Student Voices | Navigating the Shift – Oil and Gas Companies’ Path to a Net-Zero Economy

Responsible Business Center | Jun 28, 2024 | Gabelli School of Business

According to the Intergovernmental Panel on Climate Change (IPCC), the evidence for human-induced climate change is overwhelming, necessitating urgent action across all sectors of the economy. Traditional high-emitting sectors play a critical role simply because their emissions represent a significant portion of the total emissions in the atmosphere. The oil and gas industry’s operations account for 15% of total energy-related emissions, and it produces the fuels that create another 40% of global emissions. 

Regulation, increasing investors’ interest, and consumers’ demands for cleaner energy production often place oil and gas companies in the difficult trade-off between reducing emissions and maintaining profitability. Isabella Vallory and Walder Almeida, 2024 Responsible Business Center Fellows,  investigate how global oil and gas firms are adapting, drawing insights from recent reports. 

Investments in Renewable Energy

Companies are increasingly investing in renewable electricity, wind, and solar power. This strategic shift allows companies to diversify their energy portfolios, reducing their dependence on fossil fuels while remaining profitable amid growing demand for electricity. This trend appears to be more common among European oil and gas firms. Total Energie SA stands out as particularly ambitious, expecting to produce more than 100 TWh/year by 2030, which would rank it among the world’s top five producers of renewable electricity. Shell, which made its first move into the wind energy sector over 24 years ago, is expected to have 9.2 GW of generation capacity from wind and 0.8 GW from solar by 2050. 

Emission Reduction Innovation Technologies

The IPCC recognizes that deploying technologies that capture emissions is unavoidable if net zero emissions are to be achieved. Exxon Mobil, which has the largest oil and gas operation around the globe, also owns the LaBarge facility in Wyoming, with more than 30 years of experience capturing and storing carbon dioxide, including the design, construction, and safe operation of facilities around the world. Similarly, Chevron is advancing multiple carbon capture, utilization, and storage projects to sequester 25 million metric tons of carbon annually by 2030.

Operational Efficiency

Operational efficiency involves upgrading equipment, optimizing processes, and adopting digital technologies to minimize the carbon footprint of traditional operations. Occidental Petroleum efforts include diminishing flare activities and conducting equipment upgrades to curtail methane and CO2 emissions.

Low-carbon Products and Services

The strategy focuses on creating and expanding the portfolio of low-carbon and renewable fuel products, including renewable diesel, biofuels, and hydrogen. This aims to fulfill the growing demand for cleaner energy sources, offering a substantial reduction in carbon emissions compared to conventional fossil fuels. ARC Resources LTD is partnering with Ekona power to pilot hydrogen technology.

Carbon Offsets

This approach involves neutralizing emissions by funding environmental initiatives that decrease greenhouse gasses in other locations. Carbon offsets enable organizations to counterbalance their carbon footprint by endorsing sustainability projects that otherwise would not materialize. Conoco Philips is developing a diverse portfolio of offsets, encompassing third-party projects and funds, alongside evaluating proprietary offset initiatives that may start generating credits by 2025.  

A Shift in Industry Priorities 

Despite these efforts, oil and gas companies face criticism for their role in climate change. Critics argue that investments in renewable energy and carbon capture technologies, while positive, may not be sufficient to offset the environmental damage caused by continued fossil fuel extraction and consumption. For instance, a report by the International Energy Agency (IEA) highlights that the current pace of decarbonization in the oil and gas sector is not aligned with the Paris Agreement goals, suggesting that more aggressive action is needed. Furthermore, environmentalists and environmental groups such as Greenpeace have raised concerns about the environmental impact of carbon capture and storage technologies, arguing that they may prolong reliance on fossil fuels and divert attention from the need to reduce consumption. 

These criticisms underscore the challenges and complexities of achieving a meaningful reduction in greenhouse gas emissions within the industry. As the world moves towards a Net Zero economy, the oil and gas industry’s role is evolving. It’s clear these firms are redefining their operational and strategic paradigms to align with environmental sustainability goals, demonstrating a significant shift in industry priorities towards greener and more sustainable energy solutions. Their efforts reflect a commitment to sustainability and economic viability, demonstrating how traditional energy sectors can contribute to the global fight against climate change.

Written by the 2024 Responsible Business Fellows: Isabella Vallory, M,S., Walder Almeida, MBA 2024
Advised by Kate Kennon, Ph.D. and Miguel Alzola, Ph.D.