National oil companies (NOCs) in the GCC have started to articulate ambitious plans to reduce the greenhouse-gas (GHG) emissions from their operations, which are also part of national agendas against climate change. These goals are challenging, and require NOCs to turn these ambitions into actions. At the same time, NOCs must manage perceptional and commercial risks. That will be difficult as it will require that companies understand the inherent complexities of decarbonization in the industry and serve as national catalysts to help transform the economies they serve.
Worldwide, the oil and gas industry accounts for 45% of anthropogenic GHG emissions, according to the International Energy Agency. That significant contribution has led to increased pressure to decarbonize on NOCs, along with international oil and gas companies. Governments, investors, customers, and other stakeholders have declared their intent to reduce GHG emissions. Companies are competing to see who can decarbonize first.
In the GCC, several NOCs, including the Abu Dhabi National Oil Company, Qatar Petroleum, and Saudi Aramco have set targets to reduce their GHG emissions. However, turning ambitions into action is complex, for several reasons.
One is visibility. Today, emissions across operations are mostly estimated using benchmarks and proxies. Accordingly, NOCs must urgently establish a clear and reliable baseline of their actual emissions footprint across the entire value chain—upstream, midstream, and downstream.
In addition, the emissions intensity of assets can vary widely within a portfolio. A further issue is that a wide and intricate range of mitigation solutions is available, with technologies developing all the time. NOC leadership teams should be fully informed of the options. They should evaluate these options by considering their abatement potential, technological maturity, and business case for implementation.
Despite these complexities, NOCs in the GCC should serve as national catalysts for decarbonization. In addition to the global importance of reducing emissions, there is significant economic and social value at play. GCC NOCs are critical to their national economies and thus have an important role in helping each country achieve its national climate targets. Simultaneously, they can enhance the long-term resilience of national hydrocarbon resources. Beyond decarbonizing their own operations, NOCs can contribute to wider efforts by taking the following actions.
The NOCs decarbonization agendas and initiatives are significant, but can only succeed unless if they show tangible results swiftly. Leadership teams must think beyond their traditional focus on the cost and quality of their oil and gas. Despite the difficulties, the fate of NOCs, their national decarbonization agendas, and the environment depends upon their response.
This article originally appeared in Oil and Gas Middle East, October 2021.