IEA (2020), Tracking Fuel Supply 2020, IEA, Paris https://www.iea.org/reports/tracking-fuel-supply-2020
In this report
Oil and gas satisfy just under half of global energy demand in 2040 in the Sustainable Development Scenario (SDS). A key component of this scenario is that oil and gas are supplied in a way that minimises adverse social and environmental impacts: immediate and major reductions in flaring and methane emissions are central to this.
Well-designed government policies and industry initiatives, supported by investors and financial institutions, will be essential to realise the far-reaching emissions reductions needed to achieve SDS goals.
- Ensure a corporate culture where GHG monitoring and emissions reductions are considered as a high-priority, essential element of day-to-day operations.
- Identify emissions-reduction opportunities at the initial project planning stage and incorporate them into new developments.
- Develop consistent reporting methodologies and nomenclature for scope 1, 2 & 3 emissions and report progress on voluntary emissions reduction targets. These targets – announced by an increasing number of international oil companies – are a welcome step to put this sector on track with the rapid emissions reductions prescribed by the SDS; consistency of reporting will help to ensure transparency and to realise the full scope of abatement opportunities.
- Build partnerships and expand emissions reduction criteria to cover oil and gas produced from equity operations, such as joint ventures and non-operated assets. Large volumes of methane are emitted from assets operated by companies that have not yet committed to any specific reduction targets.
- Support innovation in all oil and gas subsectors, including oilfield services, to achieve continuous emissions reductions. Because many measurement and abatement technologies are developed by small ventures that may be severely impacted by the global drop in oil and gas demand caused by the COVID-19 crisis, continued support may be needed to help them survive in the downturn.
- Establish third-party verification systems and transparency for data and methods.
- Capitalise on talent and innovation in all industrial and academic areas to develop new detection and abatement methods, especially for new digital technologies.
There are limits to what can be achieved by voluntary action alone, so policies and regulations will be critical to reduce methane emissions and flaring at SDS rates.
- Policies should encourage operators to maximise abatement opportunities at the early stages of project planning and development and incentivise maintenance and leak-prevention programmes for existing infrastructure. Commitments to methane emissions reductions could be an important addition to NDCs aligned with the Paris Agreement. A lack of detailed information on emissions levels should not preclude the introduction of abatement goals or policies to prevent methane leaking or flaring.
- Policies on the treatment of associated gas should be clear and unambiguous.
- Policies need to address both venting and flaring improvements in tandem to ensure the consequences of improvement in one area go in step with improvements in the other.
- Fiscal and/or contractual terms should make clear the responsibility for ensuring productive uses of associated gas as well as the ownership of these gases.
- Regulations should be established to approve new oil developments only if they include plans to use associated gas.
For many listed companies, investors increasingly influence industry outcomes through climate-related shareholder resolutions.
- Clear, comparable disclosures and reporting can help to both establish emissions reduction targets and direct funding towards emissions reduction technologies in the oil and gas sector.
A variety of well-established technologies can reduce flaring and methane emissions from oil and gas operations, and there have also been major recent advances to improve the timely detection and measurement of leaks, for example through using aerial and satellite readings. These promise to provide much greater transparency on emissions sources, meaning that it will be far easier to identify poor performers – as well as countries and companies that are taking action.
Nonetheless, available technological solutions are not being deployed at sufficient scale, pointing to deficiencies also on the business planning and management side. Current efforts are far from being on track to match the pace and extent of reductions needed to achieve the SDS.