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COMMODITIES SECTOR PROFITS: – SAVING THE PLANET

Investments totaling $600 billion are required to halve the emissions intensity of global oil and gas operations by 2030. Interestingly, this amount is only a fraction of the windfall income obtained by oil and gas producers in 2022, thanks to soaring energy prices during a global energy crisis. In this article, I discuss how the commodities sector, especially in renewable energy, can seize this golden opportunity to address emissions from oil and gas activities in alignment with the goals of the Paris Agreement.

Oil and gas operations contribute approximately 15% to total energy-related emissions worldwide, which amounts to 5.1 billion tonnes of greenhouse gas emissions. However, according to the International Energy Agency’s Net Zero Emissions by 2050 Scenario, there is a vision to achieve a 50% reduction in the emissions intensity of these activities by the end of this decade. Combined with reductions in oil and gas consumption, this scenario could lead to a remarkable 60% decrease in oil and gas operations emissions by 2030.

Leveraging the profits of the commodities sector can catalyze funding emission reduction initiatives. Companies can reinvest a portion of their profits into research and development of low-carbon technologies, renewable energy projects, and sustainable practices. Establishing dedicated funds or partnerships with financial institutions can channel profits towards green investments, supporting the transition to a low-carbon economy.

Successful case studies demonstrate collaborations between large commodities companies and renewable energy projects. These partnerships can take various forms, such as power purchase agreements, joint ventures, or direct investments. By diversifying their portfolios and engaging in renewable energy initiatives, commodities companies contribute to emissions reduction and benefit from the growth of the renewable energy sector and its increasing demand.

While collaborations between commodities companies and renewable energy projects present opportunities, there are potential challenges and risks. Technological uncertainties, regulatory changes, financial viability, and alignment of business models are factors that need careful consideration. Mitigating these challenges requires thorough due diligence, strategic planning, and ongoing dialogue between all parties to ensure mutual benefits and seamless integration of efforts.

By addressing these questions and capitalizing on the marriage of convenience between profits and the Paris Agreement, the commodities sector can drive sustainable practices and contribute to global emission reduction goals. By leveraging profits, fostering collaborations, and managing associated risks, companies can align their financial interests with the urgent need for climate action. This dual-purpose approach allows companies to prioritize profitability and sustainability, which is vital in the transition to a low-carbon economy.

In addition to the broader goal of reducing emissions from oil and gas operations, addressing the specific challenge of methane emissions is crucial. Methane is a potent greenhouse gas, and targeted measures can be taken to tackle its release into the atmosphere. Implementing rigorous leak detection and repair programs is a key strategy. The amount of methane leakage can be minimized by regularly monitoring and repairing equipment, such as valves and pipelines.

Advanced technologies like infrared cameras and drones have been deployed to enhance the effectiveness of these efforts. These cutting-edge tools enable more efficient and accurate detection of leaks, allowing for swift repairs and immediate action. Furthermore, adopting best practices for well completions and hydraulic fracturing significantly reduces methane emissions. Minimizing venting and transitioning to low-bleed or zero-bleed pneumatic devices can reduce methane.

Another area of focus would be the ‘non-emergency flaring’ in oil and gas operations. To effectively tackle this challenge, companies can make strategic investments in infrastructure upgrades and technologies that capture and utilize associated gas. The captured gas can be transported and utilized by constructing robust gas gathering systems and pipelines rather than being flared.

This approach reduces emissions and ensures that valuable resources are not wasted. Furthermore, deploying innovative technologies like gas-to-liquids conversion or gas-to-power solutions provides viable alternatives to flaring, allowing for the productive utilization of the captured gas.

Carbon capture, utilization, and storage (CCUS) technologies are among the most popular yet challenging directives. They play a pivotal role in reducing greenhouse gas emissions. By capturing carbon dioxide (CO2) emissions from industrial processes and either storing them underground or utilizing them in other industries, CCUS offers a promising solution for reducing greenhouse gas emissions.

Retrofitting is a process that enables the efficient capture and containment of CO2 emissions, preventing their release into the atmosphere. The sector can benefit from expertise and advancements in CCUS implementation by establishing partnerships with research institutions and technology providers, further accelerating its adoption. However, to successfully implement CCUS technologies, collaboration with governments and policy support are essential. Encouraging regulatory frameworks and incentives can incentivize adoption and investment in CCUS technologies, facilitating their widespread deployment across the industry. Through this collaboration, the oil and gas sector can contribute significantly to global emission reduction efforts and demonstrate its commitment to sustainable practices.

Hydrogen production also holds tremendous potential for reducing emissions and driving sustainable energy practices. Refineries can produce green hydrogen by harnessing renewable energy sources to power electrolysis, offering a clean and environmentally friendly alternative to hydrogen derived from fossil fuels. Several key factors need to be considered and addressed to embrace these opportunities fully.

Firstly, scaling up electrolysis capacity is essential. By increasing the size and efficiency of electrolyzer systems, refineries can enhance their hydrogen production capabilities while minimizing carbon emissions. This entails investing in developing and deploying advanced electrolyzer technologies that are both cost-effective and efficient.

Additionally, establishing hydrogen infrastructure plays a vital role. Creating a robust network of hydrogen production, storage, and distribution facilities allows refineries to integrate green hydrogen into their operations and supply chains seamlessly. Collaborative efforts between refineries, energy providers, and government entities are necessary to develop this infrastructure effectively.

Despite the significant opportunities, certain barriers must be overcome for the widespread adoption of low-emissions electrolysis in refineries. One of the primary challenges is the high capital costs associated with implementing large-scale electrolysis systems. Continued research and development efforts are crucial to drive down costs and improve the economic viability of these technologies.

Moreover, the limited availability of renewable energy for large-scale electrolysis presents a hurdle. Expanding renewable energy generation and transmission infrastructure is essential to ensure a reliable and sustainable power supply for electrolysis operations. This requires strategic planning, investment, and collaboration between energy providers, governments, and refineries.

Supportive policies and regulations also play a critical role in facilitating the expansion of low-emissions electrolysis in refineries. Governments can provide incentives such as grants, tax credits, and supportive regulations to encourage refineries to invest in these technologies. Public-private partnerships and collaborations foster knowledge sharing, technology transfer, and resource pooling, accelerating innovation and adoption.

Consistent monitoring, reporting, and verifying emissions in the commodities sector is vital for public confidence. Challenges arise due to the complex value chain, measurement variations, and diverse regulations. Standardizing practices, harmonizing guidelines, and promoting transparency are crucial for overcoming these obstacles.

Technological advancements like remote sensing and satellite monitoring offer solutions for accurate emissions data. These tools enable comprehensive data collection, combining ground-level measurements from drones and airborne sensors with broader satellite views. Leveraging these innovations and advanced data analytics improves emissions monitoring and reporting efficiency and accuracy.

International frameworks and standards guide emissions monitoring and reporting. The Greenhouse Gas Protocol (GHG Protocol) by WRI and WBCSD provides guidelines, while the TCFD framework encourages climate-related disclosures. Regional initiatives like the EU ETS establish specific regulatory frameworks and reporting requirements.

By adhering to these frameworks, leveraging technology, and promoting transparency, the commodities sector can enhance emissions monitoring, reporting, and verification practices, fostering confidence and supporting global emission reduction efforts.

So by leveraging their profits, the commodities sector has the potential to drive sustainable practices, invest in renewable energy, and reduce emissions from oil and gas operations. Through strategic actions and responsible investments, the sector can contribute significantly to the global efforts of combating climate change and safeguarding our planet’s future.

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