What the IPCC report means for the O&G

Approximately two weeks ago, the United Nations Intergovernmental Panel on Climate Change (IPCC) released chilling news in the form of its Sixth Assessment Report, Climate Change 2021: The Physical Science Basis.

Revelations brought to the table included the following findings:

• Observed increases in greenhouse gases have been “unequivocally caused by human activities”, with each of the last four decades successively warmer than any decade that preceded it;
• Human influence is “very likely” the main driver for the global retreat of glaciers and Arctic sea ice, and “extremely likely” to be the main driver for rising temperatures in the ocean;
• Human-induced climate change is affecting weather and climate extremes in every region across the globe, such as heatwaves, heavy precipitation, droughts, and tropical cyclones; and
• Without drastic moves employed to eliminate greenhouse gas pollution, the planet will warm to 1.5° Celsius in the next two decades.

U.N. Secretary General António Guterres called the findings a “code red for humanity,” adding that the “alarm bells are deafening, and the evidence is irrefutable.”

What does this mean for the oil and gas industry?

One major issue that the IPCC report has made clear is this: Current sustainability and decarbonisation efforts are not enough, and industry players must do more to commit to cutting emissions.

Earlier this year, a landmark case in the Netherlands saw oil giant Royal Dutch Shell ordered to reduce its emissions by a whopping 45% (compared to its current aim of 20%) by 2030 relative to 2019 levels, and align its policies with the Paris climate accords. According to the Court, the Shell group is a major player on the worldwide market for fossil fuels and is responsible for significant CO2 emissions.

In a further slamming of the company’s decarbonisation strategies thus far, the court criticized steps taken by Shell as “intangible, undefined and non-binding plans for the long-term”, noting: “Emissions reduction targets for 2030 are lacking completely”.

In the same week, shareholders from Exxon Mobil voted to replace at least two board members with members who would be able to help the company adjust its business strategy to match global efforts to combat climate change.

As things stand, Shell has already announced its decision to appeal the court ruling.

In a statement released to the media, Royal Dutch Shell Chief Executive, Ben van Beurden, said: “We agree urgent action is needed and we will accelerate our transition to net zero, but we will appeal because a court judgment, against a single company, is not effective.”

“What is needed,” he added, “is clear, ambitious policies that will drive fundamental change across the whole energy system. Climate change is a challenge that requires both urgent action and an approach that is global, collaborative and encourages coordination between all parties.”

On Exxon Mobil’s side of things, the company has reported that it is mulling over pledging to reduce its net carbon emissions to zero by 2050.

The road ahead

Industry giants are coming to terms with the notion that like it or not, sustainability could be one of the biggest disruptors – if not the biggest disruptor – to the current refining and petrochemicals industry.

Mayank Patel, Principal Applications Engineer, Siemens Process Systems Engineering, UK, says: “Recent global regulations, like the 2016 Paris Agreement, have created an urgency with heavy industries to achieve net zero by 2050. The global push for decarbonisation solutions has rapidly increased the attention of carbon capture technologies and developments in the energy transition towards a sustainable energy future.”

What this means, Patel adds, is that the door is open for newer, cleaner technologies to stake a claim in the market.

“We see today that hydrogen is widely expected to play a key role in this transformation, and technologies geared toward its production and utilization are seeing an increased interest. Operating companies are looking into the electrification of processes such as ethane cracking, and buying electrical sources from solar and wind farms.

Many companies are looking at moves toward newer, cleaner processes in general, with more sustainable feedstocks and reduced emissions. The practical digitalization of operations through optimization and operator advisory systems based on models containing deep process knowledge is also a strong trend among the more innovative operators. This can help companies get to market much faster and with better-performing processes.”

Times are changing for the oil and gas industry, and with the changing times comes more advanced technology. Says Patel: “In hydrogen production, carbon capture, utilization and storage (CCUS) can help clean up fossil-derived hydrogen. Electrolyzer technologies can fully decarbonize the hydrogen supply. Proven technology such as pressure-swing adsorption can help purify the hydrogen product to required standards. In hydrogen utilization, modern fuel cell technology provides a channel for hydrogen to smooth out the temporal mismatch between supply and demand for renewable energy.”

The road ahead toward sustainability may not necessarily be an easy one for companies and operators to navigate, Patel admits, but industry players may look to modern digital design approaches to aid in system design for these operations and accelerate implementation. What’s important, he says, is that companies are prepared to accommodate the necessary shift.

“Awareness is growing faster than before, and we can expect that the focus after this pandemic will be on sustainability. Operators are looking more into circular economies and the reuse of waste, implying new processes that are quite complex.”