It is paramount that the oil and gas sector aid in the transition to clean energy in order to reduce the overall amount of greenhouse gas emissions. Greenhouse gases are responsible for increasing global temperatures and contributing to climate change. A decrease in emissions and a transition to clean energy can help minimize the effects of climate change.
The oil and gas sector is uniquely positioned to facilitate positive changes in the world’s transition to clean energy. Not only can oil and gas companies work to reduce their own carbon footprints, but they possess the knowledge and resources to aid the rest of the world in the much-needed transition to clean energy.
What is more, large oil and gas companies are experiencing conflict in the wake of new policy surrounding decarbonization efforts, forcing them to consider these changes. More pressure comes in the form of shareholders looking for the best investment opportunities moving into the future, contributing to the transition of the oil and gas sector to clean energy.
In the presence of these increasing obstacles, companies are beginning to shift to lower emission levels in their operations, to support transitions to cleaner energy, and to find innovative solutions to decrease greenhouse gas concentrations.
This article will cover the information you need to know about the transition of the oil and gas sector to clean energy — from how they will transition to the roles they will play in the process. We’ll look into what’s in store for the oil and gas industry moving into a clean energy future.
What Is the Role of Oil and Gas Companies in the Clean Energy Transition?
While many view the oil and gas industry as a problematic contributor to the issue of increasing greenhouse gas emissions, there are many options available for this sector to contribute to a global transition to clean energy. Currently, the oil and gas sector has a spotlight on them. The world is seeking answers on how they will reduce greenhouse gas emissions and how they plan to alter their operations to achieve these results.
Though pressure for change continues to mount on oil and gas companies since the Paris Agreement (an international treaty that aims to reduce global warming), their contribution to reducing emissions is not as simple as limiting the acquisition, production, and distribution of oil and gas products.
For one, the steadily increasing global population and a broadening global economy create demand for energy that is attainable for populations with limited access to energy sources. Another factor is that our energy systems and the global economy are heavily tied to the oil and gas sector, meaning a transition to clean energy must be well-calculated and gradual so as not to disrupt energy supplies or economies around the globe.
While these factors must be considered, it is essential that oil and gas companies continue to play a definitive role in reducing emissions. With this sector poised in such a delicate position — balancing energy supply, economic stability, and environmental responsibility — it is good to know they are beginning to look toward a future in which the transition to clean energy can become a reality.
Oil and gas executives place environmental improvement high on their list for reasons why decarbonization efforts are important, with 71% of CEOs surveyed selecting improvement to the environment as a crucial benefit to their changing business strategies.
What is more, oil and gas companies possess adequate resources, knowledge of supply chains, and experience in economic development that can aid in increasing low-carbon energy use.
Using their experience, companies can play a significant role in the global transition to clean energy. They can begin to develop low-carbon energy solutions, invest in clean energy projects, and reduce their own emission levels while still providing accessible energy to developing economies.
How Can Oil and Gas Companies Transition to Clean Energy?
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The role oil and gas companies can play in the energy transition is one thing, but is there any way these businesses can transition to a clean energy model? One such company, called Occidental Petroleum, is taking a step in the right direction by capturing carbon dioxide from the atmosphere.
Based out of Houston, the company endeavors to pull 1 million tons of carbon out of the atmosphere annually. For the time being, the company will bury the captured carbon in their oil fields to offset their carbon production. However, according to its CEO, the company could transition into a carbon management company in the future, selling its recaptured carbon to other oil and gas companies so they can offset their emissions.
Occidental Petroleum provides a great example of how the oil and gas sector can aid in the transition to carbon neutral energy. Projects like carbon capture can help offset the amounts of carbon released into the atmosphere while maintaining profits and allowing big oil businesses to further invest in clean and renewable energy projects.
Another way oil and gas companies can start making the transition to clean energy is by embracing the idea of becoming multi-faceted energy companies. Instead of only dealing in business related to fossil fuels, companies can begin offering other energy sources like biofuels and electricity generated through renewable sources like wind, solar, and hydropower.
In the meantime, while oil and gas companies are still in the process of transitioning to clean energy, these companies can take significant steps in reducing their overall emissions.
Efficiently limiting the amount of methane they produce is one area oil and gas companies can improve. Another option is to produce their gas and oil products using zero-emissions methods, such as utilizing electricity for oil and gas production. Finally, they can begin transitioning to hydrogen, which can better power heavy machinery than batteries.
What Are the Big 3 Oil Companies?
As of January 2021, the big three oil companies in the U.S. are Exxon Mobil, Chevron, and ConocoPhillips. In Europe, the largest oil companies are Shell, TotalEnergies, and BP. The largest oil-producing company in the world is Saudi Aramco.
The largest oil companies in the United States and Europe are taking different approaches to reducing their emissions and changing their overall environmental effect.
Exxon Mobil and Chevron intend to lower their emissions but have expressed no intention of involving their companies with business in the field of solar and wind-produced energy. BP and Royal Dutch Shell intend to lower emissions and limit the amount of oil they produce while further investing in renewable energy projects and low-carbon businesses.
It’s not just the major oil companies that need to evolve their business models to reduce emissions. The major oil companies account for 12% of oil and gas reserves, 15% of production, and 10% of emissions out of the entire industry. While the major companies have started taking steps toward changing the way the oil and gas industry operates, the industry as a whole needs to get on board with transitioning to cleaner methods.
Oil and gas companies only spend around 1% of their capital expenditures on projects outside their primary business practices. Individual companies that lead in pursuing clean energy projects, like solar and wind, put about 5% of their expenditures toward these sustainable solutions.
This leaves much room for improvement and means that the oil industry could speed up its transition to clean energy if it invested more in clean energy solutions.
Does the Oil and Gas Industry Have a Future?
The oil and gas industry will play a role in global energy production for the foreseeable future. The primary reason for this is a growing demand for energy as the global population increases and developing economies continue to expand.
The energy demand is expected to outpace the development of renewable energy sources, so oil and gas companies may still be required to supply the energy demand. So, in a way, the oil and gas industry does have a future, but they are adapting to make their practices more sustainable.
As oil and gas companies continue inventing new ways to reduce their carbon footprint and support sustainable energy sources, their presence as part of the global energy supply can benefit the long-term transition to clean energy.
What Will Replace the Oil and Gas Industry?
As one of the world’s primary contributors in the energy sector, the oil and gas industry has some big shoes that need to be filled. In the United States, 35% of energy consumption came from petroleum, and 34% came from natural gas in 2020. In the same year, 12% came from renewable energy and 9% from nuclear power.
Renewable and clean energy sources could eventually replace the oil and gas industry or make it so the world energy supply is not so dependent on fossil fuels.
Renewable energy sources include electricity generation from power sources like solar, wind, hydro, biomass, and geothermal energy. Nuclear is another clean energy source that could help to replace oil and gas.
The Oil and Gas Sector Can Lead the Way to a Clean Energy Future
Oil and gas companies are in the process of transformation. Currently, these companies play a crucial role in global energy production and impact economies around the world. They have the potential to facilitate dramatic change that could benefit the world’s energy sector as a whole while still providing modern energy to developing economies as the global population continues to grow.
As climate change continues to threaten the world as we know it, the oil and gas sector is in a great position to effect positive change in how the world generates energy. With abundant resources and knowledge, the most prominent companies can continue to reduce their emissions, invent new ways to sequester carbon from the atmosphere, and invest in clean energy projects.
Are you interested in how you can play a role in reducing carbon in the atmosphere? Be sure to view our carbon offset options that can reduce your individual carbon footprint or the carbon footprint of your business.
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