Oilfield Services Sector Hitting ESG Goals On Its Way To Net-Zero

Oilfield Services Sector Hitting ESG Goals On Its Way To Net-Zero
The oilfield service sector is increasing its efforts to meet net-zero criteria with a noticeably larger level of sustainability reporting in recent years.

The oilfield service (OFS) sector is increasing its efforts to meet net-zero criteria with a noticeably larger level of sustainability reporting in recent years, new research by Rystad Energy noted.

The environmental, social, and governance (ESG) criteria have become a high priority as E&P combustion activities resulted in the release of 2.2 gigatons of CO2 into the atmosphere in 2021 alone, while emissions from the upstream oil and gas value chain represent approximately 45 percent of total upstream combustion activities.

This highlights the importance of oil and gas companies pursuing an ESG strategy and setting out their goals concerning emissions and other environmental factors, as failure to do so can limit access to public and private capital and can prove value destructive.

Although emissions in the OFS sector have ranged between 10 and 15 percent of total upstream emissions over the last three years, the role of players in this sector in improving the environmental profile of the entire oil and gas industry cannot be underestimated. Companies in the sector have acknowledged the urgency for action and have increased sustainability reporting in recent years, while also setting targets for greener operations in the future.

Of the top 137 service companies tracked by Rystad Energy in the OFS market, ranging from niche players to majors, 61 percent of them now publish sustainability reports – an improvement in numbers compared with a year ago. As many companies typically publish their sustainability reports in the second half of the year, the third and fourth quarters of this year will likely see some maiden reports.

Drilling down into the list of suppliers based on services provided, the EPCI segment performs the best, with 18 out of the 22 companies reporting. As EPCI companies are mostly big engineering houses stretching their operations across several industries, they have the capital to deliver corporate social responsibility reporting. Companies involved in multi-segment operations also show similar trends to EPCI players, with 25 out of 37 companies providing CSR reporting.

Rystad observed some improvement in the drilling contractor segment as well since Helmerich & Payne, Precision Drilling, and Arabian Drilling released sustainability reports for the first time. Well services and commodities, maintenance, and operations as well as seismic are the service segments where more than half of the companies file ESG reports. It is also noticeable that in the last year, suppliers in the well services and commodities, as well as maintenance and operations segments, have improved their reporting rate by 16 and 8 percent, respectively.

It has become rare that emissions reporting is limited to Scope 1 emissions and suppliers are increasingly providing information regarding their Scope 3 emissions.

Efforts To Decrease Emissions

To make their business more investable and meet their targets, suppliers are undertaking multiple initiatives to reduce emissions in their core operations. A major theme among proppant companies in the well services segment has been the implementation of sustainable logistics. This includes reducing the number of trucks on the road, thereby cutting diesel consumption.

Suppliers in the hydraulic fracturing service segment have also adopted multiple approaches to reduce their environmental footprint. This includes using dry chemical additives, deployment of next-generation frac engine technology, migrating towards alternative water sources – including saline non-potable water and recycled water for fracture treatment – deploying electric-powered wireline units, and using fuel additives among many others.

One area where offshore drilling contractors have invested efforts is in utilizing digital tools to monitor and manage emissions. Equipping rigs with selective catalytic reduction technology for NOx emission reduction is another area where many offshore drillers have focused efforts. A few other initiatives undertaken by offshore drillers include hybridizing their rigs, running rigs on green fuel, and implementing power demand optimization on board their rigs, which reduces unnecessary power draw from inactive equipment. Onshore drillers are also undertaking similar initiatives to reduce the emissions footprint in their core operations.

In the maintenance and operations service segment, vessel companies are investing in multiple methods to reduce their environmental footprint. This includes upgrading their vessels with battery hybrid systems, better fuel management to enable control of their consumption, utilizing low sulfur fuel, evaluating the potential of alternative fuels regarding technology, storage, availability, cost, and refueling as well as upgrading vessels with shore-power systems. Where port infrastructure supports this system, shore power can help vessels use significantly less power while in port and reduce emissions.

To contact the author, email bojan.lepic@rigzone.com

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