Oil and gas production costs would increase by less than $2/bl of oil equivalent on average if the sector cuts scope 1 and 2 emissions — from direct operations and energy purchases — to 2030 to match the IEA's net zero emissions (NZE) scenario, the OECD energy watchdog said today.
The NZE scenario looks at ways to limit global average temperature rise to 1.5°C, the most ambitious temperature goal of the Paris climate agreement. The scenario envisages a rapid decline in oil demand, with no need to develop new oil and gas fields. In this scenario, the global average emissions intensity of oil and gas supply declines by more than 50pc between 2022 and 2030.
"Combined with the reductions in oil and gas consumption, this results in a 60pc reduction in emissions from oil and gas operations to 2030," the IEA said.
The IEA estimates that around $600bn in upfront spending — 65pc in capital expenditure and 35pc in operating costs — is required into 2030 to match the emission intensity reduction mapped out in the NZE scenario.
"This is 15pc of the windfall net income the industry received in 2022," the IEA said, adding that many of the measures lead to additional income stream, notably by avoiding wasting methane, a potent greenhouse gas (GHG).
The organisation has identified five levers to achieve the reductions in emissions intensity laid out in the scenario. These comprise tackling methane emissions, eliminating non-emergency flaring, electrifying upstream facilities with low-emissions power, equipping oil and gas processes with carbon capture utilisation and storage (CCUS) and expanding the use of low emissions electrolysis hydrogen in refineries.
"Tackling methane emissions is the single most important measure that contributes to the overall fall in emissions from oil and gas operations, followed by eliminating flaring and electrification," the IEA said.
The scaling up of CCUS and low emissions hydrogen "play complementary roles but have significant potential for positive spillovers into other aspects of energy transitions, by accelerating deployment and technology learning for these technologies", the IEA said.
Production, transport and processing of oil and gas resulted in 5.1bn t of CO2 equivalent last year, making scope 1 and 2 emissions from oil and gas responsible for just under 15pc of total energy-related GHG emissions, the IEA said. Use of the oil and gas results in 40pc of emissions, it said.
But the oil and gas sector needs to move faster. According to the organisation only a fraction of the commitments taken by the sector matches the pace of emissions decline laid out in the NZE scenario, while most companies plan to use carbon offsets to hit their targets. No offsets are used to achieve the reductions in emissions in the NZE scenario.
"We have converted all targets into a percentage reduction in absolute emissions to 2030 and find that companies accounting for less than 5pc of oil and gas production have targets that would meet or exceed the 60pc reduction in absolute scope 1 and 2 emissions in the NZE scenario to 2030," the IEA said.
