Phasing out the most severe oil and gas transition risks
The CO2 intensities from the production, refining and end use of various hydrocarbons (naturally occurring compounds which form the basis of crude oil, natural gas, coal and other important energy sources) can vary substantially. Both their type (liquids vs gas) and their quality (eg heavy vs light oil) are key drivers of their value-chain CO2 intensity. Hence the decision to extract a certain hydrocarbon will set the direction for emissions occurring not only during extraction, but also during refining and end use combustion.
Another relevant factor is flaring, where excess natural gas during production is burned instead of being captured and utilised. As a result, the average value-chain CO2 emissions (kg) associated with getting one unit of energy (MJ or barrel of oil equivalent, boe) from hydrocarbons can be much higher for some oil and gas companies than for others, depending on the quality of their oil and gas fields and on the efficiency of their production processes.
In a project with Rystad Energy, a leading energy research and business intelligence company, we have studied the value-chain CO2 intensities associated with global oil and gas production. The graph below ranks the oil and gas production (million boe) of the world’s producers with respect to their CO2 intensity (kg CO2/boe). The results show that a small proportion of companies produces hydrocarbons with a disproportionally high CO2 intensity.
Oil and gas will play a role for decades to come, though they will be gradually replaced by renewable energy sources. Climate change mitigation will therefore be most effective if the withdrawal from oil and gas starts with the most carbon-intensive production. This is reflected by the policy we have recently developed to gradually shift away from the most carbon-intensive oil and gas production.
From July 2021, we will no longer provide individual insurance covers for those oil and gas companies that are responsible for the world’s most carbon-intensive oil and gas production (top 5%).
From July 2023, we will no longer provide individual insurance covers for those oil and gas companies that are responsible for the world’s most carbon-intensive oil and gas production (top 10%).
Value-chain CO2 intensity* for global oil and gas production in 2019
CO2 intensity per company**
kg CO2 per boe
Source: Rystad Energy EmissionsCube;
* CO2 emissions generated from direct upstream production including flaring, refining / processing and end use combustion (adjusted for feedstock). Emissions from refining / processing and end use combustion are allocated to upstream assets, by considering the quality and mix of products.
** Only companies with more than 10m boe in production.