IEA (2018), World Energy Outlook 2018, IEA, Paris https://www.iea.org/reports/world-energy-outlook-2018, License: CC BY 4.0
Oil and natural gas will be part of the energy system for decades to come – even under ambitious efforts to reduce greenhouse gas emissions in line with the Paris Agreement. It is therefore crucial to reduce the immediate social and environmental impacts associated with producing and consuming these fuels. Minimising air pollution, water use and contamination, and local disruption are all key to this.
Attention is also now increasing on the indirect emissions associated with extracting and processing oil and gas, and transporting them to consumers. Our analysis this year provides the first comprehensive global assessment of the emissions resulting from the full oil and gas supply chains for all oil and gas that is consumed today.
Indirect greenhouse gas (GHG) emissions from oil and gas operations, including both carbon dioxide and methane emissions, today are around 5 200 million tonnes (Mt) of carbon-dioxide equivalent. These emissions – which do not include any emissions associated with the actual consumption of the fuel – amount to around 15% of the energy sector’s total GHG emissions.
The figure below represents the “indirect” emissions associated with producing, refining and transporting every barrel of oil consumed today. It highlights the vast disparity between different sources of oil. The highest 10% of barrels (on the right-hand side) result in around four times more indirect emissions than the lowest 10% (on the left-hand side).
In total, the emissions from producing, refining and transporting a barrel of oil are between 10% and 30% of its full “well-to-wheel” lifecycle emissions intensity.
For gas, indirect emissions sources are between 15% and 40% of its full lifecycle emissions intensity. This means that around 97% of gas consumed today has a lower lifecycle emissions intensity than coal. Nevertheless, the aim for the future should be to focus on cost-effective ways to minimise the gap between gas and zero-carbon technologies rather than focus on the gap between coal and gas.
Above-ground practices, such as venting methane emissions, venting CO2 that occurs naturally alongside natural gas, and flaring of unwanted methane, rather than the type of oil or gas that is extracted, are most responsible for where different types of oil and gas fall along the spectrum. Tackling these sources of emissions offer some of the lowest-cost options to cutting energy-related emissions. Other options we have examined to reduce these emissions include: electrifying upstream and midstream operations; installing renewable-based systems in upstream and midstream operations; equipping carbon capture, utilisation and storage units at large points sources of emissions; injecting CO2 in enhanced oil recovery operations; and using low-carbon hydrogen in place of hydrogen produced using natural gas.
A carbon price of $50 per tonne of CO2 is already used by some companies when screening projects. Applied across the oil and gas supply chains, this would cut CO2 emissions in 2040 by over 1 000 Mt CO2.
When combined with the reductions in methane emissions that can be achieved at no net cost (reference to WEO 2017), the total reduction in indirect emissions from the oil and gas sector would be over 2 500 Mt CO2-eq. This saving would be equal to the entire energy sector GHG emissions of India today.
Countries and companies that can credibly demonstrate that they are taking action to reduce their indirect emissions could reasonably argue that these resources should be preferred over higher-emission options in a carbon-constrained world. It is crucial for the oil and gas industry to be proactive in limiting, in all ways possible, the environmental impact of oil and gas supply, and for policy makers to recognise this is a pivotal element of global energy transitions.