I will admit that I do tend to take my eyes off reports that malign the oil and gas industry with regards to carbon emissions, and studies that highlight the damaging impact upstream operations have on the environment.
As someone intimately linked to the oil and gas sector, I feel it has become sort of cool to negatively portray anything that has to do with fossil fuels.
After all, oil, gas or minerals emanate out of land or sea, and ultimately power the globe, so to disregard their importance is unfair. But there is no denying the fact that certain conventional oil and gas techniques have languished, in the context of technical advancements (fracking comes to mind), causing significant environmental damage. I have to share with you one such report from BMI Research I’ve come across, which details that certain upstream operations in the current form are unsustainable, and will perish as the clamour for a low-carbon economy grows globally.
In the backdrop of a target to limit climate change to 2°C worldwide, BMI sees the oil and gas sector posing considerable risks to nature, but also observes that, given its high emissions intensity and dominant role in the global energy mix, the industry has a central part to play in the 2°C transition. In a sector where the core business is the exploration, production and sale of hydrocarbons, BMI sees three possible responses by an oil and gas company to contain climate change: adaption, disruption or managed decline.
‘Adaption’ involves the company decoupling its revenue growth from emissions growth, gradually shifting its asset base away from oil and gas to alternative energies. ‘Disruption’ involves the company deploying a technology which allows for the broadly carbon-neutral production and consumption of hydrocarbons. ‘Managed decline’ involves the company taking a more-or-less ‘business as usual’ approach. Investments are focussed towards minimising cost and maximising recovery, and the asset base will remain unchanged.
All three responses demand a significant shift in corporate strategy. The three are not entirely mutually exclusive and the appropriate response will vary by company, BMI maintains. It is encouraging to note, however, that the Gulf states and their NOCs have taken the lead in initating clean energy practices and are dedicated to bringing about change to traditional ways and means.
