence,” January 26, 2021, https://www.dnv.com/news/oil-and-gas-industry-doubles-down-on-transformational-green-investments-despite-crash-in-confidence-new-research-195081