The global oil and gas sector is of paramount importance in driving modern economies and providing essential raw materials for a diverse range of industries. It involves activities such as exploring, extracting, refining, transporting, and distributing fossil fuels, with a primary focus on oil and natural gas. This multifaceted and intricate industry significantly influences the worldwide economy, energy stability, and environmental sustainability.

When sustainability in the oil and gas industry is concerned, it often refers to the various activities in the sector, in a manner that minimizes negative environmental, social, and economic impacts while also ensuring long-term viability of the industry itself. It encompasses everything from environmental responsibility, resource efficiency, to technological innovation, regulatory compliance, long-term planning, etc. This approach considers the unsaid connection between the economic, social, and environmental factors, striking a balance between the needs of industry, planet, and stakeholders.

According to TechSci Research Report “Oil and Gas Risk Management Market - Global Industry Size, Share, Trends, Opportunity, and Forecast, Segmented By Type (Pre-Oil Spill Management, Post-Oil Spill Management), By End-User (Offshore, Onshore) By Region, Competition 2018-2028”, Global Oil And Gas Risk Management Market has valued at USD 150.7 billion in 2022 and is anticipated to project robust growth in the forecast period with a CAGR of 4.5% through 2028. The global Oil And Gas Risk Management market refers to the industry and associated services, products, technologies, and strategies involved in preventing, mitigating, and responding to oil spills in various environments, particularly in marine and terrestrial ecosystems.

Sustainability in Oil & Gas Industry: The Initiation

One of the most significant impacts of the exploration and production of oil and gas is the release of chemicals into the environment. This is an aspect which is increasing the pressure globally on the oil and gas industry to keep a check and reduce its environmental footprint. To the benefit, the oil and gas industry can improve sustainability through carbon capture and storage, improving efficiency, and reducing greenhouse gas emissions. Not only that, potential drivers of sustainable change in the oil & gas sector can also help level up and even surpass its current negative impact. Some of them are:

Government Regulations, Incentives, and Subsidies

Increasing government interventions are pushing oil, gas, and energy companies to seek more sustainable and circular options, in accordance with carbon taxes, incentives, and subsidies being offered, to meet aggressive carbon neutral targets.

Diversification

Diversifying into renewable energy sources, such as wind, solar, and hydroelectric power, allows oil and gas companies to reduce their carbon footprint. This diversification aligns with sustainability goals by providing cleaner energy options. As the demand for renewable energy grows, diversification enables oil and gas companies to remain competitive and relevant in a changing energy market, also reducing their exposure to the risks associated with fossil fuel price volatility.

Digitalization

Digitalization is the root that makes diversification (above) possible. Advanced technology is reshaping the operations of businesses, fostering increased potential for collaborative partnerships and unlocking fresh directions for innovative business models. Advanced data analytics can help identify areas of inefficiency and recommend improvements. This optimization reduces energy consumption and lowers greenhouse gas emissions.

Changing Expectations of Customer, Investor, and Employee

Changing expectations of the 3 pillars of the business are having a huge impact on the oil, gas, and energy industry.

For instance, customers, including industrial buyers and individual consumers, are increasingly seeking clean and renewable energy sources. They want energy providers to offer more sustainable options, pushing oil and gas companies to diversify into renewables and reduce their carbon footprint.

Similarly, Investors are increasingly factoring ESG criteria into their investment decisions. They seek opportunities in companies that demonstrate strong ESG performance, which includes sustainability initiatives in the oil and gas industry.

In addition, Employees are increasingly choosing employers whose values align with their personal beliefs, including environmental and social responsibility. They expect their workplaces to adopt sustainable practices and ethical principles.

ESG’s Role in Shaping a Sustainable Oil and Gas Sector

Energy companies are known to work in dynamic and complex environments where there remains a constant challenge for demand and supply. This is why many market forces have pushed ESG (Environmental, Social, and Governance) to the top initiatives for the energy companies. ESG factors are no longer mere buzzwords; they are catalysts for change that are influencing the direction of one of the world's most energy-intensive sectors.

ESG is no longer viewed as an optional consideration but as a critical aspect of risk management and value creation. Investment flows are now influenced by ESG ratings, indices, and sustainability commitments. Investors are not only demanding greater transparency and accountability but are also using their influence to push for ESG integration within the oil and gas industry. Companies that can demonstrate strong ESG performance are better positioned to attract capital and maintain a positive reputation in the eyes of investors and other stakeholders.

Case Studies on ESG Success:

Microsoft: By 2030, Microsoft, a well-known technology company, has initiated the goal to be carbon negative by 2030. The company has developed a comprehensive goal of investing in renewable energy, improving energy efficiency, and developing new technologies to reduce carbon emissions. Furthermore, the company has also planned to compensate all its historical carbon emissions by 2050.

Impax Asset Management: It is a UK based company, specializing in investment management in environmental markets. The company’s investment approach is based on identifying companies well positioned to benefit from the transition to a more sustainable economy. The firm, with its dedicated tools, evaluates companies across multiple ESG dimensions (resource efficiency, sustainable food, clean energy, agriculture).

Tesla: We all know Tesla as a leading electric vehicle manufacturer. Over the years, with their R&D, the company has been able to reduce carbon emissions and create a cleaner and more sustainable future. Its range of electric vehicles are extensively designed to be more energy efficient and environmentally friendly.

Generation Investment Management: The company is a London-based investment firm, having strong commitment to sustainability. It has been able to integrate ESG factors into its investment factors. The company’s investment approach is focused on identifying companies well positioned to succeed in a low carbon future and is the reason it has been recognized for its commitment to sustainability, receiving numerous awards for ESG practices.

Oil and Gas Industry’s Contribution to Sustainability: The HOW

One of the most significant ways in which the oil and gas sector is prioritizing sustainability is by focusing on reducing carbon emissions. The burning of fossil fuels, primarily oil and natural gas, has been a major contributor to greenhouse gas emissions and climate change. To address this, many companies in the industry are committing to ambitious targets for reducing emissions. This includes efforts to improve energy efficiency in their operations, implement carbon capture and storage (CCS) technologies, and reduce methane emissions, which are particularly potent in terms of their impact on global warming.

UN, in September 2015, adopted 17 sustainable development goals, addressing the global challenges facing humanity that includes inequality, health education , poverty, energy, the environment, and prosperity. Energy is central to many of these goals through its linkage to the economy, education, health, and the environment.

• Embracing the principles of the Circular Economy is one way to advance sustainability. This approach involves minimizing waste, recycling materials, and reusing resources whenever possible. By reducing waste and promoting resource efficiency, companies in the oil and gas sector are not only reducing their environmental impact but also contributing to a more sustainable and resilient supply chain.
• Compared to the year 2000 highs, the US Greenhouse Gas (GHG) emissions decreased, which bears mentioning that the oil and gas figures for 2020 were lower than during the 1973-1974 oil embargo. Advancements in technology have spearheaded these declines. Today, companies tend to operate more efficiently, reducing their environmental impacts.
• Recognizing the changing energy landscape, some oil and gas companies are positioning themselves for an Energy Transition. This involves exploring natural gas and hydrogen as transitional fuels while simultaneously investing in renewable energy sources. The dual approach reflects an understanding of the industry's evolving role in a greener energy future.
• While not all oil is suitable for use, conventional methods of disposing of oil are both environmentally harmful and wasteful. An increasing number of oil and gas companies are adopting Small-Scale Waste-Oil Systems that not only refine used oil but also convert it into diesel fuel. This approach not only provides a sustainable source of fuel for their ongoing operations but also serves as a valuable and eco-friendly alternative to expensive and environmentally damaging disposal methods.

Carbon Intensity and CCS in the Oil and Gas Industry

Carbon intensity with CCS (Carbon Capture & Storage) refers to harnessing the potential of Carbon Capture and Storage (CCS) technology to address and reduce the carbon intensity of the industry's operations. Carbon intensity measures the amount of carbon dioxide (CO2) emissions produced per unit of energy or economic output. In the context of the oil and gas industry, it is about finding ways to reduce the carbon footprint associated with the extraction, production, and utilization of fossil fuels, primarily oil and natural gas.

The entire CCS process involves the capture of carbon dioxide (CO2) emissions from significant stationary sources, such as coal-fired power plants and heavy industries. These captured emissions are then transported and securely stored in suitable geological reservoirs, which can include petroleum fields, saline aquifers, and coal seams. In essence, this process effectively sequesters the carbon, originally released into the atmosphere as CO2 from burning fossil fuels, back into geological storage sites.

Its (CCS) Multi-Faceted Role in Oil and Gas Industry

Emissions Reduction: CCS helps reduce the industry's carbon emissions by capturing and storing CO2 emissions, effectively mitigating its environmental impact.

Enhanced Oil Recovery (EOR): In some cases, the captured CO2 is used for EOR, where it is injected into mature oil reservoirs to increase the recovery of oil. This process not only enhances oil production but also safely stores CO2 underground.

Regulatory Compliance: CCS is crucial for the industry to comply with environmental regulations and emission reduction targets, allowing it to operate within legal limits.

Transition to Low-Carbon Energy: By using CCS, the oil and gas industry can transition towards cleaner and more sustainable energy sources while making productive use of captured CO2 in other processes, such as hydrogen production.

Companies Implementing CCS To Reduce Carbon Emissions

Chevron:

Chevron is a major player in the CCS arena. The company participated in the Gorgon CO2 injection project in Australia, which captures and stores CO2 emissions from natural gas production. Chevron's involvement in the Quest CCS project in Canada is another example of its commitment to emissions reduction.

Southern Company:

Southern Company is involved in the Petra Nova CCS project in Texas, capturing CO2 emissions from a coal-fired power plant. This project is notable for its efforts to reduce emissions from coal-based electricity generation.

TotalEnergies:

TotalEnergies (formerly Total) is a French energy company with significant CCS investments. The Lacq CCS facility in France, in partnership with Air Liquide, captures CO2 emissions from a natural gas processing plant and stores the CO2 underground. The company is actively exploring CCS solutions and has set ambitious emission reduction targets.

Equinor (formerly Statoil)

Equinor, a Norwegian energy company, is renowned for its pioneering work in CCS. The company's Sleipner project in the North Sea is one of the earliest and most significant CCS initiatives globally. The project captures CO2 emissions from natural gas extraction, transports the CO2, and securely stores it in geological reservoirs.

According to TechSci Research Report “Heavy Fuel Oil Market - Global Industry Size, Share, Trends, Opportunity, and Forecast Segmented By Classification (Low, Medium, High), by Application (Industrial, Non-Industrial), By End-User (Shipping, Others), By Region, Competition 2018-2028”, Global Heavy Fuel Oil market has valued at USD 68.23 Billion in 2022 and is anticipated to project robust growth in the forecast period with a CAGR of 2.84% through 2028. The price and availability of alternative energy sources are poised to be significant drivers of the global heavy fuel oil (HFO) market in the foreseeable future. These factors are intrinsically linked to the demand for HFO, as they influence the economic feasibility and attractiveness of using HFO for various applications.

To Sum Up

The transition to sustainability in the oil and gas industry is not only a moral imperative but also a strategic necessity for long-term viability. As the world seeks cleaner and more sustainable energy solutions, oil and gas companies that proactively adopt sustainable practices, are better positioned to thrive in a changing energy landscape. Moreover, the industry's commitment to sustainability is instrumental in building trust with stakeholders, attracting sustainable investment, and fostering a positive reputation.

One of the most pressing challenges the world faces is the need to expeditiously eliminate approximately 1300 gigatons of historical emissions present in the atmosphere and shift towards a net-zero economic model. As the world progressively transitions to cleaner sources of energy, there is the potential for point-source carbon capture technologies to facilitate this transformation and contribute significantly to reducing the current emission sources.