Opinion: The Upstream’s Competition on Carbon

Pressure on the energy industry to decarbonize continues to build.  The oil and gas sector is attracting particular scrutiny and is responding—preparing to compete on carbon.  Such responses generally follow three distinct approaches:

1. Fix it: scrutinize asset base for decarbonization opportunities and invest in technologies that lower emissions;
2. Shift it: reprioritize assets in a portfolio based on greenhouse-gas (GHG) intensity; and
3. Dilute it: invest in low-carbon business lines to reduce corporate GHG intensity.

The “fix it” approach has been the most broadly pursued strategy by oil companies to date. However, the ambitious targets that companies are setting to dramatically lower (i.e., “fix”) emissions associated with their core business will not be met by current technologies and capabilities. Instead they require ongoing advances to make good on stated obligations. The good news is that in many cases there is strong alignment between reducing emissions and improving oilfield performance, thus rallying a far broader range of stakeholders to the effort and spurring new collaborations with unlikely parties.

As oil companies consider a broad (and sometimes overwhelming) range of initiatives to advance their emissions reduction efforts, it’s necessary to be able to prioritize and sequence them for maximum effect.