The oil and gas industry struggles with some unique challenges in working toward a sustainable future. In a way, the social aspect of those challenges comes down to two words:
Prove it.
Often accused of being part of the problem in sustainability and not part of the solution, the oil industry faces an unusually high burden of proof when it seeks environmental trust from the public.
And that’s nothing new, said Aaron Padilla, manager of climate and ESG (environment, social and governance) for the American Petroleum Institute in Washington, D.C.
Whether the focus of the moment is climate change or carbon neutrality, ESG or greenhouse gas emissions, “those are all umbrellas for a suite of issues that our industry has been managing for a long time,” Padilla noted.
Around the world, oil and gas companies have committed to safe environmental operations and a reduction in GHG emissions. As the industry began to address the challenge of climate change in a serious way over the past decade, the need for a coordinated approach became obvious.
So today, organizations leading the industry’s sustainability efforts spend a lot of time setting standards and sharing best practices – and, importantly, establishing consistent reporting guidelines.
“One of the key sustainability challenges for our industry is to show that we can rise to meeting the challenge of being part of the solution” in a demonstrable way, Padilla said.
In response to its environmental critics, the oil industry has developed an economic argument and an engineered approach.
The economic premise says the world requires an ongoing, adequate energy supply in order to maintain a robust global economy and to meet the needs of developing countries. API’s published position on climate change begins with this statement:
“API and its members commit to delivering solutions that reduce the risks of climate change while meeting society’s growing energy needs. We support global action that drives greenhouse gas emissions reductions and economic development.”
To carry out and monitor its environmental efforts, the industry has established a by-the-numbers approach. Quantitatively, reducing GHG emissions isn’t a defined goal. A goal would be stated something like, “reduce GHG emissions by an average of 50 tons per year over five consecutive years.”
In this engineered approach, actions have to be tied to goals that can be expressed in terms of numbers, and results must be measurable as well as comparable with other reported outcomes. That enables the industry to demonstrate both its commitment and its progress.
Padilla cited the concept of “license to operate” as an important impetus for the oil industry’s sustainability efforts. To continue operating, exploration and production companies need the legal and social approval of communities where they work.
Reporting results, attaining consistency, protecting safety and sharing best practices are all essential, Padilla observed.
“Achieving a good, common level of performance is important for our industry overall,” he noted.
“We’re expected to demonstrate a consistently strong level of performance regardless of where we operate,” he said.
Setting Industry Standards
In addition to API, the organizations involved in spearheading the industry’s sustainability efforts are the International Association of Oil and Gas Producers and the IPIECA, both with headquarters in London.
API represents more than 600 member companies and organizations that produce, process and distribute most of the United States’ energy. Founded in 1919, API reports developing more than 700 industry standards to enhance operational, safety and environmental efficiency and sustainability over the past century.
According to IOGP, its members produce 40 percent of the world’s oil and gas and operate in all producing regions. IPIECA, initially established as the International Petroleum Industry Environmental Conservation Association, is a global oil and gas industry association advancing environmental and social performance, and is the industry’s main channel of engagement with the United Nations.
In March, the three associations jointly released a new edition of their “Sustainability Reporting Guidance for the Oil and Gas industry,” reflecting more than 15 years of collaboration among their member companies.
The guidelines aim at setting out a clear framework for companies to report on how they manage their performance and sustainability efforts, with updates in the new revision to improve reporting on performance indicators related to climate change.
Having clear, consistent and comparable industry reporting standards in sustainability is crucial for a number of reasons, Padilla said.
“On the government side, for example, companies in the U.S. for a while now have been required to report their GHG emissions,” he noted.
Those reports become part of the official U.S. inventory of emissions, used for comparison with other countries and for monitoring compliance with various international accords. Sustainability reporting is also important for financial industry evaluations, Padilla said.
“Banks and investors across the spectrum all have an increasingly sophisticated level of expectations about reporting on sustainability and ESG for our industry,” he explained.
IOGP and IPIECA also have issued an update to their Report 254: “Environmental management in the upstream oil and gas industry.”
According to IPIECA, the report “provides a detailed overview of environmental management practices” in the global energy industry. Its primary focus is on ways to address potential environmental impacts from exploration and production.
Padilla said the industry’s coordinating organizations also have a key role in establishing safety standards and procedures, and in sharing best practices for protecting human health and wellbeing through safe operations.
“I often point out that safety is part of the bread-and-butter for our industry, and it can get overlooked as a part of sustainability,” he said.
Methane Management
In recent years, methane emissions have emerged as a key issue in oil and gas operations. Controlling and reducing those emissions is probably the number one environmental focal point for the industry right now, Padilla said.
“The main proposal and even main challenge for our industry is to reduce the methane intensity of the production and consumption of natural gas,” he observed.
Today, “there are a number of initiatives globally to reduce methane emissions,” he said.
Increased use of natural gas is a sustainability positive because gas displaces higher-carbon, less-efficient energy sources, Padilla said. But methane, the primary component of natural gas, has an intense greenhouse gas effect when released into the atmosphere.
API is addressing the issue by promoting and sharing solutions like no-bleed or low-bleed pneumatic controllers, low-loss gas loading/unloading and enhanced leak detection and repair.
What’s needed “I think, first, is joint action on a voluntary basis within the industry to show that we are being proactive in reducing methane levels on our own,” Padilla noted.
“Our (member) companies are supporting that because we really believe that addressing climate change is a global task,” he said.