Talking Transition
Understanding OGCI’s carbon intensity target

OGCI member companies have set a short-term target to reduce the carbon intensity of their aggregated upstream oil and gas operations by 2025.

This requires all member companies – including those with lower carbon intensity levels – to put initiatives in place now and over the next five years to reduce carbon dioxide and methane emissions in the short term.

The OGCI target is to reduce carbon intensity from a collective level of 23 kg CO2e/boe in 2017 to a level of between 20kg and 21 kg CO2e/boe by 2025. This is consistent with the reduction needed across all sectors, including the oil and gas industry, by 2025 to meet the Paris Agreement goals. IEA analysis from 2018 and 2019 shows a reduction of between 9% and 11% is needed to remain on track – the OGCI target represents a reduction of between 9% and 13%. IEA data calculated using the same perimeter also shows that the OGCI baseline is considerably lower than the industry average.

The target represents a reduction of between 36 and 52 million tonnes of CO2e per year by 2025 (assuming consistent levels of marketed oil and gas production), equivalent to the CO2 emissions from energy use in between 4 and 6 million homes.

What does the carbon intensity target include?

The carbon intensity target covers carbon dioxide and methane emissions from OGCI member company upstream operated oil and gas exploration and production activities, as well as emissions from imports of electricity and steam to those same sites. Upstream operations account for about half of emissions on average across OGCI, although this share varies widely by company. OGCI’s target only covers facilities where member companies are directly in charge of operations – not where they are only equity owners.

OGCI has decided not to include liquefied natural gas (LNG) and gas-to-liquids (GTL) in the upstream carbon intensity target, as originally planned, but to work on a specific set of initiatives. Both these businesses are enabling a shift to lower carbon-intensive fuels – LNG in areas that have traditionally been reliant on coal and GTL as a way to produce low-carbon transportation fuels. But the processes required to produce them are energy-intensive and this reduces their positive climate impact. However, since these facilities are mostly owned but not operated by OGCI member companies, it was important to find a different approach to addressing these emissions.

The OGCI carbon intensity target also does not include member companies’ refinery operations. This will be an equally important area of focus. A taskforce is currently working with external experts to define and quantify emissions on these facilities in a way that cuts across differing portfolios and engineering standards.

How do oil and gas companies reduce carbon intensity?

The measures that member companies are using to reduce carbon intensity include:

• Electrifying operations, using power from the grid where it is low carbon
• Co-generating power and useful heat
• Integrating solar and wind power into both onshore and offshore facilities as a key source of power
• Improving energy efficiency through improved monitoring, energy audits, proactive and predictive maintenance, automation and machine learning
• Using carbon capture, utilization and storage to avoid operational emissions
• Reducing routine flaring to zero, through improved design and the build-out of infrastructure to use gas
• Continued progress on the methane target will contribute up to a quarter of the reductions needed to meet the new combined carbon intensity target. We will also continue to monitor these emissions separately to accelerate improvements.

Why is OGCI targeting carbon intensity and not absolute emissions?

OGCI’s carbon intensity target measures the reduction in average aggregate carbon intensity rather than an absolute reduction in emissions. Reducing intensity means reducing the amount of greenhouses gases emitted per unit of energy produced. If production levels remain the same, absolute emissions will fall by at least 9%. if they fall – as they are now – absolute emissions will fall much further. And conversely if production levels rise, absolute emission levels could stay flat or even rise.

The aim in focusing on carbon intensity is not to open up wiggle room to increase production, but to retain a meaningful target regardless of shifts across the portfolios of member companies, and to allow new members to join the target and others to adopt the metric as a benchmark. With OGCI’s methane target, for example, three new member companies joined in 2018 and were able to adopt the 0.2% intensity ambition. That simple metric is also being used as a benchmark for what is achievable by climate organizations such as the Environmental Defense Fund.

Why focus on emissions from operations when those from oil and gas use (Scope 3) are bigger?

Oil and gas operations and products account for around 42% of the greenhouse gas emissions caused by human activities. The rest comes from coal, agriculture and changes in land use, such as deforestation.

Most of these oil and gas emissions are the result of people using fuels in transport, industry and to light, heat and cool homes and offices. And member companies are starting to work much more closely with their industrial and retail customers to help them reduce their carbon footprints.

Nevertheless, around 9% of global carbon dioxide and methane emissions come from the production and processing of oil and gas before it gets to the customer. This is under member companies’ operational control. As with other emitting industries, we need urgently to reduce these emissions so the world can get to net zero emissions as early as possible. As the IEA put it, this has to be a “first-order priority” for the oil and gas industry.

OGCI has prioritized the reduction of methane emissions over the past two years – on member company assets and working across the value chain – because it is an urgent task and one that can bring quick results. But carbon dioxide remains the bigger climate challenge. That is why, building on the progress made in cutting methane emissions, OGCI is now adding carbon dioxide to its ambitions by creating a new combined 2025 carbon intensity target, covering both these greenhouse gases.

It is just one step – but it’s an important one to take now. It not only accelerates action within member companies, but is intended to have a broader impact across the industry.

VOICES OF OGCI CEOs