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Report: Oil and Gas Companies Slow with Emissions Transitions, Need Credible Targets

Oil and Gas Carbon
(Credit: Pixabay)

No oil and gas company has developed a business strategy that includes a transition to low-carbon emissions operations and renewable energy use that includes a clear path from fossil fuel production, and they are struggling to come up with such plans, according to a report from Sustainable Fitch.

To address the challenges long term, oil and gas companies should go beyond greenhouse gas emissions reduction targets and develop significant transition plans that include changes to business strategy and capital expenditure, according to the report. By doing so, the industry can get better in line with international climate goals while ensuring continued business success.

Sustainable Fitch says large companies have more resources to make such transitions successful, but smaller and localized businesses may struggle with the approach.

Volatility in the industry is also playing a role. The report says profits over the next 10 to 15 years are uncertain, and companies with more carbon intensity will face financial, investor, and regulatory risks.

More oil and gas companies are reporting their ESG efforts, driven largely by investors and increasing regulations, according to a report from Haynes and Boone and EnerCom earlier this year. All but one of 30 companies surveyed for the report said they’ve publicly disclosed ESG policies, up from 21 in 2021.

Currently, capital expenditures on low-carbon efforts in the industry are expected to range from 5% to 25% through 2030, meaning the majority of oil and gas business is still going toward fossil fuels.

While oil and gas companies should look beyond emissions targets to set the transition plans, the Fitch report finds, a credible roadmap in this area could help give their methods a better chance for success. That includes a reduction plan that encompasses Scope 1, 2, and 3 emissions, including methane emissions, across a company’s entire operations.

The International Energy Agency says indirect emissions from the oil and gas industry account for up to a third of all its emissions. Methane is the largest component of those indirect emissions.

The reductions should be increasingly absolute, Sustainable Fitch says, and should cover short-, medium-, and long-term goals. The report says major European oil and gas companies are including Scope 3 emissions in their targets, but data and standards to calculate emissions are lacking.

The report says major European oil and gas companies, and some smaller ones, are increasing investments in renewable energy and alternative fuels. Some leaders in renewable energy the report mentions are BP, Shell, and Total Energies.

Major companies in the United States have been focused on blue hydrogen and carbon capture platforms, according to the report.

Some of the sustainability initiatives recently taken on by oil and gas companies include ExxonMobil and Chevron pledging to make big changes in their emissions goals, the latter saying it is investing billions of dollars in the effort and taking on Scope 3 emissions. Chevron also is involved in several carbon capture projects throughout the US.

Equinor, Shell, and TotalEnergies are also creating a carbon capture and storage facility in Europe with the capacity to store up to 1.5 million tons of carbon dioxide a year. Additionally, Shell recently announced plans to build the largest green hydrogen plant in Europe.

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