The global oil and gas industry, long criticized for its environmental impact, could drastically reduce its carbon emissions by adopting electrification at production facilities, according to a report from Rystad Energy. The research shows that by powering oil rigs and related assets with electricity generated from renewable sources or natural gas otherwise burned off, emissions could drop by more than 80%. This shift presents a significant opportunity for the oil and gas sector to contribute meaningfully to global climate goals, while maintaining production levels.
The findings from Rystad Energy highlight the potential for electrification to reshape oil and gas production, particularly in regions like the Norwegian Continental Shelf. There, fully electrified rigs emit 86% less carbon dioxide per barrel of oil equivalent compared to those powered by traditional fossil fuels. This drastic reduction underscores the potential of electrification to decarbonize one of the world’s most polluting industries.
Electrification involves powering oil and gas production facilities using electricity derived from cleaner energy sources, such as renewables or natural gas that would otherwise be burned off through flaring. Flaring—the practice of burning off excess natural gas—is a significant contributor to global emissions, releasing approximately 320 million tonnes of carbon dioxide into the atmosphere annually.
Norway serves as a prime example of how electrification can reduce emissions. Fully electrified assets on the Norwegian Continental Shelf now emit just 1.2 kilograms of CO2 per barrel of oil equivalent, down from 8.4 kilograms before electrification. According to Rystad Energy’s vice president of upstream research, Palzor Shenga, “Where it’s possible and economically viable, electrification has great potential to lower the industry’s emissions while maintaining production output.”
This model could be replicated in other regions, although logistical challenges may make full electrification difficult in some parts of the world. Even partial electrification, however, can lead to significant reductions in emissions, particularly in “premium energy basins” (PEBs) that combine ample hydrocarbon reserves with the potential for environmentally friendly practices.
The urgency of reducing emissions is underscored by the broader context of global climate goals. The 2015 Paris Agreement, which aims to keep global warming well below 2 degrees Celsius above pre-industrial levels, requires substantial cuts in greenhouse gas emissions. Scientists estimate that the world needs to reduce emissions by 43 percent by 2030 to stand a chance of meeting these targets. The oil and gas sector, which has long been a significant contributor to greenhouse gas emissions, must play a key role in achieving these reductions.
Flaring is one of the primary sources of emissions in upstream oil and gas production. Over the last decade, an estimated 140 billion cubic meters of gas were flared annually, releasing vast amounts of CO2 and methane into the atmosphere. This process not only wastes valuable natural gas but also contributes significantly to global emissions, particularly in major production regions such as North America, the Middle East, and Africa.
Electrification offers a path to reduce emissions both by eliminating flaring and by reducing the carbon intensity of oil and gas production. Even if full electrification is not immediately feasible in some areas, avoiding flaring through the use of cleaner energy sources can make a substantial difference in the sector’s environmental footprint.
Norway, despite being one of the world’s largest oil exporters, has emerged as a leader in the electrification of upstream oil and gas facilities. The country’s unique energy mix—predominantly hydroelectric power—allows it to power its production facilities with renewable energy, drastically reducing emissions.
Norway has set a goal of cutting emissions from its continental shelf production sites by 70 percent by 2040. This ambitious target is facilitated by the proximity of its oil and gas operations to renewable energy sources, such as hydroelectric power plants. By leveraging these resources, Norway has been able to electrify many of its production facilities, setting an example for other countries to follow.
Rystad Energy identifies Norway’s success as a model for other oil and gas-producing nations, particularly those with access to renewable energy. By incorporating electrification into their upstream operations, countries can reduce their emissions while maintaining production levels, aligning their practices with global climate objectives.
While electrification presents a promising path to reducing emissions, significant challenges remain. Not all oil and gas production sites are located near renewable energy sources, making it difficult to electrify facilities in remote or infrastructure-poor regions. In areas like the Middle East and North Africa, where flaring is a major issue, additional investment in energy infrastructure would be required to support the transition to electrified operations.
Economic viability is another key consideration. Electrification requires substantial upfront investment in new technologies and infrastructure. Companies must carefully assess the costs of electrification, balancing short-term financial concerns with the long-term benefits of reduced emissions and improved operational efficiency. Additionally, the continuous energy supply required for oil and gas production—particularly in remote locations—poses a logistical challenge that must be addressed in the planning stages.
Governments and companies alike will need to take a proactive approach to overcome these hurdles. Financial incentives, regulatory frameworks, and investment in renewable energy infrastructure will be crucial in driving the electrification of oil and gas production globally.
Electrifying oil and gas production is not only about reducing emissions; it is also about aligning the industry with global climate goals. According to Rystad Energy, electrifying assets in premium energy basins could avoid 5.5 gigatonnes of CO2 emissions by 2050, equivalent to preventing about 0.025 degrees Celsius of global warming during the same period.
Given the scale of emissions from the oil and gas sector, electrification offers a viable path forward to achieving net-zero emissions by 2050, a target embraced by many of the world’s leading oil companies. However, to meet these ambitious climate goals, global collaboration and investment will be required. Governments must implement policies that encourage electrification, while oil and gas companies must commit to long-term sustainability efforts.
Palzor Shenga from Rystad Energy noted, “Where it’s possible and economically viable, electrification has great potential to lower the industry’s emissions while maintaining production output.”
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