Global climate concerns, amplified in the public consciousness by a steady stream of violent weather events such as hurricanes and California wildfires, are generating a new set of realities for the energy industry. The oil and gas upstream sector, accounting for approximately 60% of current world energy needs, faces existential threats to its market share—where inaction and/or insistence on marginal improvisations on past practices do not offer constructive and, ultimately, impactful solutions that the industry is most capable of delivering.
Central to the issues at hand are questions that demand unambiguous answers: What should be ambitious yet achievable goals for the upstream industry over the short and long term (e.g., by the year 2050) and what specific programs in the spirit of an Apollo project for oil and gas should be envisioned? The often-cited argument that upstream companies are “extractors and not emitters,” and thus its responsibility in climate matters confined only to the extraction process, is shortsighted and dilutes steps that could be taken to maintain the industry’s leading role and capacity in providing the world’s energy supplies.
Net GHG Emissions
As a basic premise, it is the net emissions of all greenhouse gases (GHG), not just CO2, that drive climate change. Hence, the upstream industry’s overriding goal should be reduction and eventual elimination of net GHG emissions. Here the key operative words are “net GHG emissions,” a distinction worth highlighting. This opens up numerous GHG management options, including CO2 capture and storage (CCS), utilization, and removal (CDR) pathways such as afforestation, reforestation, and bioenergy with CCS. This diverse portfolio enhances the ability of both market forces and new technologies to produce evergreen solutions for reducing net GHG emissions.
Equally flawed as the “upstream are only extractors” notion is the idea that the oil and gas industry should be accepting a carbon-free world energy model fueled 100% by renewable energy sources. While renewables are an important part of the solution in addressing climate change, they are nowhere nearly capable of replacing what oil and gas offers in support of the modern lifestyle. Substantive lifestyle sacrifices, however, are unlikely at a global scale and so should not constitute the underlying assumption for an ecofriendly energy future. As a further tenet for clean energy, electric vehicles, power grids (currently 85% fueled by fossil and nuclear), and battery manufacturing plants should also be judged on net emission standards.
There are no silver bullets in the fight against climate change. We need every bullet in our arsenal. Eliminating certain solution pathways, such as nuclear or fossil fuels, just makes a difficult task much more difficult and expensive. By the same token, the prospect of oil and gas playing an active role will only enhance the odds of achieving the ultimate goal—to have a positive, substantive impact on climate change.
As an example, take the production of hydrogen. Many zero-emission scenarios include hydrogen. What is problematic about this notion is the assumptions regarding the source of hydrogen. Today, over 95% of hydrogen production is from fossil fuels because hydrogen production via electrolysis is several-fold more expensive than production from steam methane reforming (SMR). Our analysis shows that adding CCS to SMR to produce carbon-free hydrogen will still be significantly less expensive than carbon-free hydrogen from electrolysis.
The Transportation Challenge
With its overwhelming reliance on crude oil, transportation poses several challenges. Proposals to migrate transportation to electric or hydrogen vehicles provoke upstream industry fears of demand decline. However, such scenarios stage new opportunities. Carbon-free hydrogen can be produced from oil and gas. Furthermore, rightfully abandoned in the 1970s due to supply constraints, the use of crude oil in electric power generation could be reinitiated in new plants incorporating CCS.
The upstream industry is well positioned to provide bullets to help in the fight against climate change. As a constructive way forward, we propose the following goals and steps.
- Promote establishment of universal net GHG emission definitions and standards to assure an even playing field among all forms of energy.
- Reduce net emissions by 100%.
- Dedicate a non-trivial percentage of annual revenues to R&D efforts to develop technologies that reduce net GHG emissions.
- Set stand-alone CO2 storage targets decoupled from EOR projects. While EOR has been a stepping stone for CCS, EOR-based storage efforts are not realistically scalable and, therefore, we must move beyond them to achieve net zero GHG emissions.
We do recognize the complexity and the associated ethical imperatives of the issues at hand. Climate change is a challenge for the energy industry that demands careful consideration of economic, political, social, and technological aspects. We are hoping to catalyze an upstream discussion toward “what can be done” without delay with an eye on 2050 when oil and gas can claim to be a premier ecofriendly supplier of energy. The question that drives us is, “What is the alternative for the oil and gas industry?”
Nansen G. Saleri is the chairman, CEO, and cofounder of Quantum Reservoir Impact (QRI), an advisory and advanced analytics firm in the upstream sector since 2007. He is one of the industry’s pre-eminent authorities on reservoir management. As the former head of Reservoir Management for Saudi Aramco for a decade, Saleri led efforts in introducing best-in-class programs in waterflooding and maximum reservoir contact wells, most notably in Ghawar, the world’s most prolific oil field. He is a recipient of the SPE John Franklin Carll Award (2006), was an SPE Distinguished Lecturer (1991/1992), and is an SPE Distinguished Member. He holds six patents and has been published or cited in numerous publications on global energy issues including The Wall Street Journal, Houston Chronicle, Reuters, Bloomberg, and CNBC. Saleri received a BSc in chemical engineering from Bosphorus University, and MSc and PhD degrees in chemical engineering from the University of Virginia.
Christine Ehlig-Economides is the first-ever William C. Miller Endowed Chair Professor of Petroleum Engineering at the University of Houston. She became the first American woman to earn a PhD in petroleum engineering when she obtained her doctorate from Stanford University in 1979. Ehlig-Economides is regarded as an expert in reservoir engineering, pressure transient analysis, integrated reservoir characterization, complex well design, and production enhancement. She was a Schlumberger engineer, and for 10 years taught petroleum engineering at Texas A&M University and founded the Center for Energy, Environment, and Transportation Innovation. She has published more than 115 papers, lectured or consulted in 50 countries, and has authored two patents. In 2016, Ehlig-Economides became the first woman to be awarded the John Franklin Carll Award, which recognizes distinguished contributions applying engineering principles to petroleum development and recovery.
Howard J. Herzog is a senior research engineer in the MIT Energy Initiative in Cambridge, Massachusetts, where he works on sponsored research involving energy and the environment, with an emphasis on greenhouse gas mitigation technologies. He received his undergraduate and graduate education in chemical engineering at MIT. Herzog was a coordinating lead author for the Intergovernmental Panel on Climate Change Special Report on Carbon Dioxide Capture and Storage and a coauthor on the MIT The Future of Coal study. He was awarded the 2010 Greenman Award by the IEA Greenhouse Gas R&D Programme “in recognition of contributions made to the development of greenhouse gas control technologies,” and is the author of the recently published book Carbon Capture.