In the grip of a global energy crisis, the perception of the oil and gas has wavered from incongruent with climate goals to necessary to achieve them. In light of consumer price constraints, the prevailing thought is to call for increases to oil and gas production in the short-term to secure some fuel price relief. However, for the oil and gas sector to capitalise on this reprieve as major emitters – there is a broad acceptance for their role in decarbonising their processes, lowering their asset’s emissions profiles and reimagining the supply chain to support the energy transition.

Many of the world’s largest oil and gas companies have shifted their operations to take account of these responsibilities, many independents are forging radical new paths hoping to capitalise on energy transition opportunities – while there remain a handful of laggards whose fortunes may currently be bright but whose future successes will increasingly diminish.

Defining and deciding on energy transition strategies is extremely complex in the context of highly technical and global operations, therefore identifying the areas that make the greatest impacts should often be the starting point for high emissions industries.

The Energy Council will consider the role of the oil & gas supply chain, from upstream to downstream, in accelerating and supporting the energy transition – and some of the leading players driving these shifts.

Upstream

The Upstream sector arguably has the greatest role to play in shifting their emissions profiles, as they contribute directly to Scope 1 & 2 emissions, and have a significant role to play in reducing Scope 3 emissions. The Oil majors, despite their core business being O&G production, are among the largest investors in clean, low carbon or decarbonisation technologies – understanding that the social contract for energy production now hinges on becoming aligned to global climate initiatives.

Dealing with Scope 1 emissions is the most direct emissions profile an O&G producer can lower immediately, doing so by powering their operations through a renewable baseload. There are a growing number of companies, especially in the North Sea where offshore wind development is highly favourable, that the majors: Equinor, bp, Shell, TOTALEnergies and the like are utilising wind to power their rigs.

The practicalities of lowering emissions in oil and gas supply should be their first port of call. Yet, the commitments by oil and gas companies in supporting clean energy technology and developments is one area that is somewhat underreported. The industry, especially the oil majors and leading NOCs, have committed to the transition. For one, bp has committed $5 billion annually to clean energy investments by 2030, with Shell committing a similar amount; TOTALEnergies has agreed to 10% of revenue channelled to clean energy investments; while the likes of Aramco’s partner company ACWA Power committing $30 billion to renewables projects.

While many might look at these energy companies with scepticism, the reality is global energy companies understand the market dynamics and processes necessary to maximise both output and profit. They do not place money where money cannot be made, and in this sense, they are actively seeking to grow the renewable market, in hand with more responsible oil and gas production  processes.

Midstream

The O&G midstream sector is the least known to most end consumers, as it occurs out of sight. From pipelines to shipping to terminals – the midstream sector creates significant emissions profiles due to the infrastructure requirements of energy transmission and distribution.

Pipelines are the most efficient method of oil and gas transport – yet their impact to the environment in their construction and the threat of serious damage when leaks occur, continues to trouble climate activists. Yet efficiency is what should be the highlighted, the capacity to transport magnitudes greater volumes of O&G reduces the need for heavy-oil fuelled ships.

Pipelines

Pipelines are crucial in reducing the environmental impacts of fuel transport – granted they carry their own significant risks if constructed improperly. The benefit however, is the capability to transport massive volumes of oil and gas efficiently and with very low emissions leakage. Moreover, most pipelines can be reutilised to transport Renewable Natural Gas or blended with Hydrogen to lower emissions profile of the natural gas. In this sense, the energy transition must take heed of where the existing infrastructures can be used, and repurpose them appropriately. Recycling and upcycling are not ‘green’ pursuits, but necessities for a sustainable future.

Renewable ammonia & Hydrogen transport

One of the more challenging problems that has arisen in pursuit of cleaner energy supply, is how to safely transport hydrogen from the source to the consumer – with ammonia being the leading solution. In essence, ammonia is able to store hydrogen in a more stable and far safer state than the complex and unstable process of super-cooling hydrogen into its liquid state.

Ammonia is a crucial element in a range of chemical products, most notably for nitrogen fertilisers used in agriculture. According to the American Institute of Chemical Engineers, “more than half of all hydrogen is used in ammonia production”, and beyond that, ammonia is “the second-most synthesized chemical on the planet (behind sulfuric acid)”.

The market demand for ammonia and hydrogen already exists in part, therefore expanding production to serve a wider energy market is achievable within the energy transition timeframe. Global green hydrogen and renewable ammonia will need to expand to serve clean energy targets, and in turn, the shipping sector will have to adapt to transport ammonia rather than oil (in the medium-term) and LNG (over the long-term).

Downstream

Downstream players face a difficult future, despite the current margins being enjoyed by a heightened price environment. With a market outlook of increasingly tight supply, there is an expectation of many more strong months ahead – especially for integrated refiners who have direct access to oil supply.

Efficiency & Optimisation

The obvious benefit of consistent and constant supply to refineries, in relation to energy transition pressures, is the increased efficiency of industrial processes. While not the most exciting solution to our decarbonisation conundrums, it is the most practical, cost effective and most effective route to lowering emissions. Moreover, the cost efficiencies provide refiners with greater leeway to invest in new technologies elsewhere. Any large emitter should first look at maximising the reductions of their  current operations.

Updating ageing assets to be digitally compatible is a core focus for any major industrial actor, providing the capacity to measure and monitor emissions, processes and efficiencies. Therefore, when seeking efficiencies, it is crucial to be future-thinking and consider how digitalisation can fast track decarbonisation efforts.

Biofuels

Looking to the future, refiners are preparing for the eventuality that EVs will take over from ICE vehicles, or ICE vehicles will be developed able to run on biofuels or renewable diesel, while airplace industry begins to mandate the shift to sustainable aviation fuels – and is where refiners expect to make the bulk of profits as demand shifts. Up to twice the margins that traditional fuel products achieve, according to Accenture Energy’s in-house analysis.

To achieve the correct supply, the downstream must seek to support the uptake of cooking oil collection and recycling, biomass development from the agriculture sector and assist in the lobbying of end-use sector to create the necessary demand.

Hydrogen

The refining sector holds a great deal of responsibility in facilitating the energy transition, part of which is facilitating the hydrogen economy. As Linde Gas, one of the world’s largest refiners explains, “Hydrogen (H2) is already indispensable for refining operations. Companies use this gas to remove sulphur from the fuels they produce in a chemical separation process called hydrodesulphurisation. In this reaction, hydrogen bonds with sulphur to form hydrogen sulphide, which is captured and further processed in another treatment step.”

Over 95% of Hydrogen is produced through this process, and while not ‘green’, this sector is a crucial foundation for the development of the wider hydrogen economy. The current green hydrogen supply is insufficient for the proposed level of demand, as such the role of natural gas within the energy transition extends beyond its own capacity as a fuel.