Executive summary The production, transport and processing of oil and gas resulted in 5.1 billion tonnes (Gt) CO2-eq in 2022. These “scope 1 and 2” emissions from oil and gas activities are responsible for just under 15% of total energy-related greenhouse gas (GHG) emissions. The use of the oil and gas results in another 40% of emissions. In this report, we look at the changes and measures needed to reduce the emissions intensity of oil and gas operations in the IEA’s Net Zero Emissions by 2050 (NZE) Scenario. The work brings together, expands and updates analysis from previous IEA work to inform discussions in the run up to COP28 in Dubai. It is part of a broader World Energy Outlook Special Report to be released in 2023 focussing on the role of the oil and gas industry in net zero transitions. The NZE Scenario maps out a way to limit the global average temperature rise to 1.5°C alongside achieving universal access to modern energy by 2030. This scenario sees a rapid decline in oil and gas demand, which is sufficiently steep that it can be satisfied in aggregate without developing new oil and gas fields. There is also an immediate, concerted effort by all the oil and gas industry to limit emissions from its activities. In the NZE Scenario, the global average emissions intensity of oil and gas supply falls by more than 50% between 2022 and 2030. Combined with the reductions in oil and gas consumption, this results in a 60% reduction in emissions from oil and gas operations to 2030.

Scope 1 and 2 emissions intensities of oil and gas operations in the NZE Scenario and total emissions from operations in 2022 and 2030

Five key levers are used to achieve this reduction in emissions intensities: tackling methane emissions, eliminating all non-emergency flaring, electrifying upstream facilities with low-emissions electricity, equipping oil and gas processes with carbon capture utilisation and storage (CCUS), and expanding the use of lowemissions electrolysis hydrogen in refineries. No offsets are used to achieve the reductions in emissions in the NZE Scenario.

Reductions in emissions from oil and gas operations in 2030 in the NZE Scenario and cumulative cost and savings of deploying these measures from 2022 to 2030

Introduction The Net‐Zero Emissions by 2050 Scenario (NZE) involves transformation of the global energy system that is unparalleled in its speed and scope. Policies are rapidly introduced to reduce emissions from existing fossil fuel infrastructure and to scale up the deployment of clean energy technologies. Clean energy investment therefore rises three-fold in the period to 2030 from USD 1.4 trillion in 2022 to more than USD 4 trillion in 2030. This investment surge leads to a decline in energy-related emissions and demand for fossil fuels. The declines in oil and gas demand in the NZE Scenario are sufficiently steep that it is possible to meet them without the need for new long lead time upstream conventional projects. This brings down total upstream investments considerably compared with the levels seen in 2022. Nonetheless, continued investment in existing oil and gas assets is essential in the NZE Scenario. This is to ensure that oil and gas supply does not fall faster than the decline in demand and also to reduce the emissions arising from oil and gas operations.

Emissions intensities today

Oil and gas operations today are responsible for 15% of global energy-related GHG emissions According to latest IEA data and estimates, oil and gas operations resulted in 5.1 billion tonnes (Gt) CO2-eq in 2022. Global energy-related GHG emissions were around 40 Gt CO2-eq in 2022, meaning the oil and gas industry was directly responsible for nearly 15% of energy GHG emissions. Oil operations were responsible for 3.5 Gt CO2-eq and natural gas operations for 1.6 Gt CO2-eq.

These emissions come from a variety of sources along the oil and gas supply chains. Extracting oil and gas from the subsurface requires large amounts of energy to power drilling rigs, pumps and other process equipment and to provide heat. Most oil is refined prior to use and this requires large quantities of energy, especially to produce the hydrogen that is used to upgrade and treat the crude oil. Natural gas also undergoes processing to separate natural gas liquids and remove impurities such as CO2, hydrogen sulphide or sulphur dioxide. Crude oil, oil products and natural gas are transported, often over long distances, by both pipeline and by ship and these processes are also an important source of GHG emissions.

There are other options that could also help reduce scope 1 and 2 emissions from oil and gas activities. Transport emissions could be reduced by switching to lowemissions fuels in shipping, or emissions reduced through incremental improvements in the efficiency of upstream and downstream operations. We focus here on the key options that deliver the largest reductions in the period to 2030 and that are consistent with the goals of the NZE Scenario. These emissions reduction options are an integral part of the NZE Scenario but they should not be considered solely in this context: these are actions that can and should be taken in any future scenario for oil and gas demand.

In the NZE Scenario, there is a 60% reduction in the global average upstream emissions intensity and a 20% reduction in the global average downstream emissions intensity to 2030. There are fewer immediately implementable options to reduce emissions in downstream activities, but action in these sectors to 2030 are crucial to help drive continued reductions in the emissions intensity of oil and gas operations after 2030. Methane emissions account for a much larger share of overall scope 1 and 2 emissions for natural gas than for oil. Efforts to cut down on methane emissions in the NZE Scenario mean that the drop in the emissions intensity of natural gas (55% to 2030) is therefore slightly larger than for oil (50%).

There are several efforts to cut down on flaring, including the Zero Routine Flaring by 2030, launched by the World Bank and the United Nations in 2015, which commits governments and companies to end routine flaring no later than 2030. Progress towards this goal has been relatively limited, however, and volumes of natural gas flared in 2022 were around the same level as in 2010. Achieving the pace and scale of reductions in flaring seen in the NZE Scenario will require strengthened and enforced policy, and industry and financial sector efforts.

A large portion of the energy required at upstream facilities is to power electrical equipment, with the electricity produced using small-scale onsite natural gas generators. These are quite inefficient and also use some of the valuable products that could often be sold. Using more efficient equipment – such as swapping an open cycle gas turbine for combined cycle – can save around 30% of the energy required. But full electrification can lead to even greater efficiency improvements. More than half of global oil and gas production today lies within 10 km of an electricity grid and 75% takes place in an area with good wind or solar resources. The energy at upstream facilities could therefore be provided by electricity from a centralised grid or generated in a decentralised renewable energy system.

We have carried out a detailed geospatial analysis to assess the most feasible and cost-effective solution for electrifying the 8 200 oil and gas production sites that are in operation in the NZE Scenario in 2030.6 We estimate that around 400 Mt CO2 – three quarters of emissions from upstream energy use in 2030 – would be technically avoidable through electrifying facilities. The remainder cover operations that are impractical for full electrification, including those that require substantial amounts of heat and those with large process emissions (such as coalto-liquids facilities). We also exclude production which takes place in remote locations far from grids or with low solar or wind resources.

Some of the lowest cost options are production sites close to electricity infrastructure in countries with relatively low electricity prices or in renewables-rich areas with plenty of available land (as in the Middle East and North Africa). Offshore sites are generally more costly to electrify as many platforms are far from the coast, are located in deep waters and operate in harsh environments. In the NZE Scenario, emissions from energy use in oil and gas production are reduced by 270 Mt CO2 in 2030 by means of electrification. This costs just over USD 260 billion to 2030, of which 10% is for grid connections, 35% is for purchasing electricity from the grid and 50% is for developing decentralised hybrid solar PV, wind and battery storage systems. The remainder is used to develop pipeline connections to nearby gas gathering pipelines to connect un-used natural gas to nearby markets. On average this would add around USD 0.3/boe at fields that are electrified.

Achieving the scale up of low-emissions electrolysis hydrogen in the NZE Scenario requires policies to create a well-functioning market. This can be achieved through a production-based economic incentive, for example as direct payments or tax credits for producing low-emissions hydrogen or oil products with a low emissions intensity. Regulatory constraints could also be used, for example by restricting the use of hydrogen or sale of oil products with an emissions intensity above a stated level (this could be in the form of a cap-and-trade system, including fuels standards with tradeable certificates). Robust measurement and reporting frameworks are also needed, which would need to include clear rules on the eligibility of different sources of hydrogen for support programmes, based on emissions intensity, and compatible international agreements to govern any imports. Permitting timelines will also need to be shortened considerably for renewable power, pipeline and electrolyser capacity and, for low-emissions electrolysis hydrogen produced by external sources and sold to refiners, rules established over pipeline and storage infrastructure access.

Source:http://IEA