EmissionsfromOilandGasOperationsinNetZeroTransitionsAWorldEnergyOutlookSpecialReportontheOilandGasIndustryandCOP28TheIEAexaminesthefullspectrumofenergyissuesincludingoil,gasandcoalsupplyanddemand,renewableenergytechnologies,electricitymarkets,energyefficiency,accesstoenergy,demandsidemanagementandmuchmore.Throughitswork,theIEAadvocatespoliciesthatwillenhancethereliability,affordabilityandsustainabilityofenergyinits31membercountries,11associationcountriesandbeyond.Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Source:IEA.InternationalEnergyAgencyWebsite:www.iea.orgIEAmembercountries:AustraliaAustriaBelgiumCanadaCzechRepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNewZealandNorwayPolandPortugalSlovakRepublicSpainSwedenSwitzerlandRepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEAIEAassociationcountries:ArgentinaBrazilChinaEgyptIndiaIndonesiaMoroccoSingaporeSouthAfricaThailandUkraineINTERNATIONALENERGYAGENCYEmissionsfromOilandGasOperationsinNetZeroTransitionsAbstractPAGE3IEA.CCBY4.0.AbstractToday,oilandgasoperationsaccountforaround15%oftotalenergy-relatedemissionsglobally,theequivalentof5.1billiontonnesofgreenhousegasemissions.IntheInternationalEnergyAgency’sNetZeroEmissionsby2050Scenario,theemissionsintensityoftheseactivitiesfallsby50%bytheendofthedecade.Combinedwiththereductionsinoilandgasconsumptioninthisscenario,thisresultsina60%reductioninemissionsfromoilandgasoperationsto2030.Fortunately,oilandgasproducershaveaclearopportunitytoaddresstheproblemofemissionsfromtheiractivitiesthroughaseriesofready-to-implementandcost-effectivemeasures.Theseincludetacklingmethaneemissions,eliminatingallnon-emergencyflaring,electrifyingupstreamfacilitieswithlow-emissionselectricity,equippingoilandgasprocesseswithcarboncapture,utilisationandstoragetechnologies,andexpandingtheuseofhydrogenfromlow-emissionselectrolysisinrefineries.UpfrontinvestmentstotallingUSD600billionwouldberequiredtohalvetheemissionsintensityofoilandgasoperationsgloballyby2030.Thisisonlyafractionoftherecordwindfallincomethatoilandgasproducersaccruedin2022–ayearofsoaringenergypricesamidaglobalenergycrisis.Thisreportaimstoinformdiscussionsontheseissuesintherun-uptotheCOP28ClimateChangeConferenceinDubaiinNovemberandispartofabroaderWorldEnergyOutlookspecialreporttobereleasedlaterin2023focusingontheroleoftheoilandgasindustryinnetzerotransitions.EmissionsfromOilandGasOperationsinNetZeroTransitionsExecutivesummaryPAGE4IEA.CCBY4.0.ExecutivesummaryTheproduction,transportandprocessingofoilandgasresultedin5.1billiontonnes(Gt)CO2-eqin2022.These“scope1and2”emissionsfromoilandgasactivitiesareresponsibleforjustunder15%oftotalenergy-relatedgreenhousegas(GHG)emissions.Theuseoftheoilandgasresultsinanother40%ofemissions.Inthisreport,welookatthechangesandmeasuresneededtoreducetheemissionsintensityofoilandgasoperationsintheIEA’sNetZeroEmissionsby2050(NZE)Scenario.Theworkbringstogether,expandsandupdatesanalysisfrompreviousIEAworktoinformdiscussionsintherunuptoCOP28inDubai.ItispartofabroaderWorldEnergyOutlookSpecialReporttobereleasedin2023focussingontheroleoftheoilandgasindustryinnetzerotransitions.TheNZEScenariomapsoutawaytolimittheglobalaveragetemperatureriseto1.5°Calongsideachievinguniversalaccesstomodernenergyby2030.Thisscenarioseesarapiddeclineinoilandgasdemand,whichissufficientlysteepthatitcanbesatisfiedinaggregatewithoutdevelopingnewoilandgasfields.Thereisalsoanimmediate,concertedeffortbyalltheoilandgasindustrytolimitemissionsfromitsactivities.IntheNZEScenario,theglobalaverageemissionsintensityofoilandgassupplyfallsbymorethan50%between2022and2030.Combinedwiththereductionsinoilandgasconsumption,thisresultsina60%reductioninemissionsfromoilandgasoperationsto2030.Scope1and2emissionsintensitiesofoilandgasoperationsintheNZEScenarioandtotalemissionsfromoperationsin2022and2030IEA.CCBY4.0.306090120OilNaturalgas20222030EmissionsintensitykgCO₂-eq/boe-50%-55%1234OilNaturalgasGtCO₂-eqTotalemissions-60%-65%EmissionsfromOilandGasOperationsinNetZeroTransitionsExecutivesummaryPAGE5IEA.CCBY4.0.Fivekeyleversareusedtoachievethisreductioninemissionsintensities:tacklingmethaneemissions,eliminatingallnon-emergencyflaring,electrifyingupstreamfacilitieswithlow-emissionselectricity,equippingoilandgasprocesseswithcarboncaptureutilisationandstorage(CCUS),andexpandingtheuseoflow-emissionselectrolysishydrogeninrefineries.NooffsetsareusedtoachievethereductionsinemissionsintheNZEScenario.Tacklingmethaneemissionsisthesinglemostimportantmeasurethatcontributestotheoverallfallinemissionsfromoilandgasoperations,followedbyeliminatingflaringandelectrification.ScalingupCCUSandexpandingtheuseoflow-emissionshydrogenplaycomplementaryrolesbuthavesignificantpotentialforpositivespilloversintootheraspectsofenergytransitions,byacceleratingdeploymentandtechnologylearningforthesetechnologies.Reductionsinemissionsfromoilandgasoperationsin2030intheNZEScenarioandcumulativecostandsavingsofdeployingthesemeasuresfrom2022to2030IEA.CCBY4.0.Tacklingscope1and2emissionsfromoilandgasisoneofthemostviableandlowestcostoptionstoreducetotalGHGemissionsfromanyactivityto2030.AroundUSD600billionupfrontspendingisrequiredovertheperiodto2030toachievethefull50%reductionintheemissionsintensityofoilandgasoperations.Thisis15%ofthewindfallnetincometheindustryreceivedin2022.Manyofthemeasuresalsoleadtoadditionalincomestreamsbyavoidingtheuseorwasteofgasmeaningtheycanquicklyrecouptheupfrontspendingrequired.Forfacilitiesimplementingthesemeasures,theaveragecostofproducingoilandgaswouldincreasebylessthanUSD2perbarrelofoilequivalent(boe).4008001200HydrogenCCUSElectrifi-cationFlaringMethaneEmissionsreductionsin2030MtCO₂-eq-1000100200300MethaneFlaringElectrifi-cationCCUSHydrogenBillionUSD(2022)Costandsavingsto2030EmissionsfromOilandGasOperationsinNetZeroTransitionsExecutivesummaryPAGE6IEA.CCBY4.0.Anumberofcompanieshavetodateannouncedtargetstoreducetheirscope1and2emissions.Thesevarymarkedlyintheirscopeandtimelinesforimplementation.OnlyafractionofthesecommitmentsmatchesthepaceofdeclineseenintheNZEScenarioandmostplantouseoffsetstoachievetheirtargets.Forward-leaningcompaniesneedtorecognisetheneedtomovefasterthantheglobalaveragereductioninemissionsandbuildabroadercoalitionofcompanieswillingtoplaytheirpart.Tobuildpublicconfidenceinactionsbeingtaken,aconsistentapproachisneededtomonitor,report,andverifyemissionsfromoilandgasactivities.Thisshouldbebasedonrobustmeasurementstoimprovetheaccuracy,availability,andtransparencyofemissionsdata.EmissionsfromOilandGasOperationsinNetZeroTransitionsIntroductionPAGE7IEA.CCBY4.0.IntroductionTheNet‐ZeroEmissionsby2050Scenario(NZE)involvestransformationoftheglobalenergysystemthatisunparalleledinitsspeedandscope.Policiesarerapidlyintroducedtoreduceemissionsfromexistingfossilfuelinfrastructureandtoscaleupthedeploymentofcleanenergytechnologies.Cleanenergyinvestmentthereforerisesthree-foldintheperiodto2030fromUSD1.4trillionin2022tomorethanUSD4trillionin2030.Thisinvestmentsurgeleadstoadeclineinenergy-relatedemissionsanddemandforfossilfuels.ThedeclinesinoilandgasdemandintheNZEScenarioaresufficientlysteepthatitispossibletomeetthemwithouttheneedfornewlongleadtimeupstreamconventionalprojects.Thisbringsdowntotalupstreaminvestmentsconsiderablycomparedwiththelevelsseenin2022.Nonetheless,continuedinvestmentinexistingoilandgasassetsisessentialintheNZEScenario.Thisistoensurethatoilandgassupplydoesnotfallfasterthanthedeclineindemandandalsotoreducetheemissionsarisingfromoilandgasoperations.Thisreportsetsoutthecurrentcontributionofoilandgasactivitiestoglobalgreenhousegas(GHG)emissions,theopportunityandcostsofmeasuresthatcantackletheseemissions,andthereductionsseeninoilandgas“scope1and2”emissionsintheNZEScenariointheperiodto2030.1ThisworkbuildsonthemodellingandapproachtooilandgasemissionsdescribedintheWorldEnergyOutlook(WEO)2018,theWEOspecialreportonTheOilandGasIndustryinEnergyTransitionsfrom2020,andthelatestversionoftheNZEScenariopublishedintheWEO2022.InvaluableinputtotheanalysiswasprovidedbytheRockyMountainInstitute’s(RMI)OilClimateIndexplusGas(OCI+)andtheWorldBankGlobalGasFlaringReductionPartnership.FurtherdetailsondefinitionsandthemodellingapproachcanbefoundintheTechnicalAnnex.1Inthisreport,“scope1”emissionsaretakenasemissionsthatcomedirectlyfromtheoilandgasindustryitself(e.g.emissionsfrompoweringtheenginesofdrillingrigsormethaneemissionsthatariseduringoilandgasextractionortransport).“Scope2”emissionsarisefromthegenerationofenergythatispurchasedbytheoilandgasindustry(e.g.fromthegenerationofelectricitytakenfromacentralisedgridtopowerauxiliaryservices.Thesumofscope1and2emissionsisoftenreferredtoasthe“well-to-tank”or“well-to-meter”emissions.EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsintensitiestodayPAGE8IEA.CCBY4.0.EmissionsintensitiestodayOilandgasoperationstodayareresponsiblefor15%ofglobalenergy-relatedGHGemissionsAccordingtolatestIEAdataandestimates,oilandgasoperationsresultedin5.1billiontonnes(Gt)CO2-eqin2022.Globalenergy-relatedGHGemissionswerearound40GtCO2-eqin2022,meaningtheoilandgasindustrywasdirectlyresponsiblefornearly15%ofenergyGHGemissions.Oiloperationswereresponsiblefor3.5GtCO2-eqandnaturalgasoperationsfor1.6GtCO2-eq.IEA.CCBY4.0.Theseemissionscomefromavarietyofsourcesalongtheoilandgassupplychains.Extractingoilandgasfromthesubsurfacerequireslargeamountsofenergytopowerdrillingrigs,pumpsandotherprocessequipmentandtoprovideheat.Mostoilisrefinedpriortouseandthisrequireslargequantitiesofenergy,especiallytoproducethehydrogenthatisusedtoupgradeandtreatthecrudeoil.NaturalgasalsoundergoesprocessingtoseparatenaturalgasliquidsandremoveimpuritiessuchasCO2,hydrogensulphideorsulphurdioxide.Crudeoil,oilproductsandnaturalgasaretransported,oftenoverlongdistances,bybothpipelineandbyshipandtheseprocessesarealsoanimportantsourceofGHGemissions.Spectrumofscope1and2emissionsintensitiesforoil,2022EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsintensitiestodayPAGE9IEA.CCBY4.0.In2022,theenergyrequiredfortheextraction,processing,refiningandtransportofoilresultedin450MtCO2emissions.Gasflaring,predominantlyatoilproductionfacilities,resultedinafurther250MtCO2emissions.Theenergyfornaturalgasextraction,processingandtransportresultedin270MtCO2emissions.Inaddition,weestimatethatoilandgasoperationsresultedintheextractionofaround130MtofnaturallyoccurringCO2thatwasventedtotheatmosphere.Naturalgasispredominantlymethane,apotentGHG,andtherearemultiplepotentialsourcesoffugitiveandventedmethaneemissionsalongtheoilandgassupplychains.Weestimatethatupstreamoiloperationsresultedin45Mtofmethaneemissionsin2022,upstreamnaturalgasoperationsresultedinaround25Mtandnaturalgastransportresultedinjustover10Mt.Intotal,thisisequivalentto2.4GtCO2-eq.2Spectrumofscope1and2emissionsintensitiesfornaturalgas,2022IEA.CCBY4.0.Puttingthesefigurestogether,105kgCO2-eqisemittedonaverageforeachbarrelofoilproduced:thisis20%ofthefulllifecycleemissionsintensityofoil.3Scope1and2emissionsfromnaturalgasare65kgCO2-eqperbarrelofoilequivalent(boe)produced,15%ofthefulllifecycleemissionsofnaturalgas.Thereisastrikinglybroadrangeofemissionsfordifferenttypesofoilandgasproduction:thehighest10%ofproductionforoil,forexample,resultsinaroundfour-timesmorescope1and2emissionsthanthelowest10%.Foroil,emissionsintensities2Onetonneofmethaneisconsideredtobeequivalentto30tonnesCO2basedonthe100‐yearglobalwarmingpotential(IPCC,2021).3Differentoilproductsresultindifferentlevelofemissionswhencombustedbuttoday’sglobalaveragearrayofoilproductsproducedfromabarrelofoilequivalent(boe)resultsin405kgCO2whencombusted.Naturalgascombustionresultsin320kgCO2perboe(around600kgCO2-eqperthousandcubicmetres).5010015001000200030004000UpstreamenergyVentedCO₂PipelineLNGUpstreammethaneDownstreammethanekgCO2-eqperboeBillioncubicmetresEmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsintensitiestodayPAGE10IEA.CCBY4.0.tendtobelowerinplaceswheretheoiliseasytoextractorwhererefiningandconsumptiontakesplaceclosetothepointofextraction.Intensitiesarealsotypicallylowerinlocationsthathavelowmethaneemissionsorproducelightoilornaturalgasliquids(NGLs),whichcanbeprocessedbysimplerefineriesorbypasstherefiningsectorentirely.Fornaturalgas,thehighenergyintensityoftransportmeansthatcountriesthatexportalargeshareoftheirproductionasliquefiednaturalgas(LNG)orbylong-distancepipelinetendtohaveahigheroverallemissionsintensity.EmissionsfromOilandGasOperationsinNetZeroTransitionsReductionsintheNZEScenarioPAGE11IEA.CCBY4.0.ReductionsintheNZEScenarioTheemissionsintensityofoilandgassupplyfallsbymorethan50%to2030,leadingtoa60%overallreductioninemissionsfromoilandgasoperationsIntheNZEScenario,aconcertedeffortbyalloilandgascompaniesworldwideleadstoamorethan50%reductionintheglobalaveragescope1and2emissionsintensitybetween2022and2030.Overthisperiod,globaloilandnaturalgasconsumptionbothfallbyaround20%to2030.Asaresult,totalscope1and2emissionsfromoilandgasoperationsfallby60%between2022and2030.Thereductionsinemissionsarethereforemuchlargerthanthosethatwouldaccruesimplybyrelyingonreductionsindemandtobringdownemissionsfromoilandgasoperations.SummaryofreductionsinoilandgasemissionsintheNZEScenarioto2030IEA.CCBY4.0.Fivekeyleversareusedtoachievethisreductioninemissionsintensities:tacklingmethaneemissions,eliminatingallnon-emergencyflaring,electrifyingupstreamfacilities,equippingoilandgasprocesseswithcarboncaptureutilisationandstorage(CCUS),andexpandingtheuseoflow-emissionselectrolysishydrogeninrefineries.NooffsetsareusedtoachievethereductionsinemissionsintheNZEScenario.-70%-60%-15%-45%204060801001202022203020222030UpstreamDownstreamkgCO₂-eq/boeOilNaturalgasEmissionsfromOilandGasOperationsinNetZeroTransitionsReductionsintheNZEScenarioPAGE12IEA.CCBY4.0.Thereareotheroptionsthatcouldalsohelpreducescope1and2emissionsfromoilandgasactivities.Transportemissionscouldbereducedbyswitchingtolow-emissionsfuelsinshipping,oremissionsreducedthroughincrementalimprovementsintheefficiencyofupstreamanddownstreamoperations.Wefocushereonthekeyoptionsthatdeliverthelargestreductionsintheperiodto2030andthatareconsistentwiththegoalsoftheNZEScenario.TheseemissionsreductionoptionsareanintegralpartoftheNZEScenariobuttheyshouldnotbeconsideredsolelyinthiscontext:theseareactionsthatcanandshouldbetakeninanyfuturescenarioforoilandgasdemand.SummaryofreductionsintotaloilandgasemissionsintheNZEScenariobyabatementmeasureto2030IEA.CCBY4.0.Notes:CCUS=carboncapture,utilisationandstorageappliedtohydrogenproductionatrefineriesortosupplyrefineries.Hydrogenistheuseoflow-emissionselectrolysishydrogentoreplacehydrogenfromunabatedfossilfuels.IntheNZEScenario,thereisa60%reductionintheglobalaverageupstreamemissionsintensityanda20%reductionintheglobalaveragedownstreamemissionsintensityto2030.Therearefewerimmediatelyimplementableoptionstoreduceemissionsindownstreamactivities,butactioninthesesectorsto2030arecrucialtohelpdrivecontinuedreductionsintheemissionsintensityofoilandgasoperationsafter2030.Methaneemissionsaccountforamuchlargershareofoverallscope1and2emissionsfornaturalgasthanforoil.EffortstocutdownonmethaneemissionsintheNZEScenariomeanthatthedropintheemissionsintensityofnaturalgas(55%to2030)isthereforeslightlylargerthanforoil(50%).Anumberofcompanies,accountingforjustunderhalfofglobaloilandgasproductiontoday,haveannouncedplansortargetstoreducetheirscope1and2emissions.Thereisaneedtobuildamuchbroadercoalitionofcompanieslooking12345620222030ReductionindemandMethaneFlaringElectificationCCUSHydrogenGtCO2-eqEmissionsfromOilandGasOperationsinNetZeroTransitionsReductionsintheNZEScenarioPAGE13IEA.CCBY4.0.toachievemeaningfulreductionsinemissionswithforward-leaningcompaniesmovingfasterandachievinggreaterreductionsthantheglobalaveragepaceofdeclineintheNZEScenario.Wehaveassessedthecumulativelevelofspendingthatisrequiredtoimplementthesemeasuresbetween2022and2030.IntotalweestimatethatUSD600billionupfrontspendingisrequired,ofwhich65%iscapitalexpenditureand35%isoperatingcosts.Thisisbasedonagranularassessmentofactionsacrossthefiveareastakingintoaccountvariationsintechnologycostsacrossregionsandspatialaspects,e.g.forelectrificationandflaringreduction.Totalspendingrepresents15%ofthenetincomegeneratedbytheoilandgasindustryin2022.Cumulativecapitalandoperatingcostsandsavingsfrom2022to2030intheNZEScenariobymeasureIEA.CCBY4.0.Measurestargetingmethaneemissions,flaringandelectrificationofoperationsavoidnaturalgasuseonsiteorcapturegasthatwouldotherwisebelost.Thiscanoftenbesoldtogenerateanadditionalrevenuestreamandsomanyoftheabatementoptionscanenduppayingforthemselves.Nonetheless,evenwithouttheseadditionalrevenuestreams,cuttingmethaneemissionsfromoilandgasoperationsandstoppingallnon-emergencyflaringareamongthemostreadily-implementableandcost-effectivemeasuresavailableinanysectoroftheeconomytoreduceGHGemissions.Forlong-livedprojects,thespendingto2030willcontinuetoyieldemissionsreductionsformanyyearsafter2030.AsoilandgasdemandcontinuestodeclineintheNZEScenarioafter2030,operatorsmayalsobeabletoselllowemissionselectricityorhydrogentootheruserstogenerateadditionalrevenuestreams.Inaddition,reducingemissionsthroughCCUSandtheuseoflow-emissions-200-1000100200300ElectrificationCCUSHydrogenMethaneFlaringBillionUSD(2022)CapitalexpenditureOperatingcostsIncomeEmissionsfromOilandGasOperationsinNetZeroTransitionsReductionsintheNZEScenarioPAGE14IEA.CCBY4.0.hydrogenhelpstostimulatelearningandcostreductionsinthesetechnologiesthatareimportantforemissionsreductionsacrossthewiderenergyeconomy.Actiontoreduceemissionsfromoilandgasoperationsisoneofthemostcost-effectivewaystoreduceglobalGHGemissions.Weestimatethatachievingthereductionsinscope1and2emissionsto2030intheNZEScenariowouldaddlessthanUSD2/boeonaveragetothecostofproducingoilandgasatfacilitiesimplementingthesemeasures(equivalenttoaroundUSD0.3permillionBritishthermalunits[MBtu]).Companyscope1and2emissionreductiontargetstodateBasedonananalysisofthe40largestoilandgascompanies,weestimatethatjustunderhalfofglobaloilandgasproductionisnowproducedbycompaniesthathaveannouncedatargettoreducetheirscope1and2emissions.Thesevarywidelyintheirnature,scopeandambition.Coverageandcharacteristicsofcompanyscope1and2emissionstargetsIntensityreductiontargetsareconvertedtoabsolutereductionsassumingstatedproductionplansorproductiongrowthinlinewithhistorictrends.Linearinterpolationisusedtoderiveavaluefor2030whennotgiven.Source:IEAanalysisbasedonannualreportsof40oilandgascompaniesrepresentingtwothirdsofglobalproduction,othercompaniesareassumednottohaveatarget.Mosttargetsareforanabsolutereductioninscope1and2emissions,expressedeitherasapercentagereductionovertimeorforemissionsfromoperationstobebelowaspecificlevelbyagivendate.Sometargetsareinsteadforareductionintheemissionsintensityofoperations,expressedasapercentagereductionortofallbelowaspecificlevel(usuallyexpressedinkgCO2-eq/boe).Mostcompanieshaveannouncedlong-termtargetswithoneormoreinterimtargets;companies25%50%75%100%UseofemissionsoffsetsAbsolutereduction2021-30TargetappliestoTargetcoverageInterim&long-termtargetsAbsolute&intensitytargetsGlobalproductioncoveredWithtargetWithouttargetAbsoluteorbothIntensityonlyHasinterimgoalLong-termonlyAlloperationsUpstreamonlyOperatedassetsOwnedassetsAllowedNotallowed<20%>50%20-30%40-50%30-40%EmissionsfromOilandGasOperationsinNetZeroTransitionsReductionsintheNZEScenarioPAGE15IEA.CCBY4.0.makinguponequarterofglobaloilandgasproductionhaveannouncedatargetonlyfor2050.Mostcompaniesalsoindicatethattheirreductiontargetscoveronlydirectly-operatedassets,ratherthancoveringproductionfromanyassetinwhichtheyholdanequitystake.Finally,mergersandacquisitionswillimpacttheprogressofcompaniestowardstheirtargets.Anumberofprincipleshavebeenproposedtolimittheriskthatassetsalesfromacompanywithatargettoacompanywithoutatargetcouldleadtoanincreaseinglobalemissions.Wehaveconvertedalltargetsintoapercentagereductioninabsoluteemissionsto2030andfindthatcompaniesaccountingforlessthan5%ofoilandgasproductionhavetargetsthatwouldmeetorexceedthe60%reductioninabsolutescope1and2emissionsintheNZEScenarioto2030.Mostcompaniesalsoindicatethattheyintendtouseemissionsoffsetstoachievetheirtargets(thereductionsintheNZEScenariodonotrelyonanyuseofoffsets).EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE16IEA.CCBY4.0.EmissionsreductionsbymeasureMinimisemethaneemissionsCuttingoilandgasmethaneby75%isoneofthemostimpactfulmeasurestoreduceGHGemissionsto2030Methaneisresponsibleforaround30%oftheriseinglobaltemperaturessincetheIndustrialRevolution,andrapidandsustainedreductionsinmethaneemissionsarekeytolimitingnear-termwarmingandimprovingairquality.Weestimatethattheoilandgasindustryisresponsiblefor80Mtofmethaneemissions,equivalentto2.4GtCO2-eq.Thereisawidevarietyofwell-knowntechnologiesandmeasuresavailabletoreducemethaneemissionsfromoperations,andintheNZEScenarioemissionsfallbyover60Mt–a75%reduction–to2030.One-thirdofthisdropoccursbecauseofreductionsinoilandgasuseto2030intheNZEScenario,withtheremainingtwo-thirdsstemmingfromwidespreadeffortsacrossallpartsofthesupplychaintoreducetheemissionsintensityofoilandgasoperations(themethaneemissionsintensityofoilandgasproductionfallsbymorethan70%to2030).By2030,alloilandgasproducershaveanemissionsintensitysimilartotheworld’sbestoperatorstoday.OilandgasmethaneemissionsintheNZEScenario,2010-2030IEA.CCBY4.0.2040608010020102015202020252030MtmethaneUpstreamoilUpstreamgasDownstreamgasDownstreamoilEmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE17IEA.CCBY4.0.Technologiesandmeasurestopreventmethaneemissionsfromoilandgasoperationsarewellknownandhavealreadybeendeployedinmultiplelocationsaroundtheworld.Keyexamplesincludeleakdetectionandrepaircampaigns,installingemissionscontroldevices,andreplacingcomponentsthatemitmethanebydesign.AlmostallavailableabatementmeasurescostlessthanUSD20/tCO2-eqtodeploy–andmostwouldcostconsiderablyless–meaningthatmitigatingmethaneemissionsisamongstthelowestcostoptionofanytechnologythatcanbringaboutastep-changeinglobalGHGemissions.WeestimatethatUSD75billionupfrontspendingisrequiredbetween2022and2030toachievetheemissionsreductionsintheNZEScenario.Around65%ofthisiscapitalexpenditureonnewequipmentand35%isoperatingcosts,mainlyrelatedtoregularleakdetectionandrepairprogrammes.4Manymeasurescansavemoneybecausetheoutlaysrequiredtodeploythemarelessthanthemarketvalueofthemethanethatiscapturedandcanbesold.NaturalgaspricesfalltolowlevelsintheNZEScenariobutthisadditionalincomemeansthatachievinga75%reductioninemissionsby2030wouldonaverageaddjustUSD0.05/boetothecostofproducingoilandgasintheNZEScenario.Costsfromavoidingmethaneemissionsatoilandgasoperations,2022IEA.CCBY4.0.Note:Incomefromgassalesbasedon2017-2021averagegasprices.4TheIEAwillbereleasingasecondshortreportdesignedtoinformdiscussionsintherun-uptoCOP28focusingoninvestmentinreducingmethaneemissionsandhowthiscanbefinanced.-20-15-10-5051015200300600900120015001800USD/tCO₂-eqMtCO₂-eqEarlyreplacementofdevicesReplacepumpsReplacecompressorsealorrodReplacewithinstrumentairsystemsReplacewithelectricmotorVapourrecoveryunitsBlowdowncaptureInstallflaresInstallplungerUpstreamDownstreamOtherReplaceexistingdevicesInstallnewdevicesLeakdetectionandrepairEmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE18IEA.CCBY4.0.AnimmediateandsignificantchangeinthepaceandscaleofpolicyandindustryactionisneededtoachievethemethanereductionsintheNZEScenario.AspartoftheGlobalMethanePledge,150countrieshavecommittedtoworktogethertocollectivelyreducemethaneemissionsbyatleast30%below2020levelsby2030.Themostcost-effectiveopportunitiesformethaneabatementareintheenergysectorandtheoilandgassectorshouldleadthewayineffortstoachievethePledge.Industryeffortscanandshouldalsobeenhancedwithcompaniesadoptingazero-toleranceapproachtoemissionsfromallassetsinwhichtheyholdanequitystakeandactivelypushingforotherstodosimilarly.Investorsandfinancialactorscanplayanimportantrolebytakingthelevelofmethaneemissionsintoaccountwhenmakingfinancingdecisionsonoilandgas.Greatertransparency,throughsatellitedetection,betterindustrystandardsandothermonitoringtools,willgreatlyacceleratetheseefforts.SeveralcountrieshavesignedaJointDeclarationthatcallsforglobalactiontosupportrobustmeasurementandtransparencyofemissionsdatatohelpachieverapidandsustainedemissionsreductions,andtheUSInflationReductionActrequirescompaniestoreporttheiremissionsbasedonempiricalandaccuratedata.TheInternationalMethaneEmissionsObservatoryhasbeentaskedtodevelopacomprehensivepublicdatasetdetailingmethaneemissionslevelsandsourcesfromfossilfuelactivitiesaroundtheworld.Eliminateallnon-emergencyflaringNaturalgasflaring–totallingnearly140bcmin2022–iscutby95%by2030intheNZEScenarioAround140bcmnaturalgaswasflaredin2022causing260MtCO2emissions–fromthecombustionofmethaneandnaturalgasliquids–and8Mtofmethaneemissions.5Flaringthereforeresultedin500MtCO2‑eqannualGHGemissionsin2022.Around70%ofgasflaredgoestoflaresthatoperateonanearcontinualbasis.IntheNZEScenario,allnon-emergencyflaringiseliminatedgloballyby2030,resultingina95%reductioninflaredvolumesandavoiding365MtCO2-eq.Therearemanyoptionstousenaturalgasthatiscurrentlyflared,includingbybringingittoconsumersviaaneworexistinggasnetwork,reinjectingittosupportreservoirpressure,andconvertingittocompressednaturalgas(CNG)orLNG.Thegascanalsobeusedtogeneratepower,whichneedstobeequippedwithCCUSifitistosubstantiallyreducetheindustry’sscope1and2emissions.5Thereshouldbeminimalmethaneemissionsifaflareisdesigned,maintainedandoperatedcorrectlybutthisisnotalwaysthecase.Therearealsooccasionswhenflaresareextinguished,resultingindirectventingtotheatmosphereofgasthatshouldbecombusted.Weestimatethataround92%ofgasvolumesdirectedintoflaresgloballyisproperlycombusted(inlinewithstudiesforthemainoilandgasproducingregionsoftheUnitedStatesindicatingacombustionrateof90-92%).EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE19IEA.CCBY4.0.CO2combustionemissionsfromflaringandflaringintensityintheNZEScenario,2010-2030IEA.CCBY4.0.Notes:C&SAmerica=CentralandSouthAmerica.Thecostsofflaringreductionprojectscanvarysignificantlydependingonthesizeandfrequencyofflaringandthedistancetoexistinginfrastructure.WeestimatethataroundUSD70billionupfrontspendingisrequiredbetween2022and2030toachievetheflaringreductionsintheNZEScenario.Themostcost-effectivesolutionistobringthegastomarketvianewpipelineconnectionstogastransmissionordistributiongrids,CNGorLNGterminals,andthisiswheremostofthecapitalexpenditureisdirected.Withtheexceptionofgasinjection,thegasthatissavedcanberesold,significantlyloweringthenetcostofabatementevenatthelowgaspricesintheNZEScenario.WeestimatethattwothirdsofvolumesflaredcouldbeavoidedatnonetcostbecausethevalueofthecapturedmethaneintheNZEScenarioissufficienttocoverthecostoftheabatementmeasure;thissharewouldbeevenhigherinscenarioswithhighernaturalgasprices.Reporteddataonflaringandcombustionefficienciesareoftenbasedonestimatedemissionratesthatcanvarysubstantiallyfromthevolumesrecordedduringmeasurementcampaigns.Measuringflaringandventinglevelsisnecessaryforcompanyaccountabilityandtodevelopalternativeoptionsorlayafoundationformarket-basedmechanismsthatfavourlow-emissionoilandgassources.Measurementsshouldbemadepubliclyavailabletohelpbuyers,consumersandfinancialactorsbetterunderstandscope1emissions.Newtechnologieshavemadeiteasiertomonitorandreduceemissions.Flarescannowbemonitoredonanearreal-timebasis,helpingcompaniestoidentifybottlenecksandopportunitiesinoperatedandnon-operatedassets.Mobile0.30.60.910020030020102015202020252030m³/bblMtCO₂AfricaEurasiaMiddleEastNorthAmericaC&SAmericaAsiaPacificEuropeWorldFlaringintensity(rightaxis)EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE20IEA.CCBY4.0.mini-LNGorCNGproductionequipmentcanreducetheneedforflaringandventingduringwell-testingandothershort-termoperations.Automatedair/fuelratiocontrolscanensurecompressorsandenginesoperateatoptimallevels,reducingtheamountofmethanethatescapesfromcombustionprocesses.Thereareseveraleffortstocutdownonflaring,includingtheZeroRoutineFlaringby2030,launchedbytheWorldBankandtheUnitedNationsin2015,whichcommitsgovernmentsandcompaniestoendroutineflaringnolaterthan2030.Progresstowardsthisgoalhasbeenrelativelylimited,however,andvolumesofnaturalgasflaredin2022werearoundthesamelevelasin2010.AchievingthepaceandscaleofreductionsinflaringseenintheNZEScenariowillrequirestrengthenedandenforcedpolicy,andindustryandfinancialsectorefforts.Emissionsreductionspotentialin2022andaveragecostofflaringreductionmeasuresintheNZEScenarioIEA.CCBY4.0.Notes:Abatementmeasureswereselectedbasedonflaresizeanddistancefromexistinginfrastructure.Gasincomebasedonpricesto2030intheNZEScenario.Sources:IEAanalysisbasedoninformationprovidedbyEDF,theWorldBankGlobalGasFlaringReductionPartnership,theMethaneGuidingPrinciple’sCostModel,andCapterio.ElectrifyupstreamoperationsElectrifyingoperationscutsinhalfCO2emissionsfromupstreamenergyusein2030Oilandgasextractionrequiresalargequantityofenergytopowerdrillingrigs,pumps,compressors,andotherprocessequipment,whileheatisusedtokeepdrillingfluidsorextractedoilatdesiredtemperatures.Acontinuoussupplyoffueltoprovidetheenergyrequiredforupstreamoilandgasoperationsisessentialand-40-20020406080-100-50050100150200MajorpipelinesLNGCNGPowerOtherpipelinesInjectionUSDpertCO₂-eqMtCO₂-eqEmissionsreductionsCostwithoutgasrevenueCostwithgasrevenueLeftaxis:Rightaxis:EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE21IEA.CCBY4.0.dieselisoftenusedtoprovidetheenergyrequiredbeforeproductionhasstarted(i.e.duringthedrillinganddevelopmentstage),andnaturalgasorelectricityisoftenusedduringtheproductionphase.Theenergyrequiredfortheseupstreamoilandgasprocessesresultedinmorethan700MtCO2in2022.Averagewindandsolarpotentialanddistancetonearestelectricityconnectionformajoroilandgasproducersin2022IEA.CCBY4.0.Notes:Bubblesizeindicatestotalenergyrequirementsin2022forupstreamoilandgasproduction.Thefigureshowsthetwentyproducerswiththelargestabsoluterequirements.Solarandwindpotentialareproduction-weightedaveragescalculatedpersquarekilometre,normalisedtoamaximumscoreoffiveforeach.Alargeportionoftheenergyrequiredatupstreamfacilitiesistopowerelectricalequipment,withtheelectricityproducedusingsmall-scaleonsitenaturalgasgenerators.Thesearequiteinefficientandalsousesomeofthevaluableproductsthatcouldoftenbesold.Usingmoreefficientequipment–suchasswappinganopencyclegasturbineforcombinedcycle–cansavearound30%oftheenergyrequired.Butfullelectrificationcanleadtoevengreaterefficiencyimprovements.Morethanhalfofglobaloilandgasproductiontodaylieswithin10kmofanelectricitygridand75%takesplaceinanareawithgoodwindorsolarresources.Theenergyatupstreamfacilitiescouldthereforebeprovidedbyelectricityfromacentralisedgridorgeneratedinadecentralisedrenewableenergysystem.Norwayhasbeenleadingeffortstoelectrifyupstreamoilandgasoperations,withgridconnectionsordedicatedoffshorewindinstallationsanintegralpartofitsplantoreduceemissionsby70%fromNorway’sContinentalShelfproductionby2040.BPhaselectrifiedasubstantialportionofitsassetsinthePermianBasininTexas.Buttherearefewexamplesoflarge-scaleactionsbeingtakenbyotheroilandgasproducers,especiallyforexistingassets.UnitedStatesRussiaChinaSaudiArabiaCanadaIranIraqUAEBrazilKuwaitIndonesiaIndiaQatarAustraliaAlgeriaKazakhstanNorwayNigeriaOmanLibya456789100102030405060WindandsolarpotentialKilometres+Energyrequirement50TWhEmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE22IEA.CCBY4.0.Operatorsfaceseveralchoiceswhenimplementinganelectrificationprogramme,includingselectingtheappropriatetechnologyanddesign(whethertousedirectoralternatingcurrentcables,orchoosingtherightmixofwind,solarandbatterycapacity),andassessingtotalcostsinthecontextofthecapitalrequiredtobuildrenewablecapacityorgridconnections,aswellasthepriceoftheelectricityandnaturalgasandthevalueofavoidedCO2.Itisalsoimportanttoensureacontinuous,reliablesourceofenergytomaintainoperationsandensuresafety;thereareseveralsolutionsavailabletodoso,includingtheuseofbatteries,hybridsystemsortheretentionofexistingassetsforback-uppower.Wehavecarriedoutadetailedgeospatialanalysistoassessthemostfeasibleandcost-effectivesolutionforelectrifyingthe8200oilandgasproductionsitesthatareinoperationintheNZEScenarioin2030.6Weestimatethataround400MtCO2–threequartersofemissionsfromupstreamenergyusein2030–wouldbetechnicallyavoidablethroughelectrifyingfacilities.Theremaindercoveroperationsthatareimpracticalforfullelectrification,includingthosethatrequiresubstantialamountsofheatandthosewithlargeprocessemissions(suchascoal-to-liquidsfacilities).Wealsoexcludeproductionwhichtakesplaceinremotelocationsfarfromgridsorwithlowsolarorwindresources.Costsofelectrifyingoilandgasoperationsin2030intheNZEScenarioIEA.CCBY4.0.Note:Coststakeintoaccountrevenuefromsalesofoilandgasnotusedinoperations.Source:IEAanalysisbasedongeospatialdatafromWorldBank(2023),GlobalSolarAtlas(2023),RystadEnergy(2023).6NonewfieldsaredevelopedintheNZEScenarioandsothisassessmentlooksonlyatopportunitiesforelectrifyingexistingfields,takingintoaccountchangesinproductionto2030.Fieldsthatstopproducingbefore2030arenotconsidered.Foreachfield,theassessmentexaminescurrentandfuture:upstreamenergyuse,distancefromanexistingelectricitygrid,gridconnectioncosts,electricityprices,emissionsintensityofelectricity,windandsolarpotentialandcosts,andbatterycosts.ProjectionsofpricesandcostsarebasedondataintheNZEScenarioto2030.Thechoiceofelectrifyingasitethroughgridconnectionordecentralisedrenewables,andtheoptimalmixofwindandsolarcapacity,isbasedontheoptionwiththelowestnetpresentvalueineachyear.-200204060801000100200300400USD/tCO₂MtCO₂OnshoreOffshoreOnshoreOffshoreDecentralisedrenewables:Grid:EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE23IEA.CCBY4.0.Someofthelowestcostoptionsareproductionsitesclosetoelectricityinfrastructureincountrieswithrelativelylowelectricitypricesorinrenewables-richareaswithplentyofavailableland(asintheMiddleEastandNorthAfrica).Offshoresitesaregenerallymorecostlytoelectrifyasmanyplatformsarefarfromthecoast,arelocatedindeepwatersandoperateinharshenvironments.IntheNZEScenario,emissionsfromenergyuseinoilandgasproductionarereducedby270MtCO2in2030bymeansofelectrification.ThiscostsjustoverUSD260billionto2030,ofwhich10%isforgridconnections,35%isforpurchasingelectricityfromthegridand50%isfordevelopingdecentralisedhybridsolarPV,windandbatterystoragesystems.Theremainderisusedtodeveloppipelineconnectionstonearbygasgatheringpipelinestoconnectun-usednaturalgastonearbymarkets.OnaveragethiswouldaddaroundUSD0.3/boeatfieldsthatareelectrified.Alongsidetheelectrificationofupstreamoilandgasproduction,therearealsoopportunitiesfurtherdownstream–suchastheuseofelectricmotorstopowertheLNGliquefactionprocess(asiscurrentlydoneintheSnøhvitterminalinNorwayandtheFreeportterminalintheUnitedStates)ratherthanusingindustrialopen-cyclegasturbines(whichcanemitasmuchas250kgCO2pertonneLNG).Usinggridelectricityinplaceofgasincompressorstationscansimilarlyreduceemissionsassociatedwiththetransportofnaturalgasviatransmissionpipelines.Mostelectrificationoptionswouldincuranetcosttooperators,evenwhenaccountingforefficiencygainsandthesaleoftheadditionaloilandgasnotrequired.Policyorregulatoryincentivesarethereforenecessarytostimulatetherequiredupfrontinvestment.ThiscouldtaketheformofaCO2price–whichprovidedthespurfordevelopmentinNorway–ormightcomeintheformoftaxbreaksorexemptionsonaportionofelectricitytariffs.Costscouldbekeptdownifoperatorscollaboratetobuildsharedcleanelectricityinfrastructurethatwouldfeedwiderareasofproduction,anexamplebeingrecenteffortsbycompaniesoperatingintheNorthSea.ProjecteconomicscouldalsobeimprovedbycreditingavoidedCO2orsellingsurplusrenewableelectricitybacktothegrid.DeploymentofCCUSOilandgascompaniesarealreadyleadersinCCUSandboostingdeploymentwouldsignificantlycuttheirownemissionsTheoilandgasindustryisinvolvedin90%ofCO2captureandstoragecapacityinoperationaroundtheworldtoday.Morethan40%ofCCUSinvestmentsince2010hasbeeninprojectsdirectlyrelatedtotheoilandgasvaluechains.ThereEmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE24IEA.CCBY4.0.are15largeCCUSprojectsinoperationthatcaptureandstore25MtCO2peryearfromnaturalgasprocessing,mostlyinAustralia,Brazil,thePeople’sRepublicofChina(hereafter“China”),theMiddleEastandtheUnitedStatesandanotherthreerefineryorupgraderfacilitiesinCanadaandtheUnitedStatesthateachcapturearound1MtCO2peryear.CCUSinvestmentinoilandgasvaluechainsandshareoftotalCCUSinvestmentIEA.CCBY4.0.Source:AnalysisbasedonIEACCUSprojectdatabase.SeveralactivitiesalongtheoilandgassupplychainresultinhighlyconcentratedsourcesofCO2emissionssuitableforCCUS.Inaddition,oncetheCO2iscapturedandcompressed,geologicalstorageresourcesareoftenfoundclosetoexistingoilandgasactivities,andsometimeswithintheiroperationalscope.TherearethreemainprocessestowhichCCUScanbeappliedtoreducetheemissionsintensityofoilandgasoperations.Gasprocessing.Whenextracted,naturalgascancontainnumerousimpurities,includingCO2thatisusuallyremovedbeforelongdistancetransportandventedtotheatmosphere.7Weestimatethataround150MtofnaturallyoccurringCO2isextractedeachyearthroughoilandgasoperationsofwhich125MtCO2isventedtotheatmosphere.Ofthe25MtCO2thatiscaptured,mostisinjectedintooilfieldstoboostproductionbutsomeisgeologicallystoredatinactivefields.WeestimatethatitwouldcostUSD15-30/tCO2tocaptureandstoremostofthesehighlyconcentratedCO2streams,whichwouldtranslateintoanadditionalcostofUSD0.1/MBtuforextractingnaturalgaswitha5%CO2content.Whereconditions7Forpipelines,CO2levelsinnaturalgashavetobereducedtobelow0.5%orsometimesashighas3%(molefractionbasis).ForLNG,thethresholdisaround0.005%.20%40%60%80%100%0.30.60.91.21.52010201120122013201420152016201720182019202020212022BillionUSD(2022)NaturalgasprocessingRefineryhydrogenOtherhydrogenShareoftotalCCUSinvestment(rightaxis)EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE25IEA.CCBY4.0.havebeenfavourableintheUnitedStates,ithasbeenpossibletoentirelycoverthiscostwithrevenuefromthesaleofCO2tooilproducers.Refiningandbitumenupgrading.Around40MtofhydrogeniscurrentlyusedtorefineandupgradeoilgloballyandtheCO2emissionsfromthetransformationoffossilfuelstoproducethishydrogencanbecaptured.8HydrogenproductionunitscreatearelativelypurestreamofCO2thatisoftenvented:thisaccountsfor60%ofthetotalCO2emittedbyasteammethanereformeranditisstraightforwardtocaptureit.Coal-andnaturalgas-basedhydrogenunitscanbedesignedfor95%CO2capturetomeetexpectationsforloweremissionsintensityofhydrogensupply.CCUScanalsoreduceemissionsfromcatalyticcrackers,heatplantsandpowergenerationatrefinerysites.EquippingCCUStohydrogenproductioncostsUSD15-45/tCO2avoided(forcoal)orUSD50-80/tCO2avoided(fornaturalgas),withcostsaroundtwiceashighforotheronsiteCO2sourceswherethesizesoftheindividualCO2streamsaresmaller.Otheroptionstoreduceemissionsfromrefineriesincludeswitchingtotheuseoflow-emissionselectrolytichydrogen(seenextsection)andelectrifyingheatandpowersupplies;thesemaybemorecost-effectiveoptionsinsomecases.LNGliquefaction.Liquefyingnaturalgasrequirescoolingitto-162°C,whichisanenergyintensiveprocessthatisusuallypoweredbyconsumingaportionofthegasflowingtothe(oftenremote)facility.Theamountusedinthiswayvariesmarkedlybetweenfacilitiesbutaveragesaround9%globally.Inadditiontoanyventingofnaturally-occurringCO2,thismeansaround2-3tonnesofCO2isemittedforeverytentonnesofLNGproduced.TherearenoprojectsinoperationtodaythatuseCCUStoreducetheseprocessemissions,butitcouldreduceemissionsbyaround90%.CostswouldvarybyprojectscaleandexperiencebutwouldlikelyaveragearoundUSD40/tCO2avoidedwhichwouldtranslateintoaroundaUSD0.25/MBtuincreaseinthecostoftheliquefactionprocess(arounda20%increaseincosts).IntheNZEScenario,CO2capturedfromthesethreeapplicationsgrowsfromaround25MtCO2in2022to160MtCO2in2030.ThelargestincreasecomesfromdeployingCCUSintheoilvaluechain,bothonsiteatrefineriesandattheproductionsitesofexternalsupplierswhosellhydrogentorefiners(around30%ofthehydrogenconsumedinrefineriestodaycomesfromtheseexternalsuppliers).AchievingthislevelofCCUSdeploymentin2030wouldrequirearoundUSD100billioninvestmentto2030,mostlyforcapitalcosts.Thisinvestmentcontinuestoprovideemissionsreductionsafter2030.ThereareevengreateremissionsreductionsfromacrosstheoilandgassupplychainthroughtheuseofCCUSafter2030.8Thissectionfocusesonlow-emissionshydrogenproducedusingCCUS.Refineriescanalsoreducetheiremissionsbysubstitutingexistinghydrogendemandforlow-emissionshydrogenusingwaterelectrolysisandcanselectwhicheverapproachismostcompetitiveinagivenlocation.Hydrogenfromelectrolysisisdiscussedinthenextsection.EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE26IEA.CCBY4.0.CO2emissionsavoidedgloballythroughCCUSinthenaturalgasandoilvaluechainsintheNZEScenarioIEA.CCBY4.0.Note:CO2emissionsavoidedarelowerthanthevolumeofCO2capturedduetothereductioninefficiencyofprocessesbecauseofCO2captureandcompression.Learningsfromthefinancing,constructionandoperationofCCUSatgasprocessingandhydrogenfacilitiesthisdecadeintheNZEScenarioalsocontributetocostreductionsforCCUSinothersectors,suchascementproduction.TheinvolvementofoilandgascompaniescanalsohelpdevelopnewgeologicalCO2storageresourcestounderpinfuturedeployment.Forexample,threeoilcompaniesareinvolvedintheNorthernLightsCO2storagefacilitythatwillstoreCO2fromcementandwaste-to-energyplantsinNorway.IntheNZEScenario,policiesaresoonintroducedtoboostthedeploymentofCCUS,includingthroughmeasuresthatmitigaterisksforlarge-scaleCO2storagedevelopment,offerperformance-basedpaymentsforprovenCO2avoidance,andcreatemarketsforlow-emissionsproducts.Therehavebeenanumberofpositivepolicydevelopmentsandincentivesrecentlyinthisregard.TheseincludetaxcreditsofuptoUSD85/tCO2undertheUSInflationReductionAct,whichcanbecoupledwithsupportfromLowCarbonFuelsStandardcertificatesinsomestates,andvarioussupportschemesforlow-emissionshydrogenaroundtheworld.InEurope,theEuropeanCommissionhasproposedmakingEUoilandgassupplyconditionaloninvestmentinCO2storageresources.Inoil-producinglocations,first-moversmaystoretheCO2throughenhancedoilrecoverytoimproveprojecteconomics.50100150NaturalgasOilMtCO₂20222030EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE27IEA.CCBY4.0.Useoflow-emissionselectrolysishydrogenElectrolysishydrogenplaysasmallerroletoreduceoilandgasemissionsto2030butenablesmuchlargerreductionslateronFourofthefivelargestprojectsunderconstructiongloballytoproducehydrogenfromelectrolysisarebeingdevelopedbyoilandgascompaniesorwillsupplyhydrogentoarefinery.9Thisincludesa260MWelectrolysertoproducehydrogenforarefineryanda200MWelectrolyserforuseatacoal-to-chemicalsplant,bothinChina,anda200MWelectrolysertoreplacehydrogenfromanaturalgasreformerintheNetherlands.Aroundtheworld,oilandgascompanies,includingthoseengagedinnaturalgasdistribution,areinvolvedinnearly50electrolysisprojectsinoperationordevelopment,representingmorethan1.6GWofcapacity.Around40Mtofhydrogenisusedbyrefineriestoday,morethantwo-fifthsofglobalhydrogendemand,resultinginover200MtCO2annually.IntheNZEScenario,thedeclinesinoilconsumptionmeantherequiredvolumesofhydrogenfallsslightlybutdemandin2030issimilartolevelsin2015.Thereareanumberofreasonswhyrefineriesarewellsuitedforthedeploymentoflow-emissionshydrogen:Theycanaccommodateanewsourceoflow-emissionhydrogenwithouttheneedfornewend-userequipment.Thisavoidstheneedtosynchroniseinvestmentinlow-emissionshydrogensupplywithinvestmentinhydrogendemandtechnologies.Insomecases,existingsourcesofhydrogencanbekeptonlinetoensurecontinuoussupplyduringatransitionperiod.Theyareoftenco-locatedwithotherindustrialsourcesofhydrogendemand,whichcansharesomeprojectrisksanddiversifyhydrogensuppliesovertime.Theyareofteninlocationsthatarewell-suitedfordevelopingtherenewableelectricity(suchasoffshorewindorsolarPV)orCO2storagethatareessentialforlow-emissionshydrogenandminimisetheneedfornewinfrastructuretomoveelectricity,hydrogenorCO2.Theyaretypicallycoastalandsocanbelinkedintotheplanningoffutureimportorexporthubsforhydrogenandhydrogen-basedfuels.9Thissectionfocusesonlow-emissionshydrogenproducedfromwaterelectrolysis.Refineriescanalsoreducetheiremissionsbysubstitutingexistinghydrogendemandforlow-emissionshydrogenproducedwithCCUS,asdiscussedintheprevioussection.EmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE28IEA.CCBY4.0.EvolutionofhydrogendemandintheNZEScenarioIEA.CCBY4.0.Notes:Otherexistingsourcesofdemandincludeammonia,methanolanddirectreductionofiron.Newsourcesofdemandforlow-emissionshydrogenincludeinputstohydrogen-basedfuelsproduction,ironandsteel,transport,biofuelsproduction,electricitystorageandpowergeneration,andheatgeneration.WeestimatethatthecostofavoidingonetonneofCO2throughtheuseoflow-emissionselectrolysishydrogenin2030willrangewidelydependingontherelativepricesoffossilfuelsandcostsofrenewableelectricity.Costsarelowestinregionswheretheimportednaturalgaspricesarerelativelyhighandrenewableelectricitycostsrelativelylow,whichincludesIndiaandpartsofLatinAmerica.Intheseregions,thiswouldaddaroundUSD0.2/bbltothecostofrefiningabarrelofoil.InChina,lowercapitalcostsofelectrolyserinstallationreducethecostgapwithcoal-basedhydrogentojustUSD0.2/kgofhydrogen.Betweenthem,ChinaandIndiarepresent50milliontonnesofCO2abatementpotential.InEuropeandNorthAmerica,thecostsofavoidingCO2arelessfavourable,butwouldstillonlyaddUSD2/bbltothecostofrefining.IntheNZEScenario,around6Mtoflow-emissionselectrolysishydrogenisprojectedtobeusedinrefineriesin2030.Around65%ofthisisproducedonsiteatrefineriesthemselvesandtheremainderispurchasedfromexternalsuppliers.Intotal,thisrequiresaround60GWofelectrolysercapacityandaround280TWhoflow-emissionselectricity.ThiswouldcostjustoverUSD80billion,splitbetweencapitalexpenditureforelectrolysersandnewrenewablecapacitytoproducethehydrogenonsite(35%)andoperationalcostsandpurchasesoflow-emissionselectrolysishydrogenfromthirdpartysuppliers(65%).Thisinvestmentyieldsotherco-benefitsbyreducing100200300400500200020102020203020402050MilliontonneshydrogenRefiningOtherexistingsourcesofdemandNewsourcesofdemandforlow-emissionsEmissionsfromOilandGasOperationsinNetZeroTransitionsEmissionsreductionsbymeasurePAGE29IEA.CCBY4.0.costsandrisksforotherprojectsrelatedtonewsourcesofhydrogendemand(suchaselectricitystorage,hydrogen-basedfuels,andsteelproduction).CostofavoidingCO2emissionswithlow-emissionselectrolysishydrogen,andCO2emissionsfromrefineryhydrogenbyregionintheNZEScenarioin2030IEA.CCBY4.0.Notes:Regionsnotshownhavehigheraverageabatementcosts.LevelisedcostsbasedonaveragefossilfuelandcostsofthecheapestdedicatedrenewableelectricityinstallationsperregionintheNZEScenarioin2030,inclusiveofcapitalcostsoftheexistinghydrogensource.Achievingthescaleupoflow-emissionselectrolysishydrogenintheNZEScenariorequirespoliciestocreateawell-functioningmarket.Thiscanbeachievedthroughaproduction-basedeconomicincentive,forexampleasdirectpaymentsortaxcreditsforproducinglow-emissionshydrogenoroilproductswithalowemissionsintensity.Regulatoryconstraintscouldalsobeused,forexamplebyrestrictingtheuseofhydrogenorsaleofoilproductswithanemissionsintensityaboveastatedlevel(thiscouldbeintheformofacap-and-tradesystem,includingfuelsstandardswithtradeablecertificates).Robustmeasurementandreportingframeworksarealsoneeded,whichwouldneedtoincludeclearrulesontheeligibilityofdifferentsourcesofhydrogenforsupportprogrammes,basedonemissionsintensity,andcompatibleinternationalagreementstogovernanyimports.Permittingtimelineswillalsoneedtobeshortenedconsiderablyforrenewablepower,pipelineandelectrolysercapacityand,forlow-emissionselectrolysishydrogenproducedbyexternalsourcesandsoldtorefiners,rulesestablishedoverpipelineandstorageinfrastructureaccess.501001500102030405060708090100110USD/tCO₂MtCO₂LatinAmericaIndiaChinaOtherAsiaEuropeanUnionNorthAmericaAfricaMiddleEastEmissionsfromOilandGasOperationsinNetZeroTransitionsTechnicalannexPAGE30IEA.CCBY4.0.TechnicalannexModellingapproachforemissionsin2022TheGlobalEnergyandClimateModeltracksabarrelofoilorcubicmetreofnaturalgasfromwhereitisproducedtowhereitisrefinedorprocessedandfinallytowhereitisconsumed.Inthisanalysiswefocusonscope1and2CO2andmethaneemissionsfromoilandgasoperations.MethaneemissionsaretakenfromtheGlobalMethaneTracker2022.ForupstreamCO2emissions,wegeneratecountry-specificenergyintensitiesforeachtypeofoilandgasproductionthattakeintoaccountthevariousprocessesusedalongproductionstages(e.g.exploration,development,drilling,extraction,processing,maintenance).TheintensitiesarederivedfromtheOilClimateIndexplusGastool(OCI+)whichisbasedonadetailedfield-by-fielddatasetandwascreatedbytheRockyMountainInstitute(RMI)usingtheOilProductionGreenhouseGasEmissionsEstimator(OPGEE,version3.0a).Intensitiesareprojectedintothefuturetakingintoaccountcontinuedtechnologicalimprovements(whichtendtoreducetheenergyintensityofproduction)andresourcedepletion(whichtendtoincreasetheenergyintensity).WeaccountforCO2emissionsfromgasflaring(mostlyfromoilfields)basedondatafromtheWorldBankGlobalGasFlaringReductionPartnershipandCO2venting(mostlyfromgasfields).FordownstreamCO2emissions,transportenergyuseandemissionstakeintoaccountthedifferenttraderoutesandwhetherthetransportisbyshiporpipeline.Refiningemissionstakeintoaccountthedifferentqualitiesofoilusedasfeedstockandtheleveloftheprocessingrequiredtoprovidetheend-useproductsdemandedbyconsumers.Hydrogenneedsinrefiningoperationstakeintoaccountdifferencesinthesulphurcontentofcrudeoilandtheallowedsulphurcontentoffinalproducts.Valuesareadjustedbasedontheprocess-levelinformationinthePetroleumRefineryLifeCycleInventoryModel(PRELIM).Theglobalaveragearrayofoilproductsproducedfromabarrelofoilequivalent(the“productslate”)canvarysubstantiallybetweendifferentindividualrefineries.However,refineriesgenerallytrytolimittheproductionofheavierproducts,andsoataregionallevelthereisonlyaslightvariationintheemissionsfromcombustingabarrelofoilequivalent.Theadditionalemissionsassociatedwithconvertingabarrelofextraheavyoilintosyntheticcrudeoilarecapturedinourmodellingasrefiningemissions.Someoilproductsareusedasfeedstocksandnotcombusted,reducingtheglobalaverageemissionsassociatedwithalloiluse.EmissionsfromOilandGasOperationsinNetZeroTransitionsTechnicalannexPAGE31IEA.CCBY4.0.Ouranalysisdoesnotconsiderallemissionsthatcouldbeincludedinafulllifecycleassessment.Wedonotincludetheenergyusedinmanufacturingthedrillingrigsorthesteelusedinwellsorpipelines;theseamountsarenoteasilyavailableinenergystatisticsandarelikelytobedwarfedbythedirectuseofenergy.Wealsodonotconsiderland-useCO2emissionsfromclearingareasforproductionfacilitiesinonshoreareas.Previousassessmentshaveindicatedthatthesearelikelytoberelativelysmall-lessthan1%oftotallifecycleemissionsofabarrelofconventionalcrudeoil–althoughemissionscanbeverysitespecific,dependingonhowthelandwasusedpriortoconstructionofthefacility,andaresubjecttolargeuncertaintyranges.ScopeofemissionsincludedinanalysisIEA.CCBY4.0.InternationalEnergyAgency(IEA)ThisworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseoftheIEA’sindividualMembercountriesorofanyparticularfunderorcollaborator.Theworkdoesnotconstituteprofessionaladviceonanyspecificissueorsituation.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.Forfurtherinformation,pleasecontact:WorldEnergyOutlook(weo@iea.org).SubjecttotheIEA’sNoticeforCC-licencedContent,thisworkislicencedunderaCreativeCommonsAttribution4.0InternationalLicence.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/about/contactTypesetinFranceby2023-May2023Coverdesign:IEAPhotocredits:©Shutterstock