16 Nov Sustainability is vital to the future of the Oil and Gas industry
The world is changing fast. A few short years ago the idea of the world’s biggest Oil and Gas companies committing to long-term net zero targets was unthinkable. But more multinationals are firmly stating their commitment to sustainability targets. In May this year for example, BP Plc committed to a strategy of net zero by 2050, something that alters its entire way of working.
Other signs of an industry ready to embrace the challenges of climate change and the urgent need for sustainability can be seen with this year’s Davos World Economic Forum. Held in January, this annual event is not usually renowned for a focus on the environment. But this year teenage climate activist Greta Thunberg was one of the biggest draws.
What does sustainability mean within the Oil and Gas industry?
Sustainability as a term within the Oil & Gas industry has a broad meaning. In technical terms, oil and gas are finite and therefore cannot be termed as renewables. In theory, they will be used up at some point in the future. However, in practical terms sustainability within Oil & Gas can be implemented as they still have a long future.
The term is applied to different aspects of the industry including:
- Social impact.
Most companies in the sector sum it up as follows, according to the survey. Sustainability means to “maximise cleaner oil and gas production and products, while minimising the impact on the external environment and society.”
Fossil fuels are necessary for our society to continue. We are not in a realistic or practical situation to drastically eliminate the use of fossil fuels, and instead must find ways to balance their use with the impact on the environment. Attempting to eliminate the use of fossil fuels will have a detrimental effect on those at the lowest income and in the most difficult circumstances. This is clearly not the way forward for sustainability within Oil & Gas.
Striking a balance between sustainability and fossil fuels
It’s a particularly interesting time to be in the Oil & Gas industry. A pandemic may not have been on anyone’s agenda for 2020, but the net result of COVID-19 is an even more urgent focus on climate and sustainability. The goals set by the International Oil Companies could massively reduce the fossil fuel impact on the planet, but it’s clear much more needs to be done.
These measures are in response to widespread pressure on the energy industry to take demonstrable steps towards fighting climate change. Ambitious targets to slash emissions from the production and consumption of fuel and other petroleum products is a key way to profoundly change a future threatened by the effects of climate change.
Right now, the world continues to rely on petroleum. It provides 95% of the fuel across global transportation. And fossil fuels remain inextricably linked with economic prosperity. The challenge is to find a workable balance between sustainability, fossil fuels and economic development.
Collaboration is necessary to achieve Sustainable Development Goals
In September 2015, the UN General Assembly formally launched the Agenda for Sustainable Development 2030. Within this there are 17 Sustainable Development Goals (SDGs) that are designed to tackle some of the biggest challenges facing the world.
The idea is that UN member states frame their future development through the SDGs and incorporate them into core business practice. The SDG expand on the previous targets set by the Millennium Development Goals (MDG), which have now expired. To achieve these SDGs, collaboration between civil society, the private sector and governments must occur. And because Oil and Gas as an industry potentially affects most of the SDGs across different areas including economies, ecosystems and communities, there must be a strong industry commitment.
Oil and Gas contributes to the planet’s sustainable development in many ways, from supplying vital access to energy without which economies would fail, to providing jobs. In addition, the industry contributes a vast amount of tax and government revenue, supports and enables the development of innovative and advanced technology and manages the complex balance between human rights, environmental protection and health and safety.
Pressure on energy industry from changing investor behaviour
Global warming, climate change and the future are fundamentally altering investor behaviour too. There is potential growth in renewables, such as solar and wind energy. These generate around 20% of energy needed globally, but this will increase.
Major investment firms are now demanding that businesses demonstrably improve their environmental, social and governance (ESG) metrics. And while sustainability is often associated only with diversifying into renewables, it should also link to business operations. Businesses within Oil and Gas that take a holistic approach to sustainability, will improve things internally too. They will manage equipment, energy consumption and costs in a way that benefits the wider environment. This is where digitisation enters the sustainability debate.
Companies across all sectors are showing how efficiency and profitability can be improved through innovative tech. AI, automation and Big Data are changing the way that operators manage systems and meet challenges. Digitisation is one of the biggest drivers for change in the Oil and Gas industry, but for this to make tangible differences to sustainability, investment, development and innovation must continue.
Sustainability is the biggest challenge for Oil and Gas industry
Sustainability is vital for the longevity and viability of the Oil and Gas industry. It is arguably the most important challenge facing companies around the world. A survey from Gulf Energy Information canvassed the upstream, midstream and downstream sectors to find out what companies are doing regarding sustainability. The survey uncovered the following:
- Just under half (49%) of all companies have a sustainability business initiative underway.
- A further 22% are currently devising an initiative.
- The remaining 29% say they have no plans to implement a sustainability initiative.
- Only 40% of respondents say they see their company as a leader in sustainability.
Of the companies that do have a sustainability initiative, the survey found that the majority (65%) believe it gives them a competitive advantage. This is the other part of the puzzle for Oil and Gas companies. It’s necessary to balance stakeholder expectations and profit along with ERG and SDGs and the overall effect on society and the environment. The following areas in particular need to be considered:
- Greenhouse gas emissions [Carbon Dioxide and Methane]
- Plastic waste.
- Impact on society.
- Low carbon initiatives.
- Cleaner fuels for transport.