The oil and gas industry is in a transitional phase. The sector is under increasing pressure in the US and abroad to reduce its carbon footprint. It’s also facing significant cost pressure as low energy prices persist.
Shell’s chief energy adviser Wim Thomas recently said the global oil oversupply, which has caused prices to plummet over the past two year, may not end until the second half of 2017.
“It can happen any time between the second half of this year and the second half of next year,” Thomas told Reuters.
Earlier this year oil prices fell more than 70 percent from 2014 highs and remain more than 50 percent below those levels.
The industry is also under threat from alternative fuels and battery technologies, which are gaining market shares of the transportation fuels, which account for 80 percent of the oil industry’s revenues. But according to a recent Lux Research report, big oil’s days of dominating the transportation fuel market may be coming to an end. “Oil’s dominant position in transportation fuels has proved impregnable for more than a century, but real threats abound now,” said Brent Giles, Lux research director and lead author of the report.
And now that US and China — the world’s two biggest carbon emitters — have ratified the Paris climate deal, pressure on big oil and gas to transition to cleaner energy sources will likely increase.
Business as usual for oil and gas companies is not an option.
In two newly published papers, DNV GL says the global oil and gas industry can meet its environmental sustainability targets and stay competitive — but it has to do business differently.
“Cost management is a top priority for the industry right now but it’s still possible to reduce our environmental footprint without breaking budgets,” said Elisabeth Tørstad, CEO of DNV GL – Oil & Gas. “Cost-effective measures can be implemented across the lifecycle of assets and throughout the supply chain. Greater transparency by the industry on environmental risk management processes and sustainability reporting will give the sector much needed credibility and speed up sustainability improvements as a business advantage.”
One of the papers, A cost-efficient approach to reducing environmental impact, proposes a framework for sustainability reporting. DNV GL says it can be used alongside other sustainability reporting initiatives or company specific sustainability key performance indicators.
Aligned with UN Sustainable Development Goals for the environment, the framework covers a wide range of indicators, including air emissions and sea discharges such as hydrocarbon spills and produced water for specific offshore assets. It is based on a three-step integrated approach: reporting and accounting of emissions and discharges, impact and risk assessment, and prioritizing cost-efficient environmental improvements.
The second paper, CO2 abatement potential for offshore upstream installations presents a case study on how carbon emissions can be reduced by implementing cost-effective measures for offshore production on the Norwegian Continental Shelf. These include flare recovery, energy storage, energy efficient design and combined heat and power.
DNV GL finds that these practices can reduce carbon emissions by 29 percent compared to current levels from offshore production on the Norwegian Continental Shelf. It says these practices will also result in cost savings for the industry.
Meanwhile David Constable, director of the American Chemical Society Green Chemistry Institute, says energy companies can reduce their environmental footprint by using “green” catalysts for shale gas production.
Constable told Bloomberg BNA that using more environmentally sustainable catalysts — made from iron, cobalt, nickel or other abundant earth metals, or cell-based catalysts such as enzymes — could convert natural gas and natural gas liquids into high-value chemicals with lower carbon footprint than their traditional petroleum-based counterparts.
The US shale gas transformation “needs to be done in as green a manner as possible,” he said.