Climate change is impacting nearly every industry, and none more so than the oil and gas sector. Thanks to rising pressure from regulators, consumers, business partners, and employees, a significant transformation toward environmental sustainability has taken hold in the oil and gas industry.
It’s a serious issue, to be sure. Oil and gas are non-renewable resources, so how these companies access the resources, address current and past missteps, and pivot to other sustainable forms of energy will be vital considerations.
Offshore Technology compared environmental sustainability mentions in oil and gas sector corporate filings over time. In 2020, there were 83,366 mentions of the environment in corporate filings versus just 64,471 mentions in 2016. Also, as recently as November 2021, over 4,300 jobs in this industry mentioned environmental sustainability.
It appears that the oil and gas industry is taking these matters seriously. Here is how this sector is impacting the environment and the ways the oil and gas industry is adopting various sustainability measures.
What Drives Sustainability in the Oil and Gas Industry?
The UN’s World Commission on Environmental and Development addressed the concept of sustainability in 1987. The group defined it as a process or development that “meets the demand of the present generation without compromising the next to meet theirs.” On the corporate side, others have defined sustainability as “any process that enables a company to meet the goals of its shareholders while improving the lives with whom it interacts and protecting the environment.”
Most petroleum companies now have goals of achieving cost-efficient and environmentally-friendly operations. Particularly among the younger generation, the environmental impact of oil and gas activities has led to an unfavorable perception of the industry.
In addition to a focus on reputation management, oil and gas companies have other incentives to make sustainability a priority. Among them are compliance with a growing list of environmental regulations, pressure from shareholders and staff, and a desire to do what’s right for the planet’s future.
How the Oil and Gas Sector Impacts the Environment
No matter how you frame it, oil and gas production isn’t a “clean” process, but the crude oil produced by this industry is used to make petroleum products that fuel cars, trucks, and airplanes, as well as heat homes, and are used as ingredients in plastics and medicines. Some of the ways the oil and gas industry affects the environment include the following.
- Water usage and recycling — Offshore production consumes a significant amount of seawater. Also, extraction operations create production water, which is considered a waste.
- Flaring and venting — Flaring during crude oil extraction is the controlled burning of waste gas which produces methane, a potent greenhouse gas. Venting is the controlled release of gas during production.
- Drill cuttings — When drilling below the surface, drill cuttings are the loose pieces of clay or rock that are left over, which may contain chemical additives from the process.
- Drilling fluids — Only certain drilling fluids can be discharged offshore after treatment due to toxic waste disposal regulations.
5 Ways the Oil and Gas Industry is Approaching Sustainability
Since oil and gas will remain a significant part of the global energy mix for many years to come, companies will need to develop transparent and proactive sustainability strategies. According to a recent survey by SAP and Oxford Economics, more than three-quarters of energy and utility executives say sustainability issues are a major concern and almost have committed to a net-zero carbon goal.
Here are several ways the oil and gas industry is approaching sustainability.
1. Improving Freshwater Usage
Water is a vital part of the oil production process, particularly in fracking operations. Each day in the oil and gas industry, hundreds of millions of barrels of freshwater are used. While O&G companies manage to recycle up to 95% of this water, they continue to explore alternatives to decrease usage and increase non-potable water use to 100%.
2. Streamlining Processes
When oil and gas companies can operate more efficiently, this can reduce waste and make the entire operation more sustainable. For example, O&G companies can use advanced analytics to reduce bottlenecks, waste, and on-site accidents. They can also use things like 3D imaging to inspect the inside of oil wells to make more informed decisions about safe and efficient operations.
3. More Used Oil Recycling
Not all oil is usable. But traditional oil disposal methods are wasteful and harmful to the environment. More oil and gas companies are starting to use small-scale waste-oil systems that refine used oil and transform it into diesel fuel. This not only creates fuel needed for ongoing operations but is also a valuable alternative to costly and harmful disposal methods.
4. Reducing Methane Leaks
According to the International Energy Agency, methane emissions are the second-largest cause of global warming, and many originate from the energy sector. By addressing malfunctioning equipment, using better components, and pledging Net Zero Emissions by 2050, oil and gas companies can play an essential role in minimizing the adverse impacts of this activity.
5. Greater Use of Renewable Energy
While many in the energy sector are looking to lower emissions by being more efficient, just as many are willing to investigate diversification into renewable energy sources. Exxon Mobil plans to produce 10,000 barrels of biofuel per day by 2025. Likewise, BP has committed to significant investments in clean energy resources.
Become a Member of COPAS
COPAS is the Council of Petroleum Accountants Societies. Members of COPAS are on the cutting-edge of the changes and innovations that represent accounting in the petroleum industry. In 1996, our organization created its Accredited Petroleum Accountant® (APA®) program to certify accountants within the oil and gas industry.
By joining COPAS, petroleum accountants receive more visibility in the industry, increased insight and knowledge, and a platform to collaborate with like-minded professionals. Contact us to learn more about becoming a member of COPAS.