Is gas greener than oil in terms of emissions?

While pondering whether gas is the green choice to bolster decarbonisation, Wood Mackenzie, an energy intelligence group, has been reviewing Scope 1, 2 and 3 emissions for oil and gas fields around the world. During this process, the firm found out that LNG facilities need to step up decarbonisation efforts to curb emissions.

Wood Mackenzie outlines that the energy sector accounts for nearly 80 per cent of global greenhouse gas (GHG) emissions, primarily from fossil fuel consumption. As a result, oil and gas companies are under increasing pressure to disclose the climate impact of their business and decarbonise operations.

In light of the fact that natural gas has long been considered an important piece of the energy transition puzzle to reach a 1.5-degree scenario by 2050, its role is under “greater scrutiny than ever.” While the ripple effect from Russia’s war in Ukraine may have knocked the balance of the energy trilemma – sustainability, affordability and security – towards the latter, the net-zero challenge will only intensify, predicts the energy intelligence group.

This begs the question of whether using more gas would help make the energy sector cleaner, since, demand reduction for fossil fuels will not be enough on its own, underlines Wood Mackenzie. As efforts to address global warming ramp up, lower fossil fuel use will reduce energy sector emissions. The energy intelligence provider expects carbon dioxide emissions to peak around 2025 and reduce by 28 per cent from the current level by 2050.

However, this would not be enough, as Wood Mackenzie has calculated that to meet the most ambitious targets of the Paris Agreement, carbon emissions would need to drop much further, by 70 per cent. The company claims that it is unlikely additional reductions in fossil fuel demand will be enough to address this shortfall.

Therefore, reducing emissions within the oil and gas industry itself will be an important part of reducing overall emissions, emphasises WoodMac. To address the sector’s emissions, it is necessary to understand where and how they are created across the whole value chain. With this in mind, the firm explained that Scope 1 emissions are direct emissions relating to oil and gas extraction and processing, including emissions from fuel combustion, flaring and venting, as well as methane losses.

On the other hand, the ones under Scope 2 are indirect emissions relating to oil and gas extraction, from purchased electricity, heat and steam consumed at facilities, while Scope 3 covers other indirect sources of emissions, including combustion of products at the point of use.

Furthermore, Wood Mackenzie points out that this makes it possible to analyse the emissions produced at the various stages of the product life cycle and gain useful insights into opportunities for the decarbonisation of oil and gas operations.

While analysing the data by field type, the energy intelligence firm uncovered that in many cases gas fields could have higher Scope 1 and 2 emissions than oil fields. This often happens where there is CO2 in the reservoir, which is subsequently vented into the air, or where the gas is liquefied prior to shipping.

Moreover, the additional liquefaction, shipping and regas process make LNG more carbon intensive than traditional pipeline gas supply. Based on Wood Mackenzie’s current analysis, LNG is anticipated to meet at least 25 per cent of global gas demand by 2050 and given the increasing reliance on LNG in Europe to replace piped gas from Russia, the figure could go even higher.

Bearing this in mind, the company believes that overall Scope 1 and 2 emissions from gas production could continue to increase unless LNG facilities take steps to decarbonise. As most carbon dioxide emissions come from gas or oil products being combusted by the end user, such as in a power station or for transportation, Scope 3 emissions have “a huge impact on overall emissions,” being an order of magnitude higher than Scope 1 and 2 emissions combined, based on Wood Mackenzie’s assessment.

Since oil and gas companies have much less control over these emissions, only ten have set Scope 3 net-zero ambitions so far. Regardless, once Scope 3 is considered, gas is “noticeably cleaner” than oil – mainly because gas has a lower carbon combustion factor than liquid fuels.

In addition, oil has to be refined before it can be used, which increases Scope 3 emissions even further for oilfields, concludes Wood Mackenzie.