Finance World Magazine| Edition: October 2024

Decarbonisation, the process of
reducing carbon dioxide (CO2)
emissions, is a central element
in the global strategy to mitigate climate
change. The goal is to achieve net-zero
emissions by mid-century, a target
endorsed by many governments and
international organisations. For the oil
industry, a major emitter of CO2, this goal
presents both challenges and opportunities.
While transitioning to low-carbon
technologies and practices involves
significant investment and restructuring,
it also opens doors for innovation and
leadership in sustainable energy solutions.
The industry’s adaptation efforts will be
crucial in shaping a greener future and
meeting global climate targets.
The Oil Industry’s Carbon Footprint
The oil industry’s carbon footprint is
significant. Oil extraction, refining, and
combustion are major sources of greenhouse
gas (GHG) emissions. According to
the International Energy Agency (IEA),
the sector accounts for approximately
40% of global energy-related CO2 emissions.
This extensive footprint makes the
industry’s transition to a low-carbon future
particularly daunting. Efforts to reduce
emissions are gaining momentum, with
companies investing in carbon capture
technologies and renewable energy integration
to mitigate their environmental
impact. However, achieving meaningful
decarbonization will require substantial
innovation, regulatory support, and collaboration
across the entire supply chain.
Innovations in Decarbonisation
Despite these challenges, the oil industry
is actively exploring various strategies
to reduce its carbon footprint. One of
the most promising approaches is the
integration of carbon capture and storage
(CCS) technology. CCS involves capturing
CO2 emissions from industrial processes
and storing them underground, preventing
their release into the atmosphere. Several
major oil companies are investing in CCS
projects, recognising their potential to
significantly reduce emissions.
Another crucial innovation is the development
of cleaner fuels. The industry
is exploring alternative fuels, such as
biofuels and hydrogen, which offer
lower carbon emissions compared to
traditional fossil fuels. Biofuels, derived
from organic materials, can potentially
replace petroleum-based fuels in various
applications. Hydrogen, when produced
using renewable energy, can be used in
fuel cells to power vehicles and generate
electricity with zero emissions.
Shifts in Industry Practices
Beyond technological innovations, the
oil industry is also undergoing significant
shifts in operational practices.
Many companies are setting ambitious
targets to reduce their emissions and
increase their investments in renewable
energy. For instance, major oil firms are
diversifying their portfolios to include
renewable energy projects such as wind
and solar power. This strategic shift not
only supports decarbonisation efforts but
also positions these companies as leaders
in the emerging green energy market.
In addition, the sector is focusing
on improving energy efficiency within
its operations. Enhanced efficiency
measures can reduce the amount of fuel
consumed and, consequently, the emissions
generated. The implementation of
advanced technologies and optimisation
practices is essential in achieving these
efficiency gains.
Challenges and Opportunities
While there are promising developments,
the transition to a decarbonised
oil industry is fraught with challenges.
One significant hurdle is the economic
impact of decarbonisation technologies.
The initial investment required for CCS
and other green technologies can be substantial.
However, as these technologies
advance and scale, costs are expected to
decrease, making them more accessible.
Another challenge is the need for
supportive policies and regulatory
frameworks. Governments play a crucial
role in facilitating the transition by providing
incentives for green technologies
and setting clear emissions reduction
targets. Collaborative efforts between
the oil industry, policymakers, and environmental
organisations are vital to
creating a conducive environment for
decarbonisation.
Despite these challenges, the move
towards a decarbonised oil industry
presents substantial opportunities.
Companies that successfully integrate
green technologies and practices can
gain a competitive advantage in the
evolving energy landscape. Additionally,
the industry’s transition to sustainability
can drive innovation and create new
markets, contributing to long-term
economic growth.
Case Studies: Pioneers in Decarbonisation
Several oil companies are leading the way
in decarbonisation efforts. For example,
We took on the task
of updating the UAE
Energy Strategy 2050
to accelerate the
energy transition and
increase the share of
clean energy in our
energy mix to become
climate neutral by 2050
and help achieve our
vision of a sustainable
development.”
Suhail Mohamed Faraj al-Mazrouei,
Energy and Infrastructure Minister
Shell has committed to becoming a net-zero
emissions company by 2050. The company
is investing heavily in renewable energy
and CCS projects while also focusing on
reducing the carbon intensity of its oil
and gas production. Similarly, BP has
announced its intention to transform
into an integrated energy company with
a significant focus on renewable energy.
BP’s strategy includes investing in wind
and solar power, developing hydrogen
technology, and advancing CCS initiatives.
These case studies illustrate that while
the transition to a decarbonised oil industry
is challenging, it is achievable with the
right strategies and commitment. The
experiences of these leading companies
offer valuable insights and lessons for
the rest of the sector.
The question of whether decarbonisation
and the oil industry can coexist
is complex but not insurmountable.
Through technological innovations,
shifts in industry practices, and supportive
policies, the oil industry can
align itself with global decarbonisation
goals. The path to a sustainable future
requires collaboration, investment, and a
willingness to embrace change. By tackling
the challenges head-on and seizing
the opportunities, the oil industry can
play a pivotal role in the transition to a
low-carbon economy, demonstrating that
economic development and environmental
stewardship can indeed go hand in hand.
Oct 2024 www.thefinanceworld.com 33